Before the

Federal Communications Commission

Washington, D.C. 20554

In the Matter of )
)
Sponsorship Identification Rules ) MB Docket No. 08-90
And Embedded Advertising )

COMMENTS

W. Kenneth Ferree and Adam Thierer, respectively President and Senior Fellow

of The Progress & Freedom Foundation, hereby file these Comments in response to the

Notice of Inquiry and Notice of Proposed Rulemaking (the “Notice”), released June 26,

2008, in the above-referenced proceeding. 1

If the Notice demonstrates anything, it is that a majority of the current

Commissioners live in a world wholly alien and unfamiliar to most Americans; indeed, a

world long forgotten if it ever existed. The Notice alludes menacingly to new, “subtle

and sophisticated means” of commercial messaging, 2 to “sneaky commercials” (quoting a

senescent order topped with nearly fifty-years of dust) 3 and to “vindicat[ing]” the policy

goals of the Communications Act – as if the FCC must exact vengeance on those who

would try – horror of horrors – to sell goods and services to the American public. 4

The melodramatic tone of the Notice is intended, of course, to set the stage for the

Commission’s latest effort to micromanage the free marketplace of ideas, i.e., the media.

Only by portraying “embedded” advertising as something new and nefarious can the

1
The views expressed in these comments are those of the authors and do not necessarily reflect the views
of the directors, officers or staff of the Foundation.
2
Notice at 1.
3
Notice at 6, n.31.
4
Notice at 10.
 2

Commission hope to justify a new portfolio of intrusive and burdensome speech

regulations in the name of preserving the “public’s right to know who is paying to air

commercials or other program matter on broadcast television and radio and cable.” 5

Such rhetorical sleight-of-hand in an effort to enhance the government’s power to

control the media recalls Justice Brandeis’ apothegmatic dissent in Olmstead v. United

States: “Experience should teach us to be most on our guard to protect liberty when the

Government's purposes are beneficent. Men born to freedom are naturally alert to repel

invasion of their liberty by evil-minded rulers. The greatest dangers to liberty lurk in

insidious encroachment by men of zeal, well-meaning but without understanding.” 6

For in this case, with scant evidence that the public either has been mislead by

embedded commercial matter or that it wants more program time and space devoted to

commercial disclosures, a majority of the Commission is poised to insist upon more, not

less, commercial material (by requiring more and longer “disclosures”), while impairing

creative freedom (by potentially requiring disclosures within program material) and

imposing upon the First Amendment rights of programmers (by regulating the precise

size, manner, and duration of each disclosure).

More troubling still, a majority of the Commissioners, each of whom individually

would like to take “credit” for instigating this proceeding, regard this Notice as a separate

5
Notice at 1. In fact, as we have noted, there is nothing new or novel about embedded advertising in
commercial media. See Adam Thierer, “Product Placement in Historical Context,” Progress & Freedom
Foundation, PFF Blog, July 30, 2008, http://blog.pff.org/archives/2008/07/product_placeme.html. Also
see: Jack Myers, “After Losing Janet Jackson Battle, FCC Extends Its Misguided Policies Into TV Product
Placement Review,” JackMyers.com, July 29, 2008, http://www.jackmyers.com/commentary/media-
business-report/25857959.html
6
Olmstead v. United States, 277 U.S. 479 (1928) (Brandeis, J., dissenting).
 3

front in their war – open or understood – against commercial media. 7 Without being too

cavalier with the analogy, this latest campaign, from what are now over-extended lines, is

doomed to wreck itself on the bulwarks of the First Amendment.

Motivating the effort to expand the FCC’s regulation of private speech is a view

that the Commission must protect the public from “stealth advertising” and “secret”

advertisements that “prey upon unsuspecting minds.” 8 One would think that before such

loaded and sinister characterizations were used, the Commission might demand some

evidence that the public is both 1) unaware of the commercial nature of product

placements or other embedded advertisements and 2) that some positive harm flows

directly from any such lack of awareness.

In fact, however, there can be little doubt but that viewers and listeners

understand that when “American Idol” judges drink from Coca Cola cups, promotional

consideration was exchanged; when a radio host talks about the great dinner he ate at

Ruth’s Chris Steak House, the restaurant is a sponsor of the show; when contestants on

“The Biggest Loser” are taught how to make desserts with “Jell-O” gelatin, the

association is not serendipitous. When brand names are used in program material, the

public generally understands that some form of commercial sponsorship is involved.

