RUNNING HEAD: Government sponsored VNRs, covert sponsorship & product placement

The Problem of Government Sponsored VNRs, Covert Sponsorship & Product

Placement

Roddena Irene Kirksey

Norfolk State University

COMM 653
Law, Ethics and Responsibility in Communication
April 26, 2011

RUNNING HEAD: Government sponsored VNRs, covert sponsorship & product placement

According to the Public Relations Society of America (PRSA), a video news release
(VNR) is the multimedia equal of a written press release; it contains visual and audio elements as
well as a script to be utilized by news reporters (Chepesiuk, 2006, pg. 2). VNRs are promotional
tools that have used by various organizations, including non-profit organizations, government
agencies, and the private sector, for over 25 years (Chepesiuk, 2006, pg.2). According to
Chepesiuk (2006), PRSA has established ethical guidelines for the use and production of VNRs
for the public relations industry (pg.5). One of the most important ethical guidelines as
prescribed by PRSA is for public relations professionals to inform their audiences of the VNRs
source or sponsor (Chepesiuk, 2006, pg. 5-6). In addition to PRSA, the Radio Television News
Directors Associations code of ethics declares news stations have a responsibility to clearly
disclose the origin of the information and label all material provided by outsiders (Schorr, 2005,
pg.2).
VNRs have been utilized by various organizations, including the federal government.
For instance, the Clinton Administration utilized VNRs to promote various government
programs and policies such as opposing oil drilling in the Alaskan wilderness (Cain, 2006, pg.9).
George W. Bushs Administration also utilized VNRs but received criticism because unlike the
Clinton Administration the Bush Administration did not reveal that it had sponsored the VNRs
(Cain, 2006, pg.9).
The Bush Administration received criticism after the Government Accountability Office
(GAO) discovered the government paid Armstrong Williams, a conservative political pundit, to
endorse the No Child Left Behind Act (NCLB) and sub-contracted Karen Ryan, a former
journalist, to promote the Medicare Drug Improvement and Modernization Act 2003. According
to McGregor (2005) Williams was a columnist for The New York Amsterdam News (pg.2). In

RUNNING HEAD: Government sponsored VNRs, covert sponsorship & product placement

addition, he was also the host of a syndicated television program called The Right Side with
Armstrong Williams and made occasional appearances on Americas Black Forum (Klein, 2007,
pg.2). In March 2003, Williams contacted the Department of Education about generating
awareness and public support for NCLB (McGregor, 2005, pg2). In November 2003, Williams
public relations firm, the Graham Williams Group, submitted a proposal to promote NCLB to the
Department of Education (McGregor, 2005, pg.2). Williams was paid over $240,000 by the
Department of Education to promote NCLB (McGregor, 2005, pg.1). Under the agreement
Williams sought to win the battle for media space [through] favorable commentaries [that] will
amount to passive endorsements from the media outlets that carry them (McGregor, 2005,
pg.2). Moreover, the agreement stated the department would arrange for Mr. Williams to
regularly comment on N.C.L.B. during the course of his broadcasts and Secretary Paige and
other department officials shall have the option of appearing from time to time as studio
guests(Alterman, 2005, pg.3).

Furthermore, it specified that Mr. Williams shall utilize his

long-term working relationships with Americas Black Forum to encourage the producers to
periodically address the No Child Left Behind Act (Alterman, 2005, pg.3). According to Klein
(2007), Williams promoted NCLB on various programs but failed to disclose his relationship
with the Department of Education to his audience (pg.1).
In addition to using Williams as a paid spokesperson for NCLB, the Bush Administration
sub-contracted Karen Ryan to produce VNRs touting the Medicare Drug Improvement and
Modernization Act 2003 (MMA). The Centers for Medicare & Medicaid Services, a department
in the Department of Health and Human Services, hired Ketchum Incorporated, a multi-national
public relations firm, to promote the new Medicare legislation (Cain, 2006, pg. 10). As part of
its public relations plan, Ketchum sub-contracted Karen Ryan, a former journalist who started

