On March 20, 2014, the FCC fined two Indiana radio station licensees a total of $12,000 for failing to conduct a contest “substantially as announced.”  The contest at issue, the “Par 3 Shoot Out,” involved two stages – an online golf competition for which the station awarded weekly prizes consisting of Victoria National Golf Club hats, and an actual hole-in-one golf contest with a grand prize of a Lexus automobile.  The Notices of Apparent Liability serve as good reminders for broadcasters about the importance of running contests to completion substantially as initially announced, as well as the proper way to modify contest rules and publicly disclose modifications after a contest has started.

Section 73.1216 of the Commission’s rules requires broadcast licensees to conduct station-sponsored contests “substantially as announced or advertised” and to fully and accurately disclose the “material terms” of such contests.  Material terms include, among other things, any eligibility restrictions; means of winner selection; and the extent, nature, and value of prizes.

In fining the stations, the Enforcement Bureau found, in part, that the stations had not conducted the contest substantially as advertised because the stations improperly changed one of the contest’s material terms.  After the online stage of the contest ended and participants for the second stage were selected, the stations sent letters to the second-stage participants informing them – for the first time – that the stations would exclude professional golfers and golf pros from the hole-in-one competition.  The stations tried to characterize this as a “minor” change because none of the second-stage participants were actually professional golfers or golf pros.  The Bureau disagreed, affirming that Section 73.1216’s definition of material terms includes eligibility restrictions.

The Bureau also seemed to suggest that, once established, a station cannot modify a contest’s material terms.  The Enforcement Bureau stated that:  “In prior cases, we have found violations when licensees changed the prize, or altered the time or means of selecting a winner, after the commencement of the Contest.  Likewise, changing a contest’s eligibility requirements after it has begun violates this rule.”  However, a better reading of FCC guidance on this issue suggests that a station may change material terms, with one essential caveat – a station can only apply such changes prospectively, not retroactively as the Indiana stations tried to do by excluding professional golfers and golf pros from the hole-in-one competition after it had already selected participants.

Although modifying material contest terms (and even non-material ones) should be avoided unless absolutely necessary once a contest has begun, change is sometimes unavoidable.  These recent NALs suggest that the FCC will strictly require licensees to announce a change before making it effective.  If, for example, your rules provide that only people aged 25 and over can enter a contest, but due to a lack of entries you want to allow folks 18 and over to participate, you need to announce the rule change (and its effective date) before expanding the eligible age range.  If you conduct, advertise, or promote a contest on-air, then you must also make on-air announcements explaining the change.  You should also modify your written rules (again, in advance of the effective date of the change) and be sure to indicate that they have been revised (this can be accomplished by placing REVISED in the header). 

If you don’t know about a change to a material term in advance, you should revise your rules and conspicuously announce the change as soon as possible.  Even this, however, may not avoid an FCC fine in some circumstances, should a listener complain.  Indeed, the Bureau has previously said that even if an announced prize becomes unavailable because of a prize donor’s failure to live up to its end of the bargain, the station still has a duty to conduct contests substantially as advertised, including by awarding contest prizes when a co-sponsor fails to do so. 

Stations should therefore ensure the accuracy of all material terms of contest rules – and secure all prizes – before starting to promote a contest.  If change is unavoidable, and particularly if you are not sure whether a contest term that you need to change is “material” or not, you should seek guidance from FCC counsel.    

Related Posts: