492 Federal Communications Commission Reports
Application, for Review
Complaint, Formal
Declaratory Ruling, Request for Denied
Application for review of staff's ruling denying the complaint
and request for declaratory ruling denied. Commission modifies
ruling, however; sufficient grounds were not presented to
warrant reversal.
BEFORE THE
FCC 81370
FEDERAL COMMUNICATIONS COMMISSION
WASHINGTON, flC. 20554
In re Request for Declaratory Ruling of
Paul Loveday and Californians for Smok-
ing and No Smoking Sections
ORDER
(Adopted: July 30, 1981; Released: August .7, 1981)
B THE COMMISSION:
1. The Commission has before it an Application for Review, filed
on November 28, 1980, by Paul Loveday et al, of the Broadcast
Bureau's ruling of October 30, 1980. *
2. The Bureau's ruling (see Attachment A, page 7) stated that
"[the complainants had not submitted) any conclusive evidence
which establishes that the tobacco companies are exercising editorial
control over CARE advertisements. . . ." To the extent that "conclu-
sive" may imply an unwarranted burden on complainants in cases
such as these, we will modify the Bureau's ruling by striking
"conclusive." The Bureau's decision, with which we agree, was based
primarily on a finding that the licensees did not act unreasonably.
The information before the Bureau did not show that there was any
editorial control of the CARE advertisements by "the tobacco
companies.
3. Except as modified above, we believe the Bureau's ruling was
correct, and the Application for Review does not contain sufficient
grounds to warrant a reversal of the ruling. Therefore, pursuant to
Section 1.115(g) of the Commission's Rules and Regulations, the
Application for Review IS DENIED.
FEDERAL COMMUNICATIONS COMMIssIoN,
WILLIAM J. TRICARICO, Secretary.
'A copy of that ruling is appended (Attachment A).
87 F.C.C. 2d
Californians for Smoking & No Smoking Sections 493
ATTACHMENT A
FEDERAL COMMVNICATIONS COMMISSION
WASHiNGTON, D.C. 20554
01127
Oct. 30, 1980
IN REPLY REFER To:
8330-H
C10-1275
C10-1264
C10-997
C10-768
Mr. Paul L. Loveday
Attorney at Law
Two Embarcadero Center, 24th Floor
San Francisco, California 94111
In re: Request for Declaratory Rul-
ing by "Californians for Smoking
and No Smoking Sections."
Dear Mr. Loveday:
This is in reference to the Request for Declaratory Ruling that you filed on October
17, 1980 on behalf of the "Californians for Smoking and No Smoking Sections" (the
"Committee") concerning advertisements opposing Proposition 10 by "Californians
Against Regulatory Excess" ("CARE"). The Committee states that Proposition 10
represents "a measure placed on the November 4, 1980 California election ballot by
the signature initiative process" which would "create smoking and no smoking
sections in indoor public places." The Committee supports the adoption of Proposition
10; CARE opposes its adoption,
Background
It is the Committee's contention that CARE is acting as the "agent and alter ego" of
the tobacco industry1 since CARE derives substantially all or "virtually 100%" of its
funds from the . industry2 and has relinquished editorial control over its advertise-
ments. to the industry. Essentially, the Committee's contentions are based on the
following: (1) CARE and "Californians for Common Sense," organized to oppose a
similar ballot proposition in 1978, retained the same legal counsel and advertising
firm and further involved similar campaign themes and strategies; (2) the four largest
cigarette manufacturers are "acting in concert" by contributing funds to CARE
according to their respective market shares in California, as was the case in 1978; (3)
the tobacco industry took personal credit for defeating the 1978 ballot proposition;2 (4)
the four cigarette manufacturers "deferred massive spending on advertisements
against Proposition 10 [until]. . . the day after the cutoff date for disclosing campaign
expenditures" allegedly to conceal their campaign involvement;4 (5) CARE has
employed former spokespersons for the,Tobacco Institute to advocate its cause; and (6)
Proposition 10 represents a "national campaign" launched by the tobacco industry to
oppose restrictive legislation aimed at smoking, as evident by the activities in Dade
County, Florida, where a similar ballot proposition is being considered. The
Committee also points out that CARE misrepresented its Board of Directors to the
Footnotes are at the end of this ruling.