7
See, e.g., Notice, Separate Statement of Chairman Martin (noting that he asked his colleagues to initiate
this proceeding at a hearing on media ownership); Separate Statement of Commissioner Adelstein (noting
that he first began pushing for new sponsorship identification rules years ago in his “Response to the
Commercialization of the American Media” speech). Characteristically, Commissioner Copps has already
concluded that new rules are needed, despite the fact that the Notice only begins the process of developing
an administrative record. See Separate Statement of Commissioner Copps (objecting to the use of an NOI
because it will take longer to adopt final rules). One wonders ever more frequently why the Commission
goes through the charade of requesting public comment in proceedings in which the Commissioners know
the outcome from the start.
8
Notice, Separate Statements of Commissioners Copps and Adelstein.
 4

Indeed, it is hard even to imagine that the American public could be as ignorant or naïve

as a majority of the Commission appears to believe they are.

More importantly, there is no evidence that embedded advertisements pose any

greater risk of misleading or deceiving the public than do segregated advertising spots.

To the contrary, as the Notice must acknowledge, the Federal Trade Commission has

found no basis to conclude that consumers give more credence to embedded commercial

claims than other advertisements, or that integrated advertising material is in any way

false or misleading. 9 Americans are not so simple minded as to be easily misled into

buying that which they neither want nor need simply because a product or service might

appear or be mentioned within program material rather than apart from it.

Indeed, to a much greater extent than ever before, consumers have tools and

techniques available to check and counter commercial messaging. As advertising expert

John E. Calfee has noted, “[t]o a much greater extent than most people realize,

advertisers are pawns of the evolving information environment in which they must

communicate.” 10 With respect to embedded commercial material, the Internet has

spawned a variety of instantaneous feedback mechanisms allowing average Americans to

serve as media watchdogs, policing product placement and taking steps to point out when

placements have become excessive, or even silly. 11

9
Notice at 6-7 & n.38.
10
John E. Calfee, Fear of Persuasion: A New Perspective on Advertising and Regulation (AEI Press, 1997)
at 43 (“Fear of Persuasion”).
11
Product placement and brand promotion in movies and television is now closely monitored by a wide
variety of websites, such as BrandSpotters.com (http://www.brandspotters.com) and BrandChannel.com
(http://www.brandchannel.com/brandcameo_films.asp). Also see: “Product Placement,” Wikipedia,
http://en.wikipedia.org/wiki/Product_placement
 5

Thus, the “harm” posited by the Notice is an imaginative fiction – a fiction driven

entirely by the paternalistic view that an enlightened few, who happen to be ensconced on

the 8th floor of a federal building in Southwest D.C., see the truth while the public at large

is made up of mindless sheep being duped at every turn by advertisers. In fact, of course,

those who hold this view are themselves victims of the so-called “third-person effect”:

“People tend to think that other people are fooled by what they themselves understand

perfectly.” 12 A rich literature exists on the myriad ways in which the third-person effect

has predicated calls for speech controls and media regulation.13

Consequently, the regulatory “remedies” outlined in the Notice to address the

fictive harm are straightforwardly unconstitutional. Under the familiar four-part Central

Hudson test, the government may regulate lawful commercial speech only to the extent

12
Fear of Persuasion at 98.
13
The third-person effect was first identified by W. Phillips Davison in a seminal 1983 article. He noted:

In its broadest formulation, [the third-person effect] predicts that people will tend to overestimate
the influence that mass communications have on the attitudes and behavior of others. More
specifically, individuals who are members of an audience that is exposed to a persuasive
communication (whether or not this communication is intended to be persuasive) will expect the
communication to have a greater effect on others than on themselves.

