This Week in Regulation for Broadcasters:  April 22, 2024 to April 26, 2024

Here are some of the regulatory developments of significance to broadcasters from the past week, with links to where you can go to find more information as to how these actions may affect your operations.

• Perhaps the biggest regulatory news of the past week came not from the FCC, but instead from the Federal Trade Commission.  The FTC, in a 570-page order, adopted rules that ban the use of noncompete provisions in employment agreements (and clauses that act like noncompetes to limit employee mobility) in virtually all instances except when the promise of a noncompete is by a seller in connection with their sale of a business. The rules apply to anyone working for a company, including interns and independent contractors. Beginning at page 367 of its order, the FTC rejected arguments that contracts with broadcast on-air talent should be exempt from the ban, suggesting that companies have other ways to protect their investment in employees other than through noncompete agreements.  While applauded by labor and employee-rights organizations, the action has been condemned by many business groups who, in some cases have already challenged the FTC’s authority to adopt such a sweeping decision impacting so many aspects of the economy based solely on the FTC’s authority to prohibit unfair methods of competition.  Unless stayed by the FTC or by a Court, the rule will go into effect 120 days after it is published in the Federal Register. 
• In a ruling that may impact many “side-car” companies that buy TV stations and enter into agreements with other broadcast companies that cannot own the station because of FCC ownership rules, the FCC’s Media Bureau granted an application proposing the assignment of TV station WADL, Mount Clemens, Michigan to Mission Broadcasting, a company closely related to Nexstar Media, Inc.  However, the grant came with many conditions that may well undermine Mission’s plans for the station.  Objections were filed against the application alleging that Nexstar will have de facto control of WADL or will exercise control of the station’s retransmission consent rights to the detriment of video programming distributors and consumers.  While the Bureau permitted Mission to acquire WADL, it imposed a number of conditions to limit Nexstar’s control, including prohibiting Nexstar from financing WADL’s acquisition (it cannot even provide a loan guarantee), it cannot have an option to acquire WADL in the future, Mission must keep at least 70% of all of WADL’s advertising revenue, and Nexstar cannot provide more than 15% of WADL’s programming (even though the station was going to be a CW affiliate, and CW is owned by Nexstar). 
• The Media Bureau entered into a Consent Decree with a New York noncommercial educational (NCE) FM station to resolve an investigation into its compliance with the FCC’s underwriting and sponsorship identification rules.  Petitions challenging the station’s license renewal alleged that, during station fundraising activities, its on-air hosts (or their guests) were allowed to promote their own products and services – efforts which entailed repeatedly mentioning the price of the promoted product or service and excessively complimenting or praising the promoted item, with the station getting a portion of the proceeds to fund its operations.  While the objections acknowledged that NCE stations can give away premiums to donors, those premiums are usually pre-purchased by the station at a flat fee, and don’t involve the station in revenue sharing promotions that benefit commercial companies.  This conduct seemingly led to the reference in the Consent Decree that the station impermissibly promoted for-profit products and services in spots that contained comparative and qualitative descriptions, pricing information, calls to action, and other inducements to buy, all prohibited by the NCE rules.  The Decree imposed a short-term license renewal, required payment of a $25,000 civil penalty and a compliance plan to ensure future compliance with FCC rules.   
• The FCC’s Office of Economics and Analytics issued the FCC’s biannual call for comments on the State of Competition in the Communications Marketplace.  The FCC seeks comments on a list of questions about competition in the video and audio marketplaces, including the impact of digital competitors on radio and TV stations and the role that regulation plays in the competitive landscape.  The FCC uses these comments to prepare a report to Congress on competition issues and sometimes references the reports in proceedings dealing with competition, including FCC proceedings dealing with its ownership rules. Comments are due June 6 and reply comments are due July 8. 
• The FCC’s Public Safety and Homeland Security Bureau extended the comment deadlines for the FCC’s January Notice of Proposed Rulemaking proposing to require TV and radio stations to file reports regarding station operational outages in the FCC’s Network Outage Reporting System (NORS) database and on their operating status during disasters in the FCC’s Disaster Information Reporting System (DIRS) database. Reporting by broadcasters is now optional, but the FCC asks in this proceeding if that obligation should be mandatory.  Comments and reply comments are now due May 13 and June 12, respectively. 
• As the result of the FCC’s sweep of the Boston area (and other parts of Massachusetts) for pirate radio activities, the FCC proposed to fine seven Massachusetts pirate radio operators.  The PIRATE Act requires such sweeps in markets with substantial pirate radio activity and authorized fines (recently adjusted for inflation) of up to $119,555 per day and a maximum of $2,391,097.  The pirate radio operators have 30 days to pay either pay their fines or to object to the FCC’s proposed action.  The FCC proposed the following fines against each pirate radio operator: a $120,000 fine for broadcasting on 101.9 FM in Boston, MA, a $20,000 fine for broadcasting on 87.9 FM in Hyannis, MA, a $40,000 fine for broadcasting on 102.1 FM in Brockton, MA, a $40,000 fine for broadcasting on 93.1 FM in Cotuit, MA, a $40,000 fine for broadcasting on 96.5 FM in Brockton, MA (which involved 2 pirate operators), and a $597,775 fine for broadcasting on 89.3 FM in Mattapan, MA and on 105.3 FM in Brockton and Randolph, MA.
• The FCC’s Media Bureau granted several assignment applications related to Cumulus Media’s debt restructuring, conditioned on the suspension of a foreign investor’s voting rights and involvement in Cumulus’ management until the Bureau completed its review of a this new investor. In 2020, the FCC approved Cumulus’ petition to exceed the 25% limit on foreign investment set out in Section 310(b)(4) of the Communications Act – provided that Cumulus would in the future request specific approval for any new foreign investor proposing to hold more than a 5% voting or equity interest.  In January 2024, a Singaporean investor filed a report with the U.S. Securities and Exchange Commission (SEC) stating that it had interests in Cumulus exceeding the 5% threshold.  Cumulus then filed a petition seeking FCC approval of this new foreign investor, stating that it did not solicit the non-compliant foreign investment and was unaware of it until the SEC report was filed.  Because Cumulus was not responsible for the foreign investment and the current applications were unrelated to the qualifications of this investor, the Bureau waived its normal process of approving all foreign investors first and issued the conditional grant.
• The Bureau affirmed its dismissal of an Oregon FM station’s license renewal application pursuant to Section 312(g) of the Communications Act, which states that a station’s license will be automatically cancelled if the station that has not operated as authorized for a full year, unless the FCC finds that there are public interest factors warranting the preservation of the license.  Here, the station operated from an unauthorized location for over a year, leading to the cancellation.  The Bureau rejected the licensee’s claim that no authority was necessary as its move of its antenna from one site to another was less than one second different in geographical coordinates, concluding that a move of less than three seconds does not require a construction permit only when it involves a coordinate correction, and even then, the move requires FCC approval in a license application after the move. Neither a construction permit nor a license application was filed by this licensee.  The Bureau also dismissed the station’s argument that it was exempt from requesting authority to move to a new transmission facility as the antenna at the new site was mounted in a tree, and thus did not require construction of a new tower.  The Bureau dismissed the station’s argument as baseless, noting that placing a station’s antenna in a tree required prior FCC authorization just as placement of a station’s antenna on a tower because the FCC needs to know the precise location of any station’s transmission facilities to ensure adequate interference protection to other stations and the safety of air navigation.  Finally, the Bureau rejected the station’s argument that its license should be reinstated since it provided a second, noncommercial service within a Tribal area because the FCC does not recognize such service as providing an exception to Section 312(g). 