87 F.C.C. 2d
494 Federal Corn rnunications Commission Reports
Californian licensees by including Mr. James Collins, the President of the California
Restaurant Association, as a member. The Committee adds "only an examination of
the files and records of Excess [CAREI can disclose how many other misrepresenta-
tions there are in Excess' [CARE's]. . . letter to Station Managers."
The Committee concludes that given the significant financial support provided by
the tobacco industry and its alleged control over the CARE campaign, the California
broadcast licensees have not "adequately fuifill[ed] their obligations of reasonable
diligence" and "have participated with the Tobacco Industry in acts of affirmative
deception by running a sponsorship identification statement ("Tag-line") stating that
such advertisements were Paid for by Californians Against Regulatory Excess' when
in fact" they were paid for by the tobacco industry. The Committee is requesting that
the Commission: (1) declare that the sponsorship identification statement attached to
CARE advertisements is "misleading" and in violation of Section 317(c) of the
Communications Act and Section 73.1212 of the Commission's Rules and Regulations;
and (2) direct all California broadcast station licensees to identify all CARE
advertisements as "paid for by the Tobacco Industry" rather than "Californians
Against Regulatory Excess."
In support of its request, the Committee cites Amendment of the Commission
"Sponsorship Identification" Rules (Sections 73.129, 73.289, 73.789 and 76.22I), 52
FCC 2d 701 (1975); In re KOOL-TV, 26 FCC 2d 42 (1970); and United States v. WHAS,
Inc., 385 F. 2d 784 (6th Cir. 1967). The Committee distinguishes the instant case from
VOTER, 46 ER 2d 350 (B/c. Bur, 1979) and National Welfare Rights Organization, 41
FCC 2d 187 (1973), since here the tobacco industry allegedly has exercised editorial
control over CARE advertisements.
The Committee asserts that time is of the essence, in light of CARE's "media blitz"
during the final days before the election which has swayed voters to oppose
Proposition 10, according to recent polls. The Committee believes that if the CARE
advertisements are "properly" identified as paid for by the tobacco industry, the
"credibility" of such advertisements would be diminished in the eyes of the voters,7
On October 27, 1980, by its attorney, CARE filed its response. CARE represents that
it is a bona fide nonprofit corporation and political committee, with 12 Board
members, organized for the purpose of "educat[ing] California voters about excessive
government regulation, and specifically, to oppose a California state ballot measure,
Proposition 10, on the November 4, 1980 general election ballot." CARE cites VOTER,
supra, and contends that the California broadcast station licensees "have acted
properly and within their discretion in concluding that [it] is the entity, and the only
entity, they must identify as sponsor of [CARE's] political spot announcements."
CARE asserts that it has "wholly and fairly disclosed its contributions under
California's campaign reporting and disclosure laws" and although "the four tobacco
companies are the major contributors," a fact which has been "widely publicized,"0
CARE exercises "editorial control over its spot ads" and "it is not controlled by the
tobacco companies."
CARE rejects the allegations contained in the Committee's request and states that:
(1) The campaign management of [CARE] is independent of any and all tobacco
companies and any of its trade associations.
(2) The use by [CARE] of some experts who have previously worked on anti-
smoking campaigns, which employment was sometimes by design and sometimes
by coincidence, is demonstrative of good management and not of conspiratoral
intentions.
(3) The allegations that [CARE's] campaigu is similar to the 1980 Dade County
Florida anti-smoking campaign is not at all substantiated and is false.
(4) The allegations that [CARE's] campaign is similar to the California Proposi-
87 F.C.C. 2d
Californians for Smoking & No Smoking Sections 495
......
tion 5 campaign in 1978 is correct. Committee acknowledges that it is appealing
to the residue of voter disapproval of Proposition 5.
