Spending on so-called "embedded advertising" has grown as advertisers look for new ways to reach viewers who flip channels during commercials or use digital video recorders like TiVo to fast-forward past them.
In an order released Thursday, the agency is considering whether sponsorship identification notices should be in larger type, appear for a lengthier period of time on the screen and whether they should appear at both the beginning and the end of programs.
The commission will also consider whether to extend disclosure requirements to cable make a determination as to whether its existing policies regarding children's programming already ban the practice.
"The point of this whole exercise is to clarify what's required so that viewers actually know who is trying to sell them on something," said commissioner Jonathan Adelstein, who has been pushing for better disclosure for three years.
The issue of product placement, in which brand-name items are used as props in shows, is not new and has not generated much controversy. It is the practice of insinuating products into actual plot lines, known as embedded advertising or "product integration," that has raised concern.
PQ Media, an alternative media research firm, estimates that paid product placement spending grew 33.7 percent to $2.9 billion in 2007 thanks to greater use of digital video recorders and "increased TV program product integration," according to the company.
Among examples cited by critics are episodes of the family-oriented show "7th Heaven," which included plot lines revolving around Oreo cookies. Other examples include "The Office" in which characters work at a Staples office supply store; a "CSI" show in which characters promote features of a General Motors vehicle; and a "Smallville" episode in which the dialogue included the line "Acuvue to the rescue," a reference to the contact lens maker.
FCC Chairman Kevin Martin has also pushed for better disclosure.
The FCC scheduled a vote on rules for embedded advertising at a commission meeting more than six months ago, but the item was pulled from the agenda following pressure by the advertising industry. The probe announced Thursday, may lead to new rules, but is not as tough as the previous proposal.
FCC rules require that sponsorship announcements be made "at the time of broadcast" and that "only one such announcement" must be made. Such disclosures are usually tacked on to the end of a show and, ironically, may be missed by people who use digital recorders like TiVo.
Writers, who have to incorporate products into scripts, and actors, who shill for products without getting paid for it, are especially unhappy.
The Writers Guild of America West, a union that represents Hollywood television and film screenwriters, wants "real time" disclosure at the time the product is mentioned, like a text "crawl" at the bottom of the screen.
"Since DVRs and other such devices allow viewers to skip or fast forward through opening and closing credits, requiring disclosure at some other moment in the programming will simply not offer adequate protection," wrote Patric Verrone, president of the organization, in a letter to Martin.
Jeffrey Perlman with the American Advertising Federation said running a crawl is an "absolutely terrible idea" and that it would be "terribly disruptive" for television viewers.
The FCC will consider new rules regarding the size and content of sponsorship notices, but the "real time" issue will be part of a less formal "notice of inquiry," which will not propose new rules.
Martin had circulated a rule-making proposal that included the real-time disclosure issue and scheduled it for a vote for the Dec. 18 commission meeting.
But on Dec. 14, a letter signed by three advertising associations, including Perlman's, was sent to Martin stating that it would be "prudent" for the commission to consider an inquiry rather than the more formal rule making.
The item was pulled from the agenda the day of the meeting, despite having the support of the Republican chairman, Adelstein and the commission's other Democrat, Michael Copps.
The commission's other two Republicans, Robert McDowell and Deborah Taylor Tate, did not vote on the item at the time. A spokeswoman for McDowell declined to comment. Tate's office did not respond to a request for comment.
Martin said Thursday that "some of the commissioners were concerned about the original proposal" and he wanted to get them all to agree.
"And in the end, we were able to put forth a compromise item that got a 5-0 vote," he said.
