Political Broadcasting - From Around the Borders

Interestingly, on the political front, the FEC has just issued a case that deals with a novel question affecting Texas and other border state broadcasters.

It now appears that immigration and drug cartels are not the only problems that border state broadcasters now have to deal with. Foreign broadcasters are now vying to sell time to U.S. candidates for elective office -- and they want to do it at their own lowest unit rate (LUC). The issue arises as an advisory opinion issued by the Federal Election Commission at the request of a Mexican broadcaster serving audiences in Texas and the time sales agency it uses.

Starchannel Communications, Inc., a U.S. company that sells advertising time on Mexican television stations owned by Mexican broadcaster Televisa to U.S. advertisers, requested the ruling to assure there would be no legal barrier to its plan to sell political advertising to U.S. candidates in border states. According to Nielson, Televisa stations are popular in Texas, garnering primetime household ratings of 23% for the Rio Grande Valley market, 42% for the Laredo market, and 13% for the El Paso market, thus reaching a significant percentage of U.S. border market viewers.

While Starchannel and Televisa are independent of one another, Starchannel acts as the exclusive representative of Televisa in the sale of advertising time in the U.S. border market on Televisa stations. Under their arrangement, Televisa establishes a minimum price for air time, based on estimated Nielsen ratings for all advertisements. The ruling does not say so, but presumably the rates also vary by class of time. The minimum prices do not vary based on the identity of the buyer.

Starchannel's deal won't permit it to discount the Televisa-established minimum price, but it may negotiate higher prices based on a variety of commercial factors. Televisa is paid only its established minimum price and any increase is kept by Starchannel. In expanding to Federal candidate advertising, Starchannel plans to follow this same model, but will offer Federal candidates the Lowest Unit Charge ("LUC") for the time slots on Televisa. By definition, that would be the Televisa established rate, assuming some time is sold by Starchannel at the Televisa mandated minimum price.

While Starchannel claimed it is not legally required to offer Federal candidates the LUC because Televisa is a Mexican company, it believes it must do so to compete with U.S. broadcasters' LUC in the same markets. Otherwise, it will require Federal candidates to comply with all paperwork, disclaimer, and other requirements of the Communications Act and FCC regulations. Candidates will be responsible for the production of their own spots and Starchannel will exercise no control over the content of the advertisements.

Several questions are presented by this arrangement.

1. Would the sale of time on Mexican stations at LUC amount to an illegal campaign contribution by the Mexican station because
   1. It is owned by a Mexican company, or
   2. It is below the rates sold to some other advertisers, and therefore be a preferential rate amounting to an undeclared, in-kind campaign contribution?
2. Does the Mexican station have to honor mandatory reasonable access demands by candidates that Starchannel may not offer to sell to?
3. Are opposing candidates entitled to equal opportunities?

The FEC held that Starchannel may sell advertising time on a television station owned by Televisa, a Mexican corporation, to Federal candidates under the conditions described below.

The Federal Election Campaign Act of 1971, as amended (the "FEC Act") Act and FEC regulations prohibit foreign nationals from making a contribution or donation of anything of value without charge or at a charge that is less than the usual and normal charge in connection with a Federal, State or local election. A "foreign national" includes corporations and other "legal persons." A "contribution" includes anything of value made for the purpose of influencing an election for Federal office. "Normal charge" is defined by the FEC as the price at which the goods or services would be purchased at the time and at commercially reasonable prevailing rates.

The FEC concluded that Televisa was indeed a foreign corporation barred from making campaign contributions to U.S. candidates. However, under the Starchannel arrangement, neither Televisa nor Starchannel would provide a service at less than the usual and normal charge, and therefore there is no "contribution." The candidate pays the same mandatory Televisa minimum charge required of all its advertisers. Since this price cannot be discounted, it would also be the LUC for that station, at least regarding time sold by Starchannel. Starchannel will only accept advertisements that comply with all other U.S. law, and therefore there is no favoritism being shown to any candidate, at least not at this stage.

While Starchannel states that it will offer LUC to all candidates, even where it is not required to, this appears to be gratuitous, given its restrictions under the Televisa agreement. However, the limiting statement that it intends to offer the LUC to Federal candidates whose advertisements would entitle them to receive the LUC from American broadcasters invokes the requirements for the stand-by-your-ad and sponsorship ID statements required by the Bipartisan Campaign Reform Act ("BCRA") and the potential loss of LUC rights by the candidate who does not make that proper disclosure and certification to Televisa. If that happened, all Texas broadcasters would have the right, and possibly the obligation, to deny a candidate LUC on their own stations for the balance of the campaign, or face charges of making an illegal campaign contribution themselves.

An interesting question not discussed by the FEC, nor apparently disclosed in the facts presented by Starchannel, is whether Televisa sells any advertising on these stations to Mexican advertisers, outside the Starchannel exclusive arrangement, at prices less than the Starchannel minimum. Were that to be the case, issues relating to both FCC LUC and FEC contribution regulations might be presented.

Yet more anomalies are possible results of this case. The FEC has jurisdiction because of the prohibition on foreign political company contributions. The other interesting issue, of course, is that since the Mexican station is not subject to the jurisdiction of the FCC, it is not under any equal opportunities obligation. So, Mexican stations are in a position to skew the political process in Texas or other border states. If a Texas station decided to give the neglected candidate more time, in order to achieve balance, it would then itself be subjected to equal opportunity requirements.

Meanwhile, Televisa could sell only to Democrats, or only to Republicans, or only to U.S. candidates favoring propositions it agrees with, without equal opportunities concerns. Opposing candidates seeking to respond to spots on Mexican stations could seek time on the U.S. stations, which then would be required to honor equal opportunities demands from the first candidate. So long as the inventory holds out, this may not be a hardship on the stations, but it does threaten to unbalance the political process in Texas, or subject any other border to the same international broadcaster tactics.

This column is provided for general information purposes only and should not be relied upon as legal advice pertaining to any specific factual situation. Legal decisions should be made only after proper consultation with a legal professional of your choosing.