CARE added that it has not retained any current employee of the tobacco companies
or the Tobacco Institute, but for the voluntary work of two employees of the Institute,
who assist in the "distribution of literature throughout California."
CARE included a declaration of Richard S. Woodward, a partner of the advertising
firm retained by CARE, in which he stated that his firm has contracted with CARE to
prepare scripts and submit them to that organization's Board and legal counsel for
clearance. Mr. Woodward also stated that Mr. Nelson, the organizer and campaign
manager of CARE, was on site during most of the production of the CARE
advertisements.
CARE states that the Committee is asking the Commission to determine whether or
not a political committee is an independent, bona fide organization. CARE further
states that broadcasters have the responsibility "to exercise reasonable diligence to
determine the identity of who paid for sponsored material." CARE concludes by
stating, "to shift that responsibility to the Commission would literally place the
Commission in the 'thicket' of all political campaigns
On October 26, 1980, counsel for the Committee contacted a staff attorney of this
office. The Committee asserted that CARE's documents prove that the tobacco
industry directs the campaign strategy and exercises editorial control over the CARE
advertisements, which it believes is essentially demonstrated by the following:
(1) On July 27, 1980 a CARE "Update" was sent to its committee from Mr.
Bergland, Chairman of CARE, which discussed the filing of a lawsuit challenging
statements concerning Proposition 10, prior to any Board meeting, indicative of
the Board's lack of control over campaign strategy;
(2) There were only four Board meetings held, only one of which was in person,
the remainder were telephonic. Only one of the four meetings had a quorum.
Thus, CARE's representations to California broadcast station licensees that the
Board "meets regularly" is incorrect and moreover, CARE's actions are not in
compliance with its bylaws.
(3) The Board meetings were conducted on 8/26/80, 10/6/80, 10/13/80, 10/20/80.
The advertising firm of Woodward, McDowell & Larson was retained in
September and CARE's advertisements were being aired on 9/30/80. The time
sequence suggests that CARE's Board did not meet after the advertising firm was
retained and before the advertisements were completed and carried by the
stations. The Committee maintains that the CARE Board did not have an
opportunity to preview the advertisements and, thus, did not exercise editorial
control over their content.
On October 27, 1980, counsel for CARE responded to the Committee's reply, during a
phone conversation with a staff attorney of this office. CARE stated that, due to an
oversight, it neglected to mention the Board's first organizational meeting which was
held on June 16, 1980. In attendance were Mr. Bergland, Mr. Dohr and Mr. Benson.
CARE also explained that a political committee which is comprised of individuals with
diverse interests, occupations and responsibilities, unlike a private corporation or an
on-going organization, often experiences difficulties in scheduling meetings and
commanding appearances at such, which accounts for its irregular meetings. CARE,
however, states that Mr. Bergland (Chairman and President of' the Board), Mr. Dohr
(Treasurer) and Mr. Nelson (Senior Campaign Manager and Organizer of CARE) meet
regularly, supervise the campaign and exercise complete editorial control over CARE
advertisements. CARE denies that the tobacco industry exercises any control
whatsoever over the organization's activities or strategies.
87 F.C.C. 2d
496 Federal Communications Comm i$sion Reports
Discussion
The thrust of this request is that the sponsorship identification statements attached
to CARE advertisements are inadequate and improper under Section 315 of the
Communications Act and Section 73.1212 of the Commission's Rules and Regulations.
To summarize, the Committee contends that the tobacco industry-specifically, the
four major cigarette manufacturersare the actual sponsors of CARE advertisements
and the true strategists behind CARE's campaign drive and should be identified as
such; CARE asserts that it exercises control over all of the advertisements and the
campaign, not the cigarette manufacturers, and that the sponsorship identification
statements are correct. Both organizations have contacted the various broadcast
station licensees throughout California to make their positions known, The issue
presented is whether the California broadcast station licensees have failed to exercise
reasonable diligence to identify the sponsor of the CARE advertisements.