RUNNING HEAD: Government sponsored VNRs, covert sponsorship & product placement

her own public relations firm in Washington D.C., to produce a VNR (Cain, 2006, pg. 10). The
VNR package featured three components including video clips, MMA facts that could be used in
introductory or concluding comments, and a pre-packaged news report (Department of health,
2004, pg. 2). The English version news report featured Karen Ryan as a journalist reporting on
the changes to Medicare and how it would affect patients (Chepesiuk, 2006, pg. 2). Ryans VNR
highlighted aspects of the legislation and asserted it would allow Medicare patients to stay
healthy and have a better quality of life (Chepesiuk, 2006, pg.2). The news report concluded
with Ryans sign-off In Washington, Im Karen Ryan reporting (Department of health, 2004,
pg.7). Although Ryans contract was funded by the Centers for Medicare & Medicaid Services
there was no mention of the relationship in the VNRs content (Department of health, 2004,
pg.2).
There are several laws regarding the use publicity and sponsorship including the
Communications Act of 1934 sections 317, 73.1212, and 507, the publicity or propaganda
prohibition clause of the Consolidated Appropriation Resolution of 2003, and the Antideficiency Act. The Communications Act of 1934 section 317 states broadcasters must disclose
to their listeners or viewers if matter has been aired in exchange for money, services or other
valuable consideration; it also requires an announcement to be made when such material is
broadcast (Payola and sponsorship, 2011, pg.1). The Federal Communications Commission
(FCC), the federal agency responsible for regulating print and broadcast media, also lays out the
broadcasters responsibilities to make sponsorship identification known to their audiences under
Title 47 C.F.R. 73.1212 (Payola and sponsorship, 2011, pg.1). Moreover, Title 47 U.S.C.
508, section 507 of the Communications Act, mandates:

RUNNING HEAD: Government sponsored VNRs, covert sponsorship & product placement

when anyone provides or promises to provide money, services or other consideration to

someone to include program matter in a broadcast, that fact must be disclosed in advance
of the broadcast, ultimately to the station over which the matter is to be aired (Payola
and sponsorship, 2011, pg.1).
According to Section 317 of the Communications Act both the party promising consideration
and the receiving party must inform the station of their agreement so that the station may be able
to make a sponsorship identification announcement (Payola and sponsorship,2011, pg.1). If
there is no acknowledgement of sponsorship, then this agreement is referred to as payola and is
in violation of the aforementioned statutes (Payola and sponsorship, 2011, p.g1). Parties
engaged in payola may be fined for no more than $10,000 or imprisoned for more than one year
or both (Payola and sponsorship, 2011, pg.1). In addition, the publicity or propaganda clause,
Pub. L. No. 108-7, Div. J, Title VI, 626, 117 Stat. 11, 470 (2003), of the Consolidated
Appropriations Resolution Act (2003) declares no part of any appropriation contained in this or
any other Act shall be used for publicity or propaganda purposes within the United States not
heretofore authorized by the Congress (Department of health, 2004, pg. 10). Furthermore, the
Antideficiency Act regulates the appropriation of funds by the government; it prohibits:
making or authorizing an obligation under, any appropriation or fund in excess of the
amount available in the appropriation or fund unless authorized by law and involving the
government in any obligation to pay money before funds have been appropriated for that
purpose, unless otherwise allowed by law (Antideficiency act background, 2011, pg.1).
Although there are laws regarding the use of publicity and sponsorship, there are several
organizations and individuals that possess contrasting views about government sponsored
publicity and VNRs. The opponents of government sponsored publicity and VNRs are advisory

RUNNING HEAD: Government sponsored VNRs, covert sponsorship & product placement

and regulatory agencies, congressional members, and advocacy groups. The two advisory and
regulatory agencies concerned with publicity and sponsorship identification are the Government
Accountability Office (GAO), which oversees governmental activities, and the Federal
Communications Commission (FCC), which regulates print and broadcast media. The GAO
conducted investigations into Williams promotion of NCLB and Ryans VNR for HHS. The
investigation focused on whether there were any violations of the Antideficiency Act and the
publicity and propaganda clause of the Consolidated Appropriations Resolution Act (2003)
(McGregor, 2005, pg.2).

FCC Chairman Michael Powell issued a probe on January 14, 2005

due to pressure from the commissions Democratic members, who received complaints about
Armstrong Williams endorsement of NCLB (Shields, 2005, pg.1). The inquiry examined:
how stations have been using VNRs, including whether the government or commercial
interest have paid to place them, whether stations receive notice regarding the identity of
entities providing programming involving political material or the discussion of issues of
public importance [and to] seek comment on whether there are alternative or better means
of ensuring proper disclosure concerning VNRs in addition to those prescribed by the
existing rules (Halonen, 2005, pg.3).
Several members of congress also opposed unidentified sponsorship of publicity. In response to
complaints about the controversy surrounding Williams and Ryan, Senators John Kerry (DMass.) and Frank Lautenburg (D-NJ) proposed the Truth in Broadcasting Act, which required
all pre-packaged news stories produced by Executive Branch agencies to contain a continuously
visible disclaimer stating Produced by the U.S. Government when such material was
broadcast on media outlets in the United States (Eggerton, 2005 April 28, pg.1). Furthermore,
the Free Press and the Center for Media Democracy, consumer advocacy groups, conducted a