• The Bureau proposed a $3,000 fine against a Class A TV station operated by a well-known Massachusetts noncommercial operator for failing to timely upload one quarterly issues/programs list and six children’s programming reports to its online public inspection file.  These documents were uploaded between one day and over one year late. The operator argued that the late-filed quarterly issues programs list should be excused as it acquired the station only two weeks before the end of the quarter, and it has to wait for program information from the prior owner.  The FCC faulted the licensee for not having timely uploaded information for the portion of the quarter in which it did hold the license. 
• The Media Bureau took several actions concerning LPFM stations:
  • The Bureau dismissed two Texas LPFM construction permit applications (see here and here) because the applicants failed to demonstrate that they were nonprofit organizations eligible to be LPFM licensees finding that the organizational document provided by each applicant did not demonstrate that it was been filed and accepted by a state as a valid nonprofit organization. 
  • The Bureau affirmed its dismissals of LPFM construction permit applications in Washington and Wisconsin because the applicants failed to meet the co-channel and/or second-adjacent channel spacing requirements for protecting nearby full-power FM stations.  The Bureau rejected each applicant’s arguments for reinstatement of their applications because the LPFM application procedures clearly state that applications failing to comply with the co-channel and/or second-adjacent channel spacing requirements would be dismissed without an opportunity to amend.  In the Washington case, the Bureau noted that applicants relying on staff advice do so at their own risk.  In the Wisconsin decision, the Bureau noted that it relies on the technical parameters submitted in the “Tech Box” portion of the application – not parameters set out in any attached exhibit – and as the information in the applicant’s Tech Box did not show compliance with the spacing requirements, the application must be dismissed. 
• In a very rare, if not unprecedented action, SGCI Holdings III LLC, the Standard General company that had sought to acquire the TEGNA television stations, and its managing member Soohyung Kim, filed a civil lawsuit against the FCC, Chairwoman Jessica Rosenworcel and Media Bureau Chief Holly Sauer personally, broadcast station owner Byron Allen and his company (an allegedly unsuccessful bidder for the TEGNA stations), and a number of other individuals and groups including parties who argued before the FCC against the approval of the transaction, alleging that they had conspired to cause the FCC to “pocket veto” the transaction by designating it for hearing (see our article here) for discriminatory reasons because Mr. Kim was not the “right type of minority.”  For more details, see press reports about the lawsuit here, here, here, here, and here (note that several have links to the complaint, and that several are subscription sites). 

On our Broadcast Law blog, we discussed the 11 states that had enacted state laws regulating the use of artificial intelligence (or “deep fakes” or “synthetic media”) in political advertising – with some states purporting to ban the use entirely, and most allowing it if it is labeled to disclose to the public that the images or voices that they are experiencing did not actually happen in the way that they are portrayed.  As noted in the article, there are concerns about some states imposing obligations on broadcasters to ensure that AI in political ads is properly labeled when broadcasters have no way to know if AI has in fact been used and, for candidate ads, the broadcaster cannot reject the ad because of the “no censorship provisions” of Section 315 of the Communications Act even if they know AI has been used.  Since we published the article, two additional states (New York and Florida) have enacted AI statutes.