Section 317 of the Communications Act provides, in pertinent part, that
(aXi) All matter broadcast by any radio Station for which any money, service or
other valuable consideration is directly or indirectly paid, or promised to or
charged or accepted by, the station so broadcasting, from any person, shall, at the
time the same is broadcast, be announced as paid for or furnished, as the case
may be, by such person.
(a) The licensee of each radio station shall exercise reasonable diligence to obtain
from its employees, and from other persons with whom it deals directly in
connection with any program or program matter for broadcast, information to
enable such licensee to make the announcement required by this section
(emphasis added).
The corresponding rule is contained in Section 73.1212 of the Commission's Rules
and Regulations and provides, in pertinent part, that:
(b) The licensee of each broadcast station shall exercise reasonable diligence to
obtain from its employees, and from other persons with whom it deals directly in
connection with any matter for broadcast, information to enable such licensee to
make the announcement required by this section.
(e) The announcement required by this section shall, in addition to stating the
fact that the broadcast matter was sponsored, paid for or furnished, fully and
fairly disclose the true identity of the person or persons, or corporation,
committee, association or other unincorporated group, or other entity by whom or
on whose behalf such payment is made or promised, or from wham or on whose
behalf such services or valuable consideration is received, or by whom the
material or services referred to in paragraph (d) of this section are furnished.
Where an agent or other person or entity contracts or otherwise makes arrange.
ments with a station on behalf of another,, and such fact is known or by the
exercise of reasonable diligence, as specified in paragraph (b) of this section, could
be known to the station, the announcement shall disclose the identity of the person
or persons or entity on whose behalf such agent is acting instead of the name of
such agent (emphasis added).
The basic premise of the sponsorship identification requirements is that the public is
entitled to know by whom they are being persuaded. VOTER, .supra at 352; National
Welfare Rights Organization, supra at 195; Applicability of Sponsorship identification
Rules, 40 FCC 141, 141 (1963).
Section 317 and Section 73.1212 impose a duty upon licensees to exercise reasonable
diligence to ascertain the identity of the sponsor of broadcast material. The obligation
87 F.C.C. 2d
Californians for Smoking & No Smoking Sections 497
to exercise reasonable diligence to determine the actual sponsor of broadcast material,
of course, does not cast licensees in the role of "insurers" as to the complete accuracy
of sponsorship identification statements; they have an affirmative obligation to
ascertain and identify the sponsor, no more-no less. National Welfare Rights
Organization, supra at 195. The Commission's responsibilities in these matters is not
to substitute its judgment for that of the licensees or to pass on the bona fide nature of
an organization; rather the Commission, as a government licensing agency, reviews its
licensees' decisions to determine if it can be said that they exercised reasonable
diligence.
We believe that the Bureau ruling in VOTER, supra, is dispositive of this request.
The case of VOTER concerned a ballot proposition (involving the establishment of a
county public power system), in which advertisements opposing the ballot were aired
as being sponsored by a political committee ("Westchester Citizens"). The Committee
was funded in substantial part or completely by the Consolidated Edison Company.
The complainant argued that Con Edison should have been substituted or added to the
sponsorship identification statement. The Committee admitted that it received
substantial financial assistance from Con Edison, but maintained that it exercised
editorial control over all of its advertisements.
After noting that "longstanding Commission policy has been that an entity paying
for advertising time and editorial control over the message must be identified as the
sponsor of the statement," the Bureau stated that:
[Wie cannot conclude that any licensee, in evaluating the facts before it
regarding the advertisement, failed to exercise reasonable diligence by accepting
the representation.s of Westchester Citizens. The substantial proportion of Con
Edison's role in Westchester Citizens funding might suggest a basis for further
inquiry to some licensees. On the other hand the Westchester Citizens by-laws,
represented assertion of editorial control over these advertisement, and the
weight of precedent suggest that those licensees who accepted Westchester
Citizens' advertisements as offered did so in good faith and without closing their
eyes to any attempted misrepresentation. Indeed, some licensees may conclude,
either on the facts thus far provided by the Westchester Citizens, or additional
information not now before us, that, in its view, "Con Edison" alone is the
appropriate identification. In such a case, we would have no basis for finding that
the licensee has acted unreasonably (emphasis added). Id. at 352; see also,
National Welfare Rights Organization, supra (announcements paid for by a
private corporation, but controlled and directed by the American Academy of
Pediatrics, were properly identified as "presented as a public service announce-
ment by the American Academy of Pediatric").
