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D.C. Circuit Vacates FCC Rule Requiring Broadcasters To Verify Foreign Governmental Sponsorship Of Programming – Telecoms, Mobile & Cable Communications

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The U.S. Court of Appeals for the D.C. Circuit, in a unanimous
decision, ruled that the Federal Communications Commission (FCC)
exceeded its statutory authority in requiring, as part of a new
foreign sponsorship identification rule adopted in 2021, that
broadcasters must verify, through inquiry to U.S. Department of
Justice (DOJ) and FCC sources, whether programming time is being
leased on a broadcast station by a foreign governmental entity.

Fearing that the Chinese and Russian governments, among others,
have been secretly leasing airtime to broadcast propaganda on
American radio and TV stations, the FCC adopted the new sponsorship
identification rule requiring broadcasters to make an on-air
disclosure where airtime is being leased by a foreign government
entity or its agent. In adopting the new foreign sponsorship
disclosure requirement, the FCC also required broadcasters,
whenever they lease airtime to a sponsor, to separately verify the
sponsor’s potential status as a foreign governmental entity or
agent, through inquiry to the DOJ’s Foreign Agent Registration
Act (FARA) website and an FCC foreign media outlet report.

The new foreign sponsorship identification requirement was
adopted under a provision of the Communications Act, Section 317,
which requires broadcasters to announce at the time of the program,
who “paid for or furnished” a sponsored program, and
requires the FCC to adopt rules implementing the provision. The FCC
has had sponsorship identification rules in place for years, which
are the source of the familiar sponsorship identification
announcements on broadcast programing regarding payments made and
consideration provided in connection with broadcast matter.

In response to the challenge to the DOJ/FCC verification
requirement from the National Association of Broadcasters, the D.C.
Circuit observed that Section 317 only requires broadcasters to
exercise reasonable diligence in obtaining information necessary to
make the required sponsorship identification announcement from its
employees and “from other persons with whom it deals
directly” in connection with the broadcast matter, typically
the sponsor or program provider. Basically, the court found that by
imposing a separate verification requirement that extended beyond
inquiry to employees and entities providing sponsored programming,
the FCC exceeded its statutory authority. As the D.C. Circuit
found, the FCC “has decreed a duty that the statute does not
require and that the statute does not empower the FCC to
impose.” This proved fatal to the verification requirement, no
matter how compelling the underlying policy rationale – here
the feared use of American airwaves for foreign governmental
propaganda by undisclosed foreign principals and agents.

The FCC argued before the court that verifying accuracy of
information is just an element of reasonable diligence when
acquiring information from a source, consistent with the
requirements of Section 317. The Court rejected this view,
concluding that broadcasters do not bear responsibility for the
truth of the information they obtain beyond their duty of inquiry
under the statutory provision to employees and the sources of
sponsored material. According to the court, “a generic grant
of rulemaking authority to fill gaps . . . does not allow the FCC
to alter the specific choices Congress made.” Rather,
“the FCC must abide ‘not only by the ultimate purposes
Congress has selected, but by the means it has deemed appropriate,
and prescribed, for the pursuit of those purposes.'” While
the issue in the foreign sponsorship identification case was a
fairly narrow one, the key holding in the case is an important
reminder that the FCC’s authority is limited by the scope of
the statutory provisions under which it is acting, no matter the
issue or the perceived public policy imperative.

FCC Chairwoman Jessica Rosenworcel, in response to the ruling,
issued a statement reiterating the policy rationale for the vacated
rule, but stopped short of defending the Commission’s authority
to adopt it, stating that
“consumers deserve to trust that public airwaves aren’t
being leased without their knowledge to private foreign
actors.” NAB President and CEO Curtis LeGeyt applauded the
decision, remarking that it “ensures that the rules rightly
continue requiring the handful of stations airing foreign
government-sponsored programming to identify it as such, but
removes the burden on the overwhelming majority of stations that
never air foreign government-sponsored content.”

Although the Court vacated the verification requirement, the
decision otherwise leaves the FCC’s new foreign-sponsorship
rules largely intact. Broadcasters must continue to disclose to
listeners and viewers through broadcast announcements foreign
governmental sponsorship of programming material broadcast through
the lease of station time and maintain programming lease agreement
records in their public station files.

The FCC has not indicated at this point whether it will seek
review of the D.C. Circuit decision, or propose an alternative to
the vacated verification requirement.

Ryan Gillcrist, a Summer Associate in the Washington, D.C.
office, contributed to this alert.

The content of this article is intended to provide a general
guide to the subject matter. Specialist advice should be sought
about your specific circumstances.

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