RUNNING HEAD: Government sponsored VNRs, covert sponsorship & product placement

study, entitled Fake TV News: Widespread and Undisclosed, that found 77 television stations
over a 10 month period did not disclose the identity of VNR sponsors, which violates
sponsorship identification regulations (Pelofsky, 2006, pg.1). As a result of their findings the
Free Press and Center for Media Democracy filed a complaint to the FCC. Following the
complaint, the FCC distributed over three dozen letters of inquiry to broadcast license holders
(Palmer, 2006, pg.1). Letters of inquiry were sent to several major license holders including:
Sinclair Broadcast Group, News Corp/Fox Television stations, Clear Channel Communications,
Tribune Company, and Viacom/CBS Corporation (Shields, 2006, pg.1).
The proponents of government sponsored publicity and VNRs are media and public
relations professionals, members of the Bush Administration and congressional members. Judith
Phair, president-CEO of PRSA, declared you have the right to pay somebody to make a
statement as long as its disclosed who theyre speaking on behalf of (Creamer, 2005, pg.1).
Foley (2006) notes that media professionals have traditionally used press releases as the
foundation for their news reports and there is nothing wrong with using VNRs in a similar
manner (pg.42). Foley (2006) also contends that media professionals act as gatekeepers; they
determine what content relates to their audiences (pg. 42). Under this premise VNR content is
edited, shortened, localized, and ideally attributed (Foley, 2006, pg.42). According to Mandese
(2005), public relations professionals prefer sponsored VNRs because of guaranteed play on
broadcasts, the ability to reach target audiences, measure audience reach, and save an
organizations resources (pg.42). Armstrong Williams and Karen Ryan also defended the
practice of government sponsored publicity. Williams asserted he did not violate the law
because he only produced one-minute advertisements featuring Rod Paige, the Secretary of
Education, but did not fully execute the contractual agreement requiring him to regularly

RUNNING HEAD: Government sponsored VNRs, covert sponsorship & product placement

comment on the administrations policies (Shields, 2005, pg.2). Similarly, Ryan asserted the
VNRs promoting MMA were clearly labeled but media professionals did not fulfill their duties
by not questioning its source or factual basis (Ryan, 2004, pg.2).
In addition, President Bush, the Department of Education, the Department of Health and
Human Services, and the Department of Justice supported government sponsored publicity and
VNR usage. After receiving criticism for paying Armstrong Williams to endorse NCLB and the
Karen Ryan VNR for MMA, President Bush laid blame upon station managers and asserted if
there is a deep concern, [stations] ought to tell viewers what they are watching (Eggerton, 2005
March 21, pg.4). The Departments of Education and Health and Human Services both defended
their conduct. Moreover, the Department of Justice released an opinion that stated the Karen
Ryan VNR was not covert propaganda, a charge thats levied against government sponsored
publicity lacking sponsorship identification (Eggerton, 2005 March 21, pg.4). Bush, fully
supporting the Justice Departments opinion, stated Justice says that these pieces are in the law
if based on facts, not advocacy (Eggerton, 2005 March 21, pg.4). Furthermore, several
members of congress were in agreement with the Bush Administrations use of publicity and
VNR usage. Senator Ted Stevens (R-Alaska) opposed the Truth in Broadcasting Act because he
insisted it inhibited free speech by instructing broadcasters how to create programming
(McConnell, 2005, pg.1). Moreover, Senator Robert Byrd (D-West Virginia) also proposed an
amendment, the Byrd Amendment, requiring labeling for VNRs but it is not as restrictive as the
Truth in Broadcasting Act (McConnell, 2005, pg.1). In addition, television and public relations
lobbyists supported Byrds amendment but opposed the Truth in Broadcasting Act because it
would impose undue burdens upon those professionals (McConnell, 2005, pg.1).

