The Advertising Report: FCC Watchdog Presses Case For Enforcement of Payola Laws
 

By Amy Schatz
8 June 2005
The Wall Street Journal

Questions For . . . Jonathan Adelstein

Title: Commissioner

Agency: Federal Communications Commission

JONATHAN ADELSTEIN, 42 years old, caused a stir recently when he called for the Federal Communications Commission to investigate whether broadcasters may have violated federal payola laws through undisclosed product promotions.

Mr. Adelstein was reacting to news reports, in The Wall Street Journal and elsewhere, about payments by companies like Eastman Kodak Co. to free-lancers hired to review products on local and national television-news broadcasts. Mr. Adelstein, one of two Democrats on the five-member commission, is also concerned about subtle paid product placements on TV shows.

Mr. Adelstein became an FCC commissioner in 2002 after a long career as a Senate staffer, including seven years as a senior aide to fellow South Dakota native, former Sen. Tom Daschle.

Below, he discusses his view that the FCC should more aggressively enforce payola laws, which require that broadcasters and cable channels announce when they are airing programs for which they have received payment.

WSJ: Product placements have become increasingly popular as a way to get commercial messages to audiences who are able to skip ads thanks to new technology. What's wrong with that?

Adelstein: There's nothing wrong with product placement so long as it's disclosed as required by law. The idea of the disclosure laws is that the public needs to know when they're being advertised to. The whole idea of product placements is to advertise to people when they're not expecting it. So the law requires that advertisers disclose then when they're on broadcast stations as something that has been paid for, and if they don't do that, it's a serious violation of the law.

WSJ: How would you propose TV networks and others disclose product placements to audiences, then? What form would the disclosure take?

Adelstein: Currently, our rules require that they disclose it sometime during the course of the broadcast. We don't spell out how that's done, but I don't think it's adequate to just have it quickly run by on a scroll so that someone would need to pause their (digital video recorder) and get out a magnifying glass to read it. That's not real disclosure.

WSJ: So what would you propose?

Adelstein: I just want to make sure the disclosure -- if it's at the end -- runs for a sufficient period and a sufficient size so that people can read it and know they've been advertised to.

WSJ: So you'd want a larger font size, longer time on the screen?

Adelstein: Yeah, basically. I think it needs to run in a way in which people can actually see it.

WSJ: The Federal Trade Commission has already declined to require disclosure of product placements. Do you really think the FCC is ready to push this ball forward?

Adelstein: The FCC operates under a different law than the FTC. The FTC is obligated to battle deceptive practices, and they determined they could do that without specifically going after a larger rulemaking on product placements. We already have a law in place that's specific to the FCC that we enforce which requires disclosure by broadcasters and cable companies for material that's been paid for or with any valuable consideration at all. We have no choice but to enforce that law.

WSJ: Should there be different standards for children's programming?

Adelstein: Children's programming is a particular concern because kids already can't distinguish between advertising and regular program content. It's particularly manipulative when you're dealing with children to try and insert product placements into the programs themselves . . . Let's leave it at that.

WSJ: What steps can the FCC take to limit this sort of thing?

Adelstein:The best thing we can do is strictly enforce our rules. I think if we find violations and pursue them aggressively, we'll find the industry will do a better job of compliance.

WSJ: You're in the Democratic minority at the FCC, and the Republican chairman hasn't exactly signed on for tougher enforcement. How do you move this forward?

Adelstein: I've spoken to all of my colleagues about this, and everyone has expressed a commitment to fully enforcing the law. I fully expect that we'll be seeing complaints about this kind of practice. That could trigger an investigation.