Crocodile Crock: FCC Issues Two Fines in a Week for Violations of Its Contest Rules

Advertising Law

July 14, 2020

The Federal Communications Commission’s (FCC) Enforcement Bureau last week issued two fines, one for $6,000 and another for $5,200, for violations of its contest rules, as two sweepstakes were not conducted as advertised.

In the first case, the FCC said Townsquare Media’s Hot AC station “93.1 Kiss FM” (KSII) in El Paso, Texas, held a sweepstakes way back in November 2016 that promised a pair of tickets to an Elton John concert as a prize. But the winner complained that he was unable to collect his prize from the station, despite repeated attempts to request fulfillment. Instead, the winner was told to call back in a few months when the concert tickets were available. But after four months and still no prize, he filed a complaint with the FCC saying he felt “played and deceived” by the station.

During the FCC’s investigation, KSII did not dispute the allegations brought by the listener. The station said it appeared that a breakdown in communications and procedure at the station resulted in no one responding to the winner’s phone calls. It also said that the failure to award the tickets was due to “human error,” not a scam, which Townsquare said was “evidenced by the fact that the four other…winners received their prizes.” The station also said that it offered to make amends to the listener by providing free tickets to a performance of Elton John in Las Vegas, including complimentary airline and hotel accommodations. Townsquare also told the FCC that it sent an email after the mixup, reviewing how station contest and prize fulfillment must align with the announced sweepstakes rules.

In the agency’s decision, FCC Enforcement Bureau Chief Rosemary Harold concluded that KSII didn’t live up to the rules that it announced to listeners even though no specific deadline for receiving the prize was mentioned. “There was an implicit deadline established because the prize was a pair of tickets for a concert on an announced date,” Harold said, concluding Townsquare’s failure to award the tickets amounted to an unreasonable delay in awarding the prize, which falls under the FCC rules about conducting a contest as advertised. Harold also said that while Townsquare did offer to instead fly the listener to a concert in Las Vegas, along with airfare and hotel accommodations, doing so didn’t relieve the station of its duty to live up to the sweepstakes rules.

As a result, the FCC issued a $6,000 fine against Townsquare Media—including an extra $2,000 penalty for a prior violation unrelated to contest rules. The radio station has 30 days to either pay the penalty or ask that it be reduced or forgiven altogether.

The second contest fine issued by the FCC also emanated from a complaint that a prize winner failed to receive a prize in a timely manner. This case involved a promotion conducted in 2016 by Gow Media’s sports station “ESPN 97.5” KFNC Houston. The radio station’s listener said he had won the “Bud Light Ultimate Fantasy Draft Party” contest but never received the advertised grand prize of a five-day, four-night, all-inclusive vacation to a resort in Puerto Vallarta, Mexico. The listener said in his complaint that two years after the contest was conducted, he had “never received the prize despite many calls, emails, and messages” to KFNC.

What allegedly happened was a situation that is rare, but is not the first time a station has been left hanging by its contest partner. In this case, Gow Media says the Marival Resort withdrew its prize, but Gow Media’s promotions director failed to inform management and the contest continued as planned. The company told the FCC that it offered the winner a cash prize of $3,600, or what it said was twice the value of the advertised prize. The listener accepted the replacement and signed an agreement that included a promise to “rescind his complaint” to the FCC.

That did not make much difference to the FCC, however, as it had already been looking into the matter. And in a decision released last week, Harold said that although it appears Gow Media took steps to resolve the issue, they were not taken until after the FCC’s investigation had begun. “The licensee’s actions to provide the complainant free tickets to a sporting event as an ‘interim prize’ and a cash settlement did not negate its liability for failing to comply with the Contest Rule,” she wrote in the decision. Gow Media was fined $5,200. The station now has 30 days to pay or attempt to get the penalty reduced or forgiven altogether.

Why it matters: The FCC’s contest rules have been among the most fine-producing for radio stations through the years. Of course, failing to fulfill and deliver a promised prize (especially a valuable one such as a trip) to a winner in connection with a promotion will very likely lead to a listeners’ filing a complaint with the FCC, which is almost guaranteed to lead to an investigation and a fine for a radio station. All prize promotions offered by any sponsor (regardless of whether they are conducted over the radio) should contain a clear description of the prize, including the approximate retail value (ARV) of each prize and the ARV of all prizes. The ARV should be based on the fair market value of the prizes, not how much it cost the sponsor to obtain them. The rules should explain the date by which the prize will be fulfilled and what happens if the prize is no longer available or cannot be fulfilled (e.g., tickets to an event that gets canceled due to COVID-19). Further, sponsors should disclose any prize limitations and exclusions. For example, if the prize is a ticket to an event, sponsors should clearly disclose whether or not travel is included. In addition, a sponsor should avoid requiring the winner to do something more—such as make a payment or purchase—in order to use the prize. For instance, providing a coupon could be problematic, because certain states have post-consideration bans that prohibit requiring consideration to receive or utilize a prize.

It is also important to remember that in September 2015, the FCC modernized its contest rules, allowing radio broadcasters to publicize the material terms of a contest that is conducted by a station by posting those rules on an Internet website, rather than requiring that the material rules be read on the air often enough that a listener is likely to have heard them. The FCC’s updated Contest Rules, however, did impose obligations that the website location be announced on the air and that the site be accessible to everyone. The website hosting the rules can either be the station’s website or some other site, but the Contest Rules must state that the site is available to everyone who visits it, without their having to register to use the site or to pay any sort of fee to access it. The on-air announcement about the website does not need to give the exact URL of the page on which the rules can be found, as long as the announcement is specific enough that a listener will be able to find the rules. The FCC also made it clear that if a station is sending its audience to the station’s homepage to find the contest rules, there should be a tab, link or other clearly identified location on the homepage as to where listeners should go to find the contest rules. The FCC also requires that the contest rules be on the website from the beginning of the contest through a point at least 30 days after the contest ends and the prize is awarded—presumably so that listeners who don’t win the contest can review the rules to make sure the station observed those rules when it was awarding the prize. That obligation highlights the need for stations to carefully observe the rules when they conduct their sweepstakes and contests. Stations must make sure that they give away the prize exactly in the way they said they would in the advertising and the rules, or risk facing fines like those leveled on Townsquare Media and Gow Media.

To ensure your promotion complies with applicable legal requirements, we recommend engaging specialized legal counsel, such as your Manatt Advertising, Marketing and Media team member, as we have decades of experience in complying with the patchwork of international, federal and state laws that regulate contest, sweepstakes and promotional activities.