RUNNING HEAD: Government sponsored VNRs, covert sponsorship & product placement

The GAOs investigation into Williams contract with the Department of Education
found several 2004 articles written by Williams endorsing NCLB (McGregor, 2005, pg.2). The
GAO concluded Williams contracted amounted to covert propaganda thus violating the
Antideficiency Act (McGregor, 2005, pg.2). In addition, the FCC issued a citation against
Williams for failing to disclose his relationship with the Department of Education while
promoting NCLB on air (Klein, 2007, pg.1). The FCC originally fined Sonshine Family
Television $40,000 for airing five episodes of The Right Side with Armstrong Williams in which
he promoted NCLB (Klein, 2007, pg.2). However, this was later reduced to $32,000 because
Sonshine Family Television had a history of following FCC regulations (Eggerton, 2009, pg.1).
The FCC also levied fines against Sinclair Broadcast Group for an episode of Americas Black
Forum on which Williams appeared and promoted NCLB (Klein, 2007, pg.2). However,
Sinclair Broadcast Group contends it did not receive payment for airing the episode and was not
aware that there was a monetary relationship between Williams and the Department of
Education; it also said it may consider a lawsuit against the FCC contesting its finding (Eggerton,
2007, pg.1).
During its investigation into the Ryan VNRs, the GAO concluded over 20 governmental
agencies produced or utilized VNRs to promote policy during the Bush Administration
(Chepesiuk, 2006, pg.2). It also determined the Ryan VNRs constituted publicity and
propaganda thus violating the Antideficiency Act and the Consolidated Appropriations
Resolution (2003) (Chepsiuk, 2006, pg.2). However, as President Bush stated the Justice
Departments opinion asserted government sponsored VNRs were within the law as long as it
was purely informational (Halonen, 2005, pg.2). Although the GAO concluded Williams
contract with the Department of Education and Ryans VNRs for HHS violated the law, the

RUNNING HEAD: Government sponsored VNRs, covert sponsorship & product placement

GAO could not enforce the law because as an investigative body it does not have the authority to
administer fines or other penalties (Goldstein, 2004, pg.). Although the Truth in Broadcasting
Act was passed by the Senate Commerce Committee, it did not become a law because of first
amendment concerns raised by Senator Stevens and support for an amendment proposed by
Senator Byrd, the Byrd Amendment (National Association of Broadcasters, 2005, pg.23).
However, the amendment was set to expire in September.
A report by the House Committee on Oversight and Government Reform claims the
Obama Administration has increased spending on public relations activities and has continued to
violate statutes regarding publicity and propaganda by federal agencies (Analysis of the, 2010,
pg.35). One such incident involved HHS and Jonathan Gruber, a health care economist. Gruber
was under contract to evaluate the costs, insurance costs and coverage costs, associated with
Obamas health care plan; he was paid $297,600 for his services (Analysis of the,, 2010,
pg.16). Gruber was also under contract for $95,000 to endorse the health care initiative
(Analysis of the,2010, pg.16). Gruber wrote several articles, which were referenced by health
care journalists, supporting the administrations position (Analysis of the, 2010, pg.16). He
also was interviewed by Time, the Washington Post, the New York Times, and the New
Republic; however, he did not disclose his standing as a HHS employee (Analysis of the,
2010, pg.16). Similarly, when Ron Brownstein wrote a feature article about the study Gruber
conducted under his original contract, Gruber did not disclose that he was paid by the
administration (Analysis of the, 2010, pg.16). Moreover, when he testified before two Senate
committees regarding health care legislation, he failed to reveal his employment status with HHS
(Analysis of the, 2010, pg.17). However, the GAO did not conduct an investigation
(Analysis of the, 2010, pg.17). The report also details several other incidents in various

RUNNING HEAD: Government sponsored VNRs, covert sponsorship & product placement

departments including: the National Endowment for the Arts, Department of Justice, Department
of Education, Department of Health and Human Services (website and a Medicare commercial),
the Federal Highway Administration, and the Department of Transportation.
In addition to covert publicity and sponsorship by the government, advertisers also use
covert sponsorship, embedded advertising or product placement and product integration, to sell
their products. The statutes that apply to sponsorship for advertising are sections 317 and 507 of
the Communications Act of 1934 and sections 73.1212 and 76.1615 of title 47 C.F.R. (Notice of
inquiry, 2008, pg.4). In 2003, Commercial Alert, an advocacy group, submitted petitions to the
Federal Trade Commission (FTC), the federal agency responsible for regulating advertising, and
the FCC seeking regulation of product placement (FCC and integrated, 2008, pg.1). The FTC
did not respond until February 2005. The agency rejected Commercial Alerts assertion that
product placements were deceptive; it concluded few objective claims appear to be made about
the products performance or attributes (FCC and integrated, 2008, pg.1). In contrast, FCC
Commissioner Jonathan Adelstein was quoted in The Wall Street Journal saying:
The whole idea of product placement is to advertise to people when theyre not expecting
it. So the law requires that advertisers disclose then when theyre on broadcast stations as
something that has been paid for, and if they dont do that, its a serious violation of the
law. The FCC operates under a different law than the FTCWe have no choice but to
enforce the law (FCC and integrated, 2008, pg.1).
There are several opponents of embedded advertising, product placement advertising,
including advocacy groups and members of congress. The advocacy groups that opposed
embedded advertising were The Benton Foundation, Campaign for a Commercial-Free
Childhood, Dads and Daughters, Free Press, Office of communication of the United Church of

