Payola And Plugola (FCC Fines Made Easy!)

Can You Be On The Take? Sure, But ... Let's Review In Case You Forgot

So, the record promoter comes by the station and offers you two box seats on the first base line to the Giants game, and a really cool Pink leather jacket. Nothing in return; "Just play our records," he says. Okay? Can you take this? It's not money. Will you play his records?

You probably don't need me to tell you that this is what's perceived to be "payola" ... and payola, of course, is bad! But the questions persist post-Spitzer: Just what is it and how do you know what is acceptable, and what is not?

"Payola" is really a violation of the sponsorship identification rule. The Communications Act and FCC rules require that the public be informed whenever someone pays for having their message broadcast. Payola occurs when anything of value is accepted, or agreed to be accepted, in return for the broadcasting of records or any other material without disclosing that the payment was made. Payment does not have to be money; it could also be services, a limousine ride, baseball tickets, or ... a really cool leather jacket.

It's not a violation of the law to take any of these for playing the record; it's a violation of the law to take it for playing the record, without disclosing the payment to station management before broadcast. And, oh yeah, violations are subject to fines of up to $10,000, one year in jail, or both.

So why don't radio stations simply "brand" segments of programming, such as "The Sony PSP Hour," for instance, and get all the toys they want?

Enter "Plugola," which is promoting the non-broadcast activities of the station licensee or an on-air personality on the air. Plugola occurs only when the financial interests are those of persons "responsible for including promotional material in a broadcast."

The real violation occurs not from taking the product or plugging your own nightclub on the air, but from failing to disclosure it to the station management and the listening or viewing audience that the record was played or the plug was mentioned for a payment or benefit.

Again, why would a jock or a station be so unwilling to disclose this on-air? Everyone else does it!

There are some things that you can take with such disclosure. A business lunch with a record executive, or a trivial gift with a value of under $25 is not considered a problem. ($25? You can barely get out of Denny's for $25!) Anything more, and you are in trouble unless you inform management. It then becomes management's responsibility to provide a sponsorship announcement that conforms to FCC rules.

By the way, you do not have to actually air the record or make the plug to violate the rule. The matter never need be broadcast. So long as it can be shown that the consideration was taken for the purpose of making the broadcast without the required disclosure, a violation has taken place, whether the broadcast took place or not.

The FCC has also held that it is management's responsibility to exercise "due diligence" to discover an employee's possible pecuniary interests in broadcast content, and that duty may be higher on stations with formats that might pose a higher "susceptibility" to payola.

Dude! You Can't Advertise Smokes, Right?

This one ain't bad...

Well, no, not exactly. You cannot advertise or plug cigarettes or little cigars, but the other stuff? Well, not snuff, either, but what about the other stuff? Here's an illustration of this conundrum:

I got this exciting call from a radio station executive. A man wanted to advertise on the entire station cluster. That's normally very exciting; someone actually called that has money and wants to advertise.

Here's the issue ... the product. The guy is licensed to sell medicinal cannabis -- in a state where it's legal under state law. "Medicinal Cannibis," that was his exact term. He has all the necessary legal paperwork in place to open this new business venture.

So, it's legal under state law. Can the station take the ad? If the air staff reads the copy, are they protected? By the way, the most popular and highest rated station in the cluster is a Top 40 with a high teen content. The question was this: What's wrong with it? Is there a difference between this and, say, any legal drug advertising?

The spot was already in his head. A couple of old guys listening to Pink Floyd trying to remember why they are making a commercial. It may be controversial, but what's wrong with controversy? It always helps a station to be in the news. Just get the calls right ... right?

Wrong!

True, medicinal cannabis has been made legal in California and in seven other states: Alaska, Colorado, Hawaii, Maine, Nevada, Oregon and Washington. However, federal drug policy continues to ban its use. In 2001, the Supreme Court ruled unanimously that the federal drug law that classifies marijuana as an illegal drug still stands. The Supreme Court ruled in 2005 in Raich v. Gonzales that the federal government can prosecute medical marijuana patients, even in states with compassionate use laws, and several medical marijuana dispensaries in California have since been subject to Drug Enforcement Administration raids. Look it up at http://en.wikipedia.org/wiki/Gonzales_v._Raich

So, it may be acceptable advertising be for a legal substance under state law, it is still illegal under federal law -- Anti-Drug Abuse Act Certification -- and, by the way, it is under federal law that broadcasters are licensed to operate their stations. A conviction of violation of federal drug laws, or the advertising of an illegal substance, might even be considered the type of conviction that requires an adverse answer on the Anti-Drug Abuse Act and adverse finding certifications found on most of the FCC forms.

All things taken into consideration, this is not advertising you want to take, or voice.

More interesting examples next week...

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.