In the same fashion, on the basis of all the information before us, we cannot
determine that any California broadcast station licensee acted unreasonably by
failing to exercise reasonable diligence in accepting the representations of CARE and
ultimately airing the CARE advertisements as offered. On the other hand, if some
licensees substituted the sponsorship identification. statements with "Paid for by the
Four Major Tobacco Companies," we would have no basis for concluding that they
acted unreasonably.
The Committee submitted a rather voluminous record (consisting of studies, polls,
newspaper articles and declarations) in an attempt to demonstrate that the tobacco
companies are controlling CARE. While it has been shown that substantially all or
"virtually 100%" of CARE's funds have come from the four major tobacco companies,
a fact that CARE readily admits in its response, there has not been any conclusive
evidence which establishes that the tobacco companies are exercising editorial control
over CARE advertisements, or for that matter over CARE's entire campaign efforts or
any other drive aimed at defeating similar legislation like that pending in California.
More importantly, there has been no evidence that the California broadcast station
498 Federal Communications Commission Reports
licensees have dismissed this matter without exercising reasonable diligence to
ascertain the true sponsor in compliance with their obligations under Section 317 and
Section 73.1212.
Conclusion
Based on all of the foregoing, we cannot conclude that any broadcast station licensee
has violated the sponsorship identification provisions of the Communications Act or
the Commission's Rules and Regulations. To hold otherwise would require this agency
to investigate the nature of political committees organized to support or oppose an
election matter (e.g., whether or not corporate formalities were adhered to), to second-
guess broadcast station licensees' judgments and to rule on the basis of hindsight,
rather than reviewing licensees' decisions to determine if they acted reasonably and
in good faith.
In closing, "we continue to urge caution and the exercise of reasonable diligence on
the part of our licensees to take appropriate steps to ascertain the fullest factual
information as to the true identity of political and controversial issue sponsors."
VOTER, supra -at 352.
Due to the imminence of the election, pertinent parts of this ruling were relayed by
phone conversation to the respective attorneys on October 30, 1980.
Staff action is taken here under delegated authority. Application for Review by the
full Commission may be requested within 30 days of the release date of this letter by
writing the Secretary, Federal Communications Commission, Washing-ton, D.C. 20554,
stating the factors warranting consideration and, if mailed, should be sent by certified
mail. Copies must be sent to the parties to the complaint. See Code of Federal
Regulations, Volume 47, Section 1.115.
SINCERELY,
STEPHEN F. SEWELL, Acting Chief
COMPLAINTS AND COMPLIANCE DIvIsIoN,
BROADCAST BUREAU.
87 F.C.C. 2d
Californians for Smoking & No Smoking Sections 499
FOOTNOTES
The Committee apparently refers to the four largest cigarette manufacturers in
the country as comprising an "entity," known as the "tobacco industry." Such
manufacturers include Lorillard, K J. Reynolds Tobacco, Brown and Williamson
Tobacco Co. and Phillip Morris.
2 According to the Committee, approximately 99.6% of CARE's financing comes
from the tobacco industry (the four major cigarette manufacturers and to a small
extent the tobacco distributors; The Committee's figures are derived from the
financial disclosure statements that CARE filed in California pursuant to
California election laws.
In this connection, the Committee enclosed a newspaper article, entitled "The
tobacco industry: How it snuffed out Proposition 5." The article quoted Richard
Woodward, of Woodward, McDowell and Larson (the advertising firm that was
retained by "Californians for Common Sense" in 1978 and CARE in 1980) and Ed
Grefe, vice president for public affairs of Phillip Morris, as describing their
campaign strategy to defeat the 1978 ballot proposition in California. The
Committee asserts that this indicates that the tobacco industry exercised control
over the campaign and editorial control over the advertisements.
