Federal Communications Commission FCC 17-171 Before the Federal Communications Commission Washington, D.C. 20554 In the Matter of ) ) Sinclair Broadcast Group, Inc. ) File No.: EB-IHD-16-00021748 ) NAL/Acct. No.: 201732080006 ) FRN No.: 0004331096 NOTICE OF APPARENT LIABILITY FOR FORFEITURE Adopted: December 13, 2017 Released: December 21, 2017 By the Commission: Chairman Pai and Commissioners O’Rielly and Carr issuing separate statements; Commissioners Clyburn and Rosenworcel dissenting and issuing separate statements. I. INTRODUCTION 1. We propose a penalty of $13,376,200 against Sinclair Broadcast Group, Inc. (identified herein, including its wholly owned subsidiaries on Attachment A and Sinclair Television Group, Inc., as Sinclair) for apparently engaging in repeated violations of the Communications Act of 1934, as amended (Act), and Federal Communications Commission (FCC or Commission) rules (Rules) regarding paid-for broadcast programming.1 Our rules require a broadcaster airing a paid program to include an announcement stating that the program has been paid to air and identifying the program sponsor (collectively, sponsorship identification announcements or disclosures). After receiving an anonymous complaint (Complaint), the Commission’s Enforcement Bureau (Bureau) gathered evidence that revealed that Sinclair apparently was paid to broadcast sponsored programming, including programming in the form of news segments that aired during the local news. Sinclair apparently broadcast such programming at 64 of its stations—collectively more than 1,400 times—without airing the required sponsorship identification announcements. The Bureau’s investigation also showed Sinclair apparently provided the paid programming to 13 non-Sinclair stations more than 280 times without advising those licensees that the programming was sponsored or who sponsored it. Then, the non-Sinclair stations apparently broadcast such programming without informing viewers that the programming was paid for by a third party or clearly identifying the third party. These apparent actions violate the Act and the Rules. 2. Our action today advances the Commission’s longstanding goals of protecting consumers by ensuring they know who is attempting to persuade them and protecting broadcasters and sponsors from unfair competitors that fail to abide by our disclosure rules. When a broadcast licensee fails to disclose the sponsor of paid programming, it may mislead the public into believing the paid broadcast material is a station’s independently generated news or editorial content. In addition, enforcement of the sponsorship identification requirements protects competition by preventing sponsors from gaining an unfair advantage by paying stations to present commercial material as news or editorial content, while their competitors’ paid programming is properly disclosed as sponsored material. II. BACKGROUND 3. On April 11, 2016, the Commission received a Complaint alleging Sinclair had aired “compensated stories as news content” about Huntsman Cancer Institute (HCI) on behalf of the Huntsman Cancer Foundation (Huntsman Foundation or HCF) but failed to disclose that HCF paid for those stories 1 Attachment A also identifies the Sinclair and non-Sinclair stations that broadcast the programming discussed herein. Federal Communications Commission FCC 17-171 to air.2 On July 26, 2016, the Bureau issued a letter of inquiry (LOI) to Sinclair, seeking more information about the HCI programming.3 The LOI included a copy of the Complaint.4 On September 30, 2016, Sinclair responded to the LOI by providing a narrative statement and responsive documents (LOI Response).5 The Bureau thereafter issued additional inquiries to Sinclair, to which Sinclair responded.6 4. As described below, although Sinclair disputes the inferences we draw from the facts, there are few, if any, actual disputes about the key facts associated with the apparent violations.7 Sinclair and the Huntsman Foundation entered into an agreement (Huntsman Agreement) to promote HCF and 2 Letter from anonymous complainant to Jeffrey J. Gee, Chief, Investigations and Hearings Division, FCC Enforcement Bureau (Mar. 31, 2016) (on file in EB-IHD-16-00021748). 3 Letter from Matthew L. Conaty, Deputy Chief, Investigations and Hearings Division, FCC Enforcement Bureau, to Barry M. Faber, Esq., Executive Vice President and General Counsel, Sinclair Broadcast Group, Inc. (July 26, 2016) (on file in EB-IHD-16-00021748). 4 Id. at 1, Attachment. 5 Letter from Miles S. Mason, Esq., Counsel to Sinclair Broadcast Group, Inc., Pillsbury Winthrop Shaw Pittman LLP, to Marlene H. Dortch, Secretary, FCC, et al. (Sept. 30, 2016) (on file in EB-IHD-16-00021748) (LOI Response). Sinclair acknowledged receipt of the Complaint and discussed it in its LOI Response. Id. at 2 n.2. 