FCC Proposes $13 Million Fine for Sinclair for Sponsorship ID Violations

The full FCC voted 3-2 -- as expected -- to propose a $13.4 million forfeiture for Sinclair Broadcast for more than 1,700 instances of improperly identified paid content (see 1712180064), but the FCC’s Democrats say that’s too little for a $2.7 billion company. “The proposed forfeiture of over $13 million is more than three times any penalty that has ever been imposed for violating our sponsorship identification rules,” Chairman Ajit Pai said in a statement released with the notice of apparent liability. “Does this mark yet another example of special treatment by the FCC majority? You decide,” Commissioner Mignon Clyburn said in her statement.

For roughly seven months starting in January 2016, Sinclair Broadcast stations and stations for which it provides programming aired content on cancer cures sponsored by the Huntsman Cancer Institute (HCI) 1,723 times without properly identifying it as paid content, the NAL said. The sponsored content included brief segments made to look like news stories and aired alongside news content, and half-hour-long paid programs, the NAL said. Huntsman Cancer Institute is affiliated with the family of former Governor of Utah and former Republican presidential candidate John Huntsman. "These advertisements were clearly commercial spots," said Susan Sheehan, President of HCI's fundraising nonprofit, the Huntsman Cancer Foundation. "Please understand that this error was outside of the control of Huntsman Cancer Foundation.”

The NAL is partially redacted to conceal information from Sinclair’s response to an FCC letter of inquiry on the matter, and the total payment made to Sinclair for the paid content is blacked out, but the notice does say that Sinclair was compensated $275,000 per month to air the HCI content. The NAL lists the HCI content as airing from January to July 2016. An attorney familiar with FCC enforcement issues told us it's not uncommon to redact sensitive financial information in an NAL.

Sinclair argued that airing the content without identifying the sponsors was inadvertent, and some of the content was partially identified as paid, though not up to the standards of the FCC, according to the NAL. Sinclair also aired spots announcing it had erred in showing the content without identification after the FCC sent it a letter of inquiry during the investigation, the NAL said. Sinclair is “disappointed by this NAL," it said in a release. The “unreasonable” NAL came after attempts to reach a settlement with the FCC, Sinclair said. “We disagree with the FCC’s action and intend to contest this unwarranted fine.”

“The unprecedented volume of these violations deserves an unprecedented response,” Commissioner Jessica Rosenworcel said, calling for the highest possible fine to be levied against Sinclair. The proposed fine is only 1/2 percent of Sinclair’s 2016 revenue and 1/3 percent of the Sinclair/Tribune deal, Rosenworcel said. The agency routinely fines companies 3 percent to 8 percent of their revenue for “egregious” violations, Clyburn said. “The FCC is more than willing to propose fines in excess of $100 million against a single individual who may never pay,” Clyburn said. “Yet when it comes to a multi-billion-dollar company that misleads millions of viewers, the majority levies a fine that is just one-sixth of the statutory maximum.”

There’s no legal precedent for the punishment level that Rosenworcel and Clyburn are seeking, Pai said. The proposed forfeiture works out to about $7,700 per violation, thousands more per violation than sponsorship ID cases against Cumulus in 2016 and Journal Broadcast in 2014, he said. The $80 million-plus penalty suggested by Rosenworcel and Clyburn would be about $48,000 per violation. “Their position deviates so wildly from our precedent that it will no doubt strike reasonable people as suspicious,” Pai said. “But I will leave it to others to speculate as to why they wish to punish this particular company in this particular way.”

The agency rejected several reasons to adjust Sinclair’s forfeiture downward, Commissioner Mike O’Rielly pointed out. “It appears that the failure to disclose this information was unintentional, the content in question involved a cancer institute, some incomplete disclosures were provided, and Sinclair took corrective measures, including publicly acknowledging and apologizing for its failure to provide sponsorship identification,” O’Rielly said, saying the FCC action was “fitting.” “While the base forfeiture in this case would have resulted in a proposed fine in excess of $6 million, I agree that the totality of the circumstances warrant a significant upward adjustment,” Commissioner Brendan Carr said.

Some observers see the enforcement action as a sign that the FCC is preparing to approve the Sinclair/Tribune deal, since it’s common for the agency to resolve outstanding enforcement matters when a transaction is pending (see 1712190054). The agreement is expected to be approved in early 2018, industry officials said. “If this is just a small speed bump on the way to Chairman Pai waving through a merger that itself violates several other limits in the ownership laws and rules, the saddest part may be that no one will even be surprised," Free Press Policy Director Matt Wood said. Free Press has urged enforcement of sponsorship ID rules in the past. “Viewers deserve to know who is speaking to them or paying for the messages they see on the public airwaves,” Wood said. Transparency groups the Center for Media and Democracy and the Sunlight Foundation didn’t comment.

Sinclair has 30 days to respond to the NAL or to pay the proposed forfeiture. A forfeiture order would require another commission vote, and it may take several months for the proceeding to progress to that point, a broadcast attorney said. “The Commission will review any written response and additional evidence it receives before determining next steps,” the agency said in a news release.