Reminder: Stations Should Make Clear to Advertisers That Certain Terms and Conditions Restrict Use of the FCC's Temporary Policy for Free "Goodwill" Commercial Spots
On March 25, the FCC's Media Bureau announced a temporary, limited exemption to the federal requirement that broadcasters must charge political candidates no more than the lowest unit rate (LUR) for the same class and time of advertising offered to commercial advertisers. The FCC took this action because the COVID-19 pandemic has caused some commercial advertisers to cancel or reduce their advertising commitments, and the FCC wanted to provide broadcasters more flexibility to fill excess inventory and build goodwill with commercial advertisers. Therefore, the FCC's exemption allows broadcasters to provide free time to commercial clients, and exclude such free time when calculating the LUR, so long as the arrangement complies with certain terms and conditions.
Importantly, the free time must be provided and treated as so-called "goodwill" spots, and completely unrelated to any "existing commercial contract for paid time." Although stations may offer free time to existing commercial advertisers that are already running paid schedules, there may not be any connection or quid pro quo between a paid schedule and the free spots. The free spots must be gifts that stand alone. Accordingly, the free time may not be provided as a reward to a commercial advertiser for an existing purchase of time, for not cancelling or reducing an existing commercial commitment or as an inducement to purchase a future ad package. Ad buyers that request such free goodwill spots as a precondition or incentive to purchase a paid schedule should be aware that a broadcaster's hands are completely tied under the FCC's policy. Any connection between a paid schedule and free goodwill spots ¨C even if merely implied - is strictly prohibited and could force an unplanned change to a station's LUR.
In the same vein, stations should not provide free spots in proportion to the amount of commercial time purchased by an existing advertiser, such as one goodwill spot for every five paid spots. Nor should a station make any promises that a certain number of free spots will be provided, or provide free spots based on the historical amount of commercial time purchased by an advertiser. Finally, the free goodwill spots should be preemptible, meaning that a station should not make any promises that the free spots will air during a particular program or day-part or will reach a certain audience size or run with any particular frequency. Failure to comply with any of these conditions could suggest a link between the paid and free ad schedules that violates the FCC exemption.
When documenting such free spots, stations should not characterize them as "bonus spots" because of the connotation that might tie such free ads to a paid schedule. NAB recommends that stations keep documentation of their offers of free time but do so separately from the documentation for paid-for packages to support the independence of the free spots. The FCC's announcement makes clear that this exemption is temporary and will be applicable only until "normal conditions are restored."
Broadcasters are strongly encouraged to consult their own attorney before implementing this guidance.