6 E-mail from Matthew L. Conaty, Deputy Chief, Investigations and Hearings Division, FCC Enforcement Bureau, to Miles S. Mason, Esq., Counsel to Sinclair Broadcast Group, Inc., Pillsbury Winthrop Shaw Pittman LLP (Oct. 25, 2016, 17:04 EST) (on file in EB-IHD-16-00021748) (Supplemental LOI); Letter from Miles S. Mason, Esq., Counsel to Sinclair Broadcast Group, Inc., Pillsbury Winthrop Shaw Pittman LLP, to Marlene H. Dortch, Secretary, FCC, et al. (Nov. 4, 2016) (on file in EB-IHD-16-00021748); E-mail from Miles S. Mason, Esq., Counsel to Sinclair Broadcast Group, Inc., Pillsbury Winthrop Shaw Pittman LLP, to Matthew L. Conaty, Deputy Chief, Investigations and Hearings Division, FCC Enforcement Bureau, et al. (Nov. 15, 2016, 16:27 EST) (on file in EB-IHD-16- 00021748) (collectively, Supplemental LOI Response); Letter from Miles S. Mason, Esq., Counsel to Sinclair Broadcast Group, Inc., Pillsbury Winthrop Shaw Pittman LLP, to Marlene H. Dortch, Secretary, FCC, et al. (Apr. 4, 2017) (on file in EB-IHD-16-00021748) (Second Supplemental Response); Letter from Miles S. Mason, Esq., Counsel to Sinclair Broadcast Group, Inc., Pillsbury Winthrop Shaw Pittman LLP, to Marlene H. Dortch, Secretary, FCC, et al. (May 12, 2017) (on file in EB-IHD-16-00021748) (Third Supplemental Response). 7 Sinclair requested, pursuant to 47 CFR § 0.459, that the Commission afford confidential treatment of its entire LOI Response. See LOI Response at 19. The Bureau thereafter provided Sinclair the opportunity to supplement and amend its request to conform to the requirements of Section 0.459. Letter from Matthew L. Conaty, Deputy Chief, Investigations and Hearings Division, FCC Enforcement Bureau, to Miles S. Mason, Esq., Counsel to Sinclair Broadcast Group, Inc., Pillsbury Winthrop Shaw Pittman LLP (Apr. 28, 2017) (on file in EB-IHD-16-00021748); E- mail from Matthew L. Conaty, Deputy Chief, Investigations and Hearings Division, FCC Enforcement Bureau, to Miles S. Mason, Esq., Counsel to Sinclair Broadcast Group, Inc., Pillsbury Winthrop Shaw Pittman LLP (May 15, 2017, 16:13 EDT) (on file in EB-IHD-16-00021748). Sinclair subsequently amended and narrowed the scope of its request, following discussions with Commission staff. Letter from Miles S. Mason, Esq., Counsel to Sinclair Broadcast Group, Inc., Pillsbury Winthrop Shaw Pittman LLP, to Marlene H. Dortch, Secretary, FCC, et al. (May 17, 2017) (on file in EB-IHD-16-00021748) (rescinding request to keep confidential Exhibit D to the Supplemental LOI Request and pages 5-40 of the Second Supplemental Response); Letter from Miles S. Mason, Esq., Counsel to Sinclair Broadcast Group, Inc., Pillsbury Winthrop Shaw Pittman LLP, to Marlene H. Dortch, Secretary, FCC, et al. (May 12, 2017) (on file in EB-IHD-16-00021748) (withdrawing request for confidentiality with respect to LOI Response Exhibits 1, 2, 3, 4, 5, 8, 11, 12, 15, 18 & 19); Letter from Miles S. Mason, Esq., Counsel to Sinclair Broadcast Group, Inc., Pillsbury Winthrop Shaw Pittman LLP, to Marlene H. Dortch, Secretary, FCC, et al. (May 3, 2017) (on file in EB-IHD-16-00021748). This NAL does not disclose material identified as confidential under Sinclair’s amended request; we defer ruling on the amended request unless and until necessary. See 47 CFR § 0.459(d)(3) (the Commission may defer acting on requests for confidential treatment of materials submitted to the Commission until a request for inspection has been made pursuant to § 0.460 or § 0.461; such materials will be accorded confidential treatment until the Commission acts on the confidentiality request and all subsequent appeal and stay proceedings have been exhausted). 2 Federal Communications Commission FCC 17-171 HCI through programming broadcast on Sinclair stations and on stations to which Sinclair provided programming under various agreements (we refer collectively to these non-Sinclair stations as Agreement Stations).8 The Huntsman Agreement provided for a multi-market campaign including: (a) 60-90 second sponsored stories about HCI made to look like independently generated news stories (on-air stories)9 and (b) 30-minute paid programs about HCI (long-form programs).10 KUTV, Sinclair’s station in Salt Lake City, Utah, produced the on-air stories and long-form programs and transmitted them to other stations for broadcast.11 According to Sinclair, “[d]espite repeated written and oral direction from Sinclair’s executive and legal staff to include proper sponsorship identification,” certain broadcasts containing paid programming aired without the required sponsorship identification announcements.12 Sinclair attributes this to alleged miscommunications and “misunderstanding[s]” concerning the process for inserting sponsorship identifications,