6/15/2009
NAA State Legislative Alert
New York State Considers Banning Exclusive Marketing Agreements
On October 31, 2007, the Federal Communications Commission (FCC) announced a rule which retroactively banned “building exclusivity” contract clauses between multifamily properties and most video service providers. This Order did not ban exclusive marketing agreements; however, the Commission, in a separate notice, announced that it would consider barring this type of agreement as well. Action on this possible rule was delayed as parties await the outcome of an NAA/NMHC filed lawsuit that challenged the Commission’s legal authority to regulate contracts between multifamily property owners/managers and cable television providers. On May 25, 2009, the U.S. Court of Appeals for the District of Columbia Circuit decided in favor of the FCC in NAA/NMHC's lawsuit possibly paving the way for future federal regulation of exclusive marketing contracts.
New York Senate Bill 4502
Despite the current inaction of the federal government, the New York State Assembly has recently seen legislation introduced that addresses exclusive marketing agreements. If passed, this measure, introduced by Senator Carl Kruger (D – Brooklyn) and designated Senate Bill 4502, will prohibit multifamily building owners, lessors and managers from entering into or renewing exclusive marketing agreements with regard to multichannel video programming services. SB 4502 defines the term "exclusive marketing agreement” to mean " a contract or other agreement, other than a bulk sales agreement, between the owner, lessor, manager or person controlling or managing a residential multiple dwelling unit and a multichannel video programming provider in which a multichannel video provider is granted preference or exclusive rights with regard to the marketing or offering of services, or access to the premises for purposes thereof." This bill does not require landlords to provide access to a programming provider for marketing purposes. It simply provides that any such access must be granted in a non-discriminatory fashion.
Similar to the justification the FCC stated when banning exclusive access agreements, Senator Kruger’s statement on SB 4502 contends that exclusive marketing agreements, which, for example, allow only one company to provide marketing materials in the leasing office, are anti-competitive and thus deprive multifamily community residents of the benefits that competition among cable operators provide. Senator Kruger believes that the bill will provide multifamily community residents with equal access to information about their choice of cable provider, thereby allowing them to obtain the best product at the lowest price.
Next Steps
SB 4502 is currently pending consideration in the Senate Energy and Telecommunications Committee. While the bill, which is backed by telephone and satellite-based video providers, is likely to receive committee consideration, it is too early in the process to predict whether it has the broad-based support necessary to become law. If enacted, New York will be the first state to ban exclusive marketing contracts.
NAA government affairs staff has contacted the New York Capitol Region Apartment Association and other allied real estate groups to offer support and assistance in their response to this legislation. Through united action NAA will assist these local organizations in their efforts to educate New York legislators to the fact that there is no need to regulate exclusive marketing contracts, - as there is no market failure necessitating government intervention- while at the same time enlightening them as to the many benefits that property owners and residents gain from such agreements. It will be made clear that apartment companies are experts in negotiating, implementing, and enforcing exclusive agreements with video providers, and that the ability to negotiate such contracts often results in lower rates and upgraded services or facilities for the benefit of our residents.
As legislation of this nature tends to spread, first regionally, and then nationally, NAA wanted to inform you all about its introduction. Going forward, in order to track this issue and assist in information sharing if legislation similar to NY SB 4502 is introduced in your state or locality please inform the NAA government affairs staff which will then share this information with all affiliates of the federation.
If you have any questions or concerns regarding this issue please contact Scot Haislip at 703/518-6141, Ext. 120 or scot@naahq.org.