License Renewal And The No-Urban Dictate Certification Requirement

Gregg Skall
Womble Carlyle Sandridge & Rice, LLP

A while ago, I wrote to remind broadcasters of some of the certifications required of an application for renewal of a broadcast license. Among the important but sometimes overlooked certifications is the requirement to certify that the station was not silent for any consecutive 12-month period during the preceding license term. Introducing that topic, I mentioned that another certification that has received rather widespread attention is the certification that the station has not accepted any "no-urban dictate" advertising.

Although this certification has received widespread attention, many licensees are still confused, even mystified, about what they must certify to and how far up the chain of advertising orders they must, or even can control, in order to make the required certification.

The instructions to the FCC renewal form 303 provide that Section II, Item 7 requires a certification that advertising agreements do not discriminate on the basis of race or ethnicity and that all such agreements contain nondiscrimination clauses. Prohibited discriminatory practices include "no-urban" and "no-Spanish" dictates. The broadcasters must have a reasonable basis for making this certification and if they cannot, then "No" must be checked and an exhibit attached to explain the situation and offering rationale for why the failure to certify should not impede the renewal. For obvious reasons, the provision does not apply to noncommercial stations and they should answer "not applicable."

The actual certification reads:

Non-Discriminatory Advertising Sales Agreements. Commercial licensee certifies that its advertising sales agreements do not discriminate on the basis of race or ethnicity and that all such agreements held by the licensee contain nondiscrimination clauses. Noncommercial licensees should select "not applicable."

In adopting the rule that lead to this certification, the Commission stated that for over 20 years, it has observed the "insidious practices" of certain advertisers, rep firms and advertising agencies of imposing written or unwritten "no-urban/no-Spanish" dictates. Questions arose immediately about the requirement. For example:

Broadcasters observed that many, if not most, advertising orders today are not delivered pursuant to a formal written advertising agreement, but are often accepted by e-mail. How are these orders to be covered?

What due diligence is required of the broadcaster when an order comes in from an agency?

Suppose, for example, you operate a cluster and an order specifically asks for only the "progressive Country" station - is that discriminatory?

How does the broadcaster assure that the advertising agency is not accepting no-urban/no-Spanish dictate in another form -- and must the broadcaster have that assurance to make the certification?

Responses quickly came from David Honig, the Executive Director of the Minority Media & Telecommunications Council (MMTC) who had long been advocating for the rules and from an FCC Enforcement Bureau Advisory. On March 11th, 2011, the bureau stated that licensees must have a good faith basis for its certification and that due diligence by a broadcaster who uses a third party to arrange advertising sales must include ensuring that the advertising agreement contains a nondiscrimination clause and that the agreement does not discriminate on the basis of race or ethnicity.

The advisory also states the FCC will require a broadcaster who learns of a violation of the nondiscrimination clause while its renewal application is pending must update its renewal application to assure that it remains accurate.

So the broadcaster must make sure that the agency agreements it accepts are from agencies that abide by the rule and include nondiscrimination clauses in their own agreements. An inquiry to one of the most popular advertising agencies serving the radio industry produced a response that they were very aware of the requirements and had taken measures to assure their own compliance. Accordingly, licensees would be well advised to make the same inquiries of their own agencies and to let them know that, even in these difficult times, they will not accept orders from agencies that have not established their own compliance policies and procedures.

Fortunately, last October, the American Association of Advertising Agencies (4As) announced a non-discrimination media vendor policy and a complaint review process that specifically addresses FCC rules and policies with regard to suspected discriminatory practices such as No-Urban and No-Hispanic Dictates. In an e-mail to FCC Chair Julius Genachowski, 4As Chairman Sherman Kizart (who also is Managing Director of Kizart Media Partners), stated that the 4As Media Policy Committee adopted this policy consistent with the FCC's media regulations in recognition that No-Urban and No-Hispanic Dictates cost African-American and Hispanic-targeted and owned broadcasters an estimated $250 million in lost revenue annually and that the new 4As policy would be distributed to over 800 of its members.

Shortly after adoption, the MMTC held a meeting among communications lawyers that addressed some of the other questions. Most lawyers present agreed that, in a situation where a suspicious order is received, due diligence would include inquiring about the media plan of the advertiser. An order for advertising to be placed specifically and only on "progressive Country," for example, can be justified by a non-discriminatory advertiser media plan, or by legitimate research not based on race or ethnicity. In the words of one lawyer who was formerly a media buyer: "Every retailer knows you can ask for the parameters. Certainly there is a target audience as opposed to discriminatory execution of a marketing plan."

Another asked: "Should the FCC really expect a hungry account executive with a small station and draw to ask these questions?" The answer was yes, and to avoid offending clients, sales reps can state that the FCC requires it. And now, they can also say the 4A agency policy also requires it.

Back in March, I offered suggestions on how to deal with deal with situations where orders are placed by an exchange of e-mail and telephone. When doing business in this manner, a non-discrimination statement and clause should become a standard part of all e-mail signature footers. Stations should also establish mandatory policies that all orders placed over the phone or in face-to-face conversations must be followed by a written exchange between the station and the advertiser to confirm the order with the non-discrimination clause included.

This column is provided for general information purposes only and should not be relied upon as legal advice pertaining to any specific factual situation. Legal decisions should be made only after proper consultation with a legal professional of your choosing.

This column is provided for general information purposes only and should not be relied upon as legal advice pertaining to any specific factual situation. Legal decisions should be made only after proper consultation with a legal professional of your choosing.