Placements Get FCC Scrutiny
Amy Schatz and Suzanne Vranica
Wall Street Journal
June 23, 2008
WASHINGTON -- Federal regulators are beginning an effort
to crack down on stealth advertising in television
shows, a move aimed at letting consumers know when
companies have paid to use their products as props.
This week the Federal Communications Commission is
expected to open a formal proceeding about new rules
requiring more disclosure of product placement, a
technique that has become a critical tool for Madison
Some of the best-known deals include Coca-Cola Co.'s
placement on Fox's "American Idol," where TV viewers
frequently see Coke cups on the judges' table and hear
frequent mentions of the brand.
Fox is a division of News Corp., which owns Dow Jones &
Co., publisher of The Wall Street Journal.
Regulators say they've become more concerned about the
issue as TV executives seem to be using more product
placements to reach viewers, who are using digital video
recorders to skip commercials.
The rules wouldn't bar the practice of product
placements or other in-show advertising designed to
reach consumers who skip commercials.
Regulators are mostly interested in improving the amount
of disclosure advertisers and producers will have to
provide for consumers during the TV programs.
"You shouldn't need a magnifying glass to know who's
said FCC Commissioner Jonathan Adelstein, a Democrat who
pressed the agency to act on the issue. "A crawl at the
end of the show shrunk down so small the human eye can't
read it isn't really in the spirit of the law." Current
rules require disclosure but allow it at the end of the
The FCC will look at whether it should require TV shows
to include notices similar to what political candidates
must say before or after campaign ads.
It also will examine whether embedded advertisements
violate FCC rules on children's programming, which
require a few-second break in between the show and an
ad. Commissioners will look at whether any new
product-placement rules need to be extended to cover
cable programmers, which are currently exempt.
For several years now, network and cable television
shows have relied on elaborate brand-integration deals
as a way to appease advertisers increasingly worried
about ad-zapping technology.
Placing brands within entertainment content is showing
no signs of a slowdown. During the recent upfront -- the
annual event at which network executives sell the lion's
share of their ad time for the new fall season --
networks such as General Electric Co.'s NBC were
aggressive about welcoming advertisers into their shows.
Product placements on broadcast TV shows rose almost 40%
in the first quarter from the year-earlier period,
according to Nielsen Co., which found that reality
television shows, including "American Idol" and NBC's
"The Biggest Loser," had the highest number of paid
U.S. paid product-placement spending increased 33.7% to
$2.90 billion in 2007 from a year earlier, according to
PQ Media, a market-research firm in Stamford, Conn. The
U.S. accounts for most of the global spending on product
The U.K. recently indicated it will reject a European
Union proposal that would allow product placements in TV
shows there. Each EU member country can decide whether
to allow the practice, but U.K. officials have expressed
concern that it might lead to consumer distrust of
The FCC was expected to take up the matter in December,
but that effort was delayed after the advertising
industry and networks complained. They asked
commissioners to only open a formal inquiry into the
matter, which wouldn't necessarily result in new rules.
"The FCC has already taken some significant actions in
this area. If you pay for placement of a product in a
program, you have to clearly and conspicuously make that
evident," said Dan Jaffe, executive vice president of
government relations at the Association of National
Advertisers, one of three industry groups opposing the
With the FCC split on the issue, the commissioners
compromised, cordoning off proposals most offensive to
advertisers -- such as contemporaneous notices when a
product is shown -- into a separate inquiry that
wouldn't result in new rules.
Last week, the FCC's five commissioners unanimously
approved that inquiry as well as a separate rule-making
vote about what sort of disclosures might be
appropriate. The vote hasn't yet been made public but is
expected to be announced this week.
It's been almost five years since Commercial Alert, a
consumer group co-founded by Ralph Nader, asked the FCC
to examine the issue of product placement and to write
new rules that "product placements should be identified
when they occur."
Just last week, 23 consumer groups sent a letter to the
FCC asking the agency to act soon to prevent what they
called "Trojan horse"
Hollywood writers have also complained, saying they
worry about being asked to write product pitches into
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