RUNNING HEAD: Government sponsored VNRs, covert sponsorship & product placement

Christ, Parents for Ethical Marketing, Parents Television Council, The Praxis Project, and the
Writers Guild of America; these groups represented the interests of parents, media reformers,
and screenwriters (Sullivan, 2008, pg.2). These groups were joined by Representative Edward
Markey (D-MA) and Representative Henry Waxman (D-CA) (Lasar, 2008, pg.1). In a complaint
sent to the FCC the representatives wrote:
As the use of product placement and product integration in television programs continues
to expand, broadcasters and cable operators should comply in a meaningful way with
their statutory obligation to identify what entity is behind sponsored programming and
what product is being pitched (Lasar, 2008, pg.1).
The supporters of embedded advertising represented the media and advertising industries.
Some members of the media coalition included the National Association of Broadcasters (NAB),
the Motion Picture Association of America, and the National Cable and Telecommunications
Association (Lasar, 2008, pg.3). The group representing the advertising industry included The
American Association of Advertising Agencies, the American Advertising Federation and the
Association of National Advertisers (FCC and integrated, 2008, pg.1). The media coalition
and advertisers cite the increasing popularity of digital video recording (DVR) technology,
which allows viewers to record programming and skip commercials, as the primary need for
embedded advertising (Lasar, 2008, pg.3).
On September 6, 2007, FCC Chairman Kevin Martin distributed a Notice of Proposed
Rule Making (NPRM) on product placement and product integration to FCC Commissioners
(FCC and integrated, 2008, pg.1). The FCC released a combined Notice of Inquiry (NOI) and
Notice of Proposed Rule Making (NPRM) in June 2008 (Notice of inquiry, 2008, pg.1). The
NOI/NPRM sought to examine the practice of product placement and product integration in

RUNNING HEAD: Government sponsored VNRs, covert sponsorship & product placement

broadcasting and the potential effects of regulations on the First Amendment and artistic rights
of programmers (Notice of inquiry, 2008, pg.8).
Some advocacy groups proposed identification methods that would let viewers know they
are being advertised to. For example, the Writers Guild proposed a crawl to run across the
bottom of the screen to inform viewers of the advertisement and information about the product
including the manufacture and place of purchase (Steinberg and Teinowitz, 2008, pg.3). Others
have suggested a pop up window or even pop up bubbles informing the audience of advertising
(Lasar, 2008, pg.1). However, Dan Jaffe, an executive Vice-President of the Association of
National Advertisers, stated a crawl or bubble would be totally disruptive of what is going on in
the program itself and is not necessary to protect the consumer (Lasar, 2008, pg.3). However,
the FCC may alter its current policy requiring broadcasters to carry a disclosure for a longer
period of time, up to four seconds, and increase the font size of the disclosure (Lasar, 2008,
pg.3).
Although covertly sponsored publicity is illegal, it will continue because as long as
administrations are in favor of using propaganda to promote their policies the Justice Department
will not enforce the law. However, the FCC has shown a willingness to penalize violators of the
Communications Act and other statutes within its purview.
Similarly, product placements/embedded advertising and product integration will
continue to appear in television and film because of the rise of DVR technology. Although
media and family advocacy groups seek stronger regulations to protect consumers, advertising
interest groups are able to persuade the FCC in their favor because any regulation of
programming content will be in violation of the First Amendment. However, the FCC should

RUNNING HEAD: Government sponsored VNRs, covert sponsorship & product placement

require sponsorship identification notices before and after airing programs and the length and
height of the announcement should be increased.

RUNNING HEAD: Government sponsored VNRs, covert sponsorship & product placement

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RUNNING HEAD: Government sponsored VNRs, covert sponsorship & product placement

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RUNNING HEAD: Government sponsored VNRs, covert sponsorship & product placement

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