On Oct. 6, 2022, the Federal Communications Commission (FCC) released a Second Notice of Proposed Rulemaking (Second NPRM) in which it proposes changes to its current foreign sponsorship disclosure requirements for broadcasters. The FCC’s proposed changes are a response to the U.S. Court of Appeals for the District of Columbia Circuit’s (D.C. Circuit) July 2022 vacatur of the FCC’s requirement that broadcasters independently confirm whether sponsors leasing airtime on their stations were foreign governmental entities or agents thereof. Through the Second NPRM, the FCC is seeking to implement new measures designed to ensure that broadcasters proceed with “reasonable diligence” in determining whether or not sponsors of airtime leased on their stations are foreign governmental entities or agents thereof. The FCC is also seeking comment on how to respond to a pending Petition for Clarification concerning the applicability of the foreign sponsorship rules to broadcast advertising.

Background

Last year, the FCC issued new rules requiring broadcasters to disclose whether any programming aired on their stations was paid for or furnished – whether directly or indirectly – by any foreign governmental entity or affiliate thereof. We discussed the FCC’s foreign sponsorship identification rules in a previous article that can be found here, but here’s a brief overview:

Originally, the FCC required broadcasters to undertake a three-step process whenever they leased airtime to a third party:

1. Ask the lessee whether it was a foreign governmental entity or an agent thereof.
2. Ask the lessee whether anyone in the programming’s production or distribution chain was a foreign governmental entity or an agent thereof.
3. Independently confirm the lessee’s responses by checking both the Department of Justice’s Foreign Agents Registration Act (FARA) website and the FCC’s U.S.-based foreign media outlets reports.

If, after undertaking such an inquiry, the broadcaster determines that leased airtime was paid for or furnished directly or indirectly by any foreign governmental entity or affiliate thereof, then the broadcaster must disclose on air the nature of the foreign sponsorship.

In July 2022, the D.C. Circuit ruled in National Association of Broadcasters v. FCC (NAB) that the FCC lacked authority under Section 317(c) of the Communications Act of 1934, as amended (the Communications Act), to require broadcasters to confirm a lessee’s status by independently reviewing either the FARA website or the FCC’s foreign media outlet reports. Instead, the D.C. Circuit interpreted Section 317(c) to require a broadcaster only to request such information directly from the lessee or from its own employees, eliminating the third step discussed above.

Second NPRM

1. Certification Requirement  

In the Second NPRM, the FCC proposes to ensure compliance with its foreign sponsorship identification rules by implementing a new diligence certification requirement that would apply to both broadcasters and airtime lessees. Specifically, the FCC proposes that:

1. Broadcast licensees certify that they have made the appropriate inquiry of each lessee and sought certification from the lessee regarding its status as a foreign governmental entity or agent thereof.
2. Airtime lessees certify whether they are or are not a foreign governmental entity and whether they know of any entity or individual further back in the programming production/distribution chain that qualifies as a foreign governmental entity and has provided some form of compensation in exchange for the broadcast of that programming.

The certification requirement would replace broadcasters’ existing requirement of memorializing their inquiries regarding the status of their lessees.

To ensure transparency, in the Second NPRM, the FCC proposes that both certifications be uploaded by the broadcaster to the relevant station’s online public inspection file (OPIF) within 30 days of entering or renewing a lease agreement – a time frame the FCC noted was consistent with broadcasters’ existing obligation to upload lease agreements to its stations’ OPIFs within 30 days of execution. While broadcasters are currently required to memorialize their due diligence efforts, they are not required to upload documentation of these efforts to their stations’ OPIFs or otherwise make that documentation publicly available. Accordingly, current rules only require public disclosures when programming is in fact sponsored by a foreign governmental entity or agent thereof.

In an effort to minimize compliance burdens for broadcasters and to ensure uniformity in the certification process, the FCC has proposed standardized language in the Second NPRM for both the licensee and lessee certifications.

Finally, the FCC would apply a six-month grace period for broadcasters to comply with the proposed certification requirement, similar to what it did when it adopted its original foreign sponsorship identification rules.

2. Comments Sought on Alternative Investigation Approaches

Despite proposing a new process to replace the diligence requirement the D.C. Circuit found unlawful, the FCC is nevertheless seeking comment in the Second NPRM on whether it should reinstate the third diligence requirement by requiring a broadcast licensee to request that the airtime lessee provide documentation of its status in the FARA database or in the FCC’s U.S.-based foreign media outlet report (e.g., by providing the licensee with a screen shot of the search results in each database). This purported “alternative approach” has its genesis in a question posed by the D.C. Circuit during oral argument in NAB as to whether requiring a licensee to ask its lessee for such documentation would be consistent with Section 317 of the Communications Act and would accomplish the same goal as the vacated third diligence requirement. The FCC is seeking comment on the feasibility and legality of this approach.

3. Petition for Clarification

Finally, the FCC is providing an additional opportunity for interested parties to comment on a pending Petition for Clarification regarding the applicability of the foreign sponsorship identification rules to advertisements sold by local broadcast stations. In its 2021 Order establishing the foreign sponsorship identification rules, the FCC stated that “traditional, short-form advertising” was excluded from the scope of the new rules without providing a clear definition of what constituted “traditional, short-form advertising” and what would be considered leased airtime. The petition therefore sought clarification from the FCC whether the foreign sponsorship identification rules apply when a station sells time to advertisers in the normal course of business as opposed to when the station leases discrete blocks of airtime. To aid the FCC in ruling on the petition, the FCC is seeking comment on the criteria it should adopt to distinguish between advertising and leased airtime for purposes of compliance with its foreign sponsorship identification rules.

Comments are due on or before December 19, 2022; reply comments are due on or before January 3, 2023. Should you have any questions regarding the FCC’s proposed new foreign sponsorship identification rules, please feel free to contact Dan Kirkpatrick at 202.861.1758 or dkirkpatrick@bakerlaw.com, Davina Sashkin at 202.861.1759 or dsashkin@bakerlaw.com, or Keenan Adamchak at 202.861.1772 or kadamchak@bakerlaw.com.