A comparison of the financial disclosure statements covering the periods of
"1/8/80 through 9/23/80" (executed 9/29/80 and "9/24/80 through 10/20/80"
(executed of 10/23/80) shows that the major cigarette manufacturers did, in fact,
channel more funds into CARE during the latter period, in the form of loans or
otherwise. However, this fact alone does not demonstrate that the cigarette
manufacturers attempted to conceal their "support" of CARE.
' With respect to the "national campaign," the Committee enclosed a copy of an
article that appeared in the United States Tobacco Journal, shortly after the
ballot proposition was defeated in 1978, which warned that the "the entire
tobacco industry . . . has an important stake in what happens in the nation's
most populous state-a state which incidentially accounts for more than 9% of
the nation's cigarette consumption-impacts nationally (as with "Proposition
3")." In addition, the Committee points out that the tobacco industry has also
significantly contributed to the "Floridians Against Increased Regulation"
("FAIR"). Moreover, the Committee represents that the same agents have been
employed in both the prior and the current campaigns in Florida and California.
In fact, the advertising firm of Woodward, McDowell and Larson was retained in
both prior campaigns, but is now only working for CARE on the California
proposition. Lance Tarrance was the only "agent" retained in all four campaign
drives by the respective political committees. Finally, the Committee contends
that the tobacco industry, in an effort to alleviate the effect of adverse legislation,
has been instrumental in drafting "watered down legislation that appears to
protect nonsmokers but in reality does not." As an example of such "diluted"
legislation, the Committee attached a copy of the 1978 Greene Bill (SB 2026). The
financing disclosure statement filed by "Californians for Common Sense" in 1978
reveals a payment of S20,000 to state Senator Bill Greene, but it does not specify
what services were rendered. It should be noted that none of these representa-
tions conclusively substantiate tobacco industry involvement.
The Committee attached correspondence that it sent to all the California
broadcast station licensees, advising them of their obligation to exercise
"reasonable diligence" to ascertain the true identity of the entity on whose behalf
advertisements are purchased. The Committee proceeded to explain that
virtually all the funds received by CARE are from the out-of-state tobacco
industry, and thus the tag line "Californians Against Regulatory Excess" is
deceptive and should be substituted with the "tobacco industry." In their
response, CARE attached correspondence that it sent to the licensees which
87 F.C.C. 2d
500 Federal Communications Commission Reports
denied allegations that it was operating as a 'front" for any person, company or
industry, admitted that it received "tobacco" funds, but emphasized that it
maintained control over CARE advertisements and campaign strategies. The
Committee forwarded letters received by several stations ,vhich essentially
denied their request for substitution of tag-lines on CARE advertisements. It
should be noted that a sponsorship identification statement referring to the
"tobacco industry" may be deceptive and misleading, in that there is no
particular entity known as such, and further that CARE is, in fact, incorporated
in California and has Californians serving on its Board.
The Committee cites two studies, the Roper Poll of 1978 commissioned by the
Tobacco institute and the Fairbanks/Canapary/Maullin Poll commissioned by
CARE, which indicate that the tobacco industry's "credibility" is low. The
Committee further claims that the tobacco industry is cognizant of their low
esteem, which explains "their" desire to operate through a "front organization"
like CARE.
A copy of that response was sent to a staff attorney of this office of October 25,
1980, at her request.
As mentioned before, Mr. Collins has denied that he was a member of CARE's
Board of Directors. By declaration of Eileen Padberg, of Robert Nelson and
Associates (Robert Nelson organized CARE), CARE represents that it was its
understanding that Mr. Collins was, in fact, serving on the Board and that all
notices of meetings and other informative data was forwarded to him, according-
ly. Eileen Padberg also stated that Mr. Kiker participated in one telephonic
Board meeting on Mr. Collin's behalf and at his request.
° Both CARE and the Committee have furnished the Commission with newspaper
articles which report the influx of the tobacco industry's financial support.
87 F.C.C. 2d