FCC to Probe TV Stations for Unlabeled Ads

By Neil Roland
Bloomberg News
Friday, May 26, 2006

Federal Communications Commission Chairman Kevin Martin ordered a probe of dozens of television stations after a report found they aired advertisements as if they were news reports, people familiar with the inquiry said.

The April study by the nonprofit Center for Media and Democracy found at least 77 stations, including seven each owned by Sinclair Broadcast Group Inc. and Tribune Co., ignored an FCC warning to disclose sponsors. The maximum fine for each violation is $32,500, rising to a maximum of $325,000 whenever violations occur for 10 days or more, FCC spokesman Clyde Ensslin said.

"If the investigation leads to significant fines, the FCC could cause stations to put disclosures in place that make clearer the corporate role in local news," said analyst Blair Levin of Stifel Nicolaus & Co. in the District. "It depends how hard Martin wants to push it."

The FCC warned TV stations in April 2005 they may be fined for airing news stories provided by the government and companies without disclosing who made them. The agency had received complaints about the use of videos provided by the Bush administration about topics including military success in Iraq.

Since then, 69 stations have aired video news releases and eight showed satellite media tours, which involve a scripted interview with an author or expert promoting a product such as a book, the Madison, Wis.-based research group found.

Ensslin declined to comment about the investigation. The FCC's enforcement unit asked the Center for Media and Democracy last week for its report and some research materials, center senior researcher Diane Farsetta said.

FCC Commissioner Jonathan S. Adelstein, a Democrat, requested an investigation after publication of the April study. Martin is a Republican.

Stations in 30 states aired the video ads, the study found. News Corp.'s Fox News and CBS Corp. each own six of the stations that aired the ads without disclosure. Twenty-three are affiliates of Walt Disney Co.'s ABC network.

Hunt Valley-based Sinclair, which owns 60 local stations, and New York-based Fox, which owns 35, said it is their policy to disclose the sources of any corporate promotions.

"It's clearly stated, and our news directors know this," Sinclair Chief Financial Officer David B. Amy said in an interview.

Fox is "taking the appropriate steps to reiterate this policy to our entire stations group," spokeswoman Erica Keane said.

Tribune spokesman Gary Weitman and CBS spokeswoman Shannon Jacobs had no immediate comment.

"Our affiliates are independently owned and operated," ABC spokeswoman Susan Sewell said. "We don't control their news policies." Burbank, Calif.-based Disney has 226 ABC affiliates in the United States.

TV stations are using promotions as news reports because they are strapped for resources at the same time that they are being asked to air more programs to keep up with cable-TV news networks, Farsetta said.

"Station managers have said they are turning to provided media because they can't afford to do all the news on their own," she said.

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