W. Phillips Davison, “The Third-Person Effect in Communication,” Public Opinion Quarterly, vol. 47, no.
1 (Spring 1983) at 3. Davison’s article prompted further research by many other psychologists, social
scientists, and public opinion experts to test just how powerful this phenomenon was in explaining calls for
censorship and other social phenomena. In these studies, third-person effect has been shown to be the
primary explanation for why many people fear—or even want to ban—various types of speech or
expression, including: news, misogynistic rap lyrics, television violence, video games, and pornography.
See: Vincent Price, David H. Tewksbury, and Li-Ning Huang, “Third-person Effects of News Coverage:
Orientations Toward Media,” Journalism & Mass Communications Quarterly, vol. 74 at 525-40;
Hernando Rojas, Dhavan V. Shah, and Ronald J. Faber, “For the Good of Others: Censorship and the
Third-Person Effect,” International Journal of Public Opinion Research, vol. 8 (1996) at 163-86; Douglas
M. McLeod, William P. Eveland, Amy I. Nathanson, “Support for Censorship of Violent and Misogynic
Rap Lyrics: And Analysis of the Third-person Effect,” Communications Research, vol. 24 (1997) at 153-
74; Hernando Rojas, Dhavan V. Shah, and Ronald J. Faber, “For the Good of Others: Censorship and the
Third-Person Effect,” International Journal of Public Opinion Research, vol. 8 (1996) at 163-86; James D.
Ivory, “Addictive, But Not For Me: The Third-Person Effect and Electronic Game Players’ Views Toward
the Medium’s Potential for Dependency and Addiction” (Aug. 2002) (available at
http://www.unc.edu/~jivory/3rd.html); Albert C. Gunther, “Overrating the X-rating: The Third-person
Perception and Support for Censorship of Pornography,” Journal of Communication, vol. 45, no. 1 (1995)
at 27-38.
 6

that the regulation in question directly and materially advances a substantial government

interest and is no more extensive than necessary. 14 Efforts to impose enhanced

disclosure obligations on programmers and advertisers for embedded commercial speech

would fail on all counts.

As discussed above, product placement and product integration have never been

found to be false, misleading, or unlawful; there is no government interest in regulating

commercial speech simply because it might be effective. Unless it is addressing some

real and demonstrable harm to consumers, the FCC has no business interfering with

private commercial speech.

Ironically, the “remedies” suggested in the Notice not only are unnecessary,

overbroad, and over-burdensome given the absolute paucity of evidence that embedded

advertisements pose any kind of risk or harm to the public, they would in fact have a

deleterious effect on the health of free media in America. As a result of the rapid

introduction and growth of new media outlets, traditional media operators, and

particularly free broadcast media, are struggling to remain relevant and profitable. 15 An

era of media abundance for consumers is an era of hyper-competition for suppliers;

traditional media operators and their business models are under enormous strain.

Yet the burdensome disclosure regulations posited in the Notice are targeted

directly at traditional media platforms, while new media outlets over which the FCC has

little or no authority would remain free to sell advertising in whatever form they choose.

14
Central Hudson gas and Elec. Corp.v. Public Serv. Comm., 447 U.S. 557 (1980).
15
Adam Thierer and Grant Eskelsen, Media Metrics: The True State of the Modern Media Marketplace,
Progress & Freedom Foundation Special Report, Version 1.0, Summer 2008,
http://www.pff.org/mediametrics/
 7

Not only would such an approach be inequitable, it would sap the very lifeblood of free,

traditional media – commercial advertising. At a time when VCRs, DVD players, digital

video recorders, video on demand, video on the Internet are making stand-alone

commercial spots obsolete, embedded advertisements and product sponsorship may

become the only methods of continued support for free, over-the-air broadcasting.

Further, enhanced government regulation of speech on traditional platforms will only

serve to accelerate the migration of program content to new, unregulated platforms. 16

In this case, therefore, the proposed remedies are worse than the purported

disease. In the name of protecting consumers from “hidden” advertisements, the FCC is

contemplating rules that likely would destroy the financial health and well-being of the

free broadcast medium and unfairly handicap cable services vis-à-vis new media

platforms. Indeed, because of the steady progress of media technology, the very rationale

for FCC content regulation of broadcast and cable programming has become

superannuated. Advertisers and consumers have moved on and are adapting to the 21st

Century media marketplace – the Commission should, too.

W. Kenneth Ferree
Adam Thierer
The Progress & Freedom Foundation
1444 Eye Street, NW, Suite 500
Washington, D.C. 20005

16
Ironically, embedded advertising and product placement are becoming common on new media platforms.
See Apryl Duncan, “Product Placement Makes a Virtual Leap,” About.com: Advertising,
http://advertising.about.com/od/promotions/a/prodplacegames.htm; Erika Brown, “Product Placement on
the Rise in Video Games,” Forbes.com (July 21, 2006), http://www.msnbc.msn.com/id/13960083/.