Radio Advertisement - Regulatory Considerations

Regulatory Considerations

The Communications Act of 1934 established the FCC, which, in turn, regulates the broadcasting media. In response to the payola scandal of the 1950s, the FCC established guidelines, known as "sponsorship disclosure" rules. These rules apply to both pay-for-play and advertisements alike, recognizing that consumers deserve to know "by whom they are being persuaded". Of particular note to advertisers is Section 317 of the Act, also known as the "Announcement of Payment For Broadcast" provision. It states, in general terms, that where money, services or other valuables are directly or indirectly paid to a radio station, in exchange for mentions on the air, the station must disclose that fact. For example, if a cell phone provider gives a free cell phone to a station's DJ, who then talks about that cell-phone provider on the air, perhaps mentioning what great service he has, the announcer must disclose that it is an advertisement.

Usually, listeners are able to discern radio advertisements from entertainment content. The Communications Act does include an "obviousness" exception: where it is obvious that something is a commercial, the announcement-for-payment provision does not apply. However, where anything of value has changed hands in exchange for mentions on the air, a station has a duty to disclose it.

The Federal Trade Commission is also responsible for broadcast industry regulation, in terms of false or misleading advertising practices. In October 2009, the FTC published guidelines regarding endorsements, requiring clear disclosure of the connection between an advertiser and an endorser. Under the FTC guidelines, an endorser is responsible for disclosing any "material connections" they have with a seller/business.

In recent years, there has been a trend toward the blurring of entertainment/editorial and advertising content. Marketers are "embedding" products into the media so that consumers are not aware they are being advertised to. In radio, it is sometimes difficult to tell where DJ chit-chat ends and an advertisement begins.