By: David Oxenford,
Wilkinson Barker Knauer LLP
On April 1, The United States Supreme Court released its decision upholding the FCC’s 2017 changes to its ownership rules in the FCC v Prometheus Radio Project case (see our summary here). Those rules had been put on hold in 2019 by a decision by the Third Circuit Court of Appeals which held that the FCC had to develop a more detailed record on the impact of rule changes on minority ownership before making any such changes (see our summary of that decision here). The Supreme Court did not issue a sweeping decision evaluating the competitive landscape for the broadcast industry, nor was it expected to. Instead, the Court decision was a narrow legal one, looking at whether the decision of the FCC was entitled to traditional judicial deference to expert administrative agencies.
The Supreme Court was reviewing the legal question of whether the FCC’s 2017 review of diversity was adequately justified. In 2017, the FCC determined that that no substantial impact on diversity was proven by any party who filed comments in the media ownership proceeding and, to the extent that there was an impact, the benefits of making broadcast companies stronger competitors in today’s media marketplace outweighed that impact. The Third Circuit would have had the FCC conduct a sweeping historical analysis of the impact of past instances where the ownership rules were relaxed to see the impact on minority ownership so that the FCC could judge the likely impact of new changes to the rules. The Supreme Court found that the FCC had no obligation to conduct its own studies into that issue and, based on the evidence before the FCC, its decision to relax the rules was not an arbitrary one. Thus, it was entitled to the deference given to decisions of expert regulatory agencies (see our article here on the deference given to administrative agency decisions). In essence, this was a narrow decision based on principles of administrative law to which all nine Justices, liberal and conservative, could agree.
The practical result of this decision is that the newspaper-broadcast cross-ownership prohibition will end. We have speculated before that the ban might well outlive the daily newspaper, but it appears that this will not be the case. We certainly do not think that any future FCC would try to reinstate the cross-ownership ban given the current state of the newspaper industry. Also abolished in 2017 and now formally ended are the radio-television cross-ownership restrictions. The 2017 decision also did away with the requirement that, to combine two TV stations in the same market, there had to be 8 independently owned and operated stations in that market. It also ended the strict prohibition on combining two of the top 4 TV stations in any market (substituting a case-by-case review by the FCC of proposed top 4 combinations). These 2017 decisions were also upheld by the Court’s decision.
The decision does not directly affect the local radio ownership rules, which were left unchanged in the 2017 decision (except for a very narrow change concerning embedded markets – see our article here). Changes to the radio rules were under consideration in a new ownership review started in late 2018, with comments filed in 2019 (see our summary here of the questions asked in that proceeding). Consideration of any changes to the radio rules, such as the significant changes proposed by the NAB, were delayed after the Third Circuit’s decision because, under that court’s reasoning, before any such changes to the rules were made, there would need to be that detailed review of the potential impact on minority ownership.
Now that the Third Circuit’s reasoning has been rejected, that still does not mean that the FCC, particularly a Democratic-controlled FCC, will automatically look to relax the radio rule. Instead, we think it likely that the Commission will ask for more comments on the issues raised in the 2018 proceeding. This will likely include a request to discuss the impact of the Supreme Court decision on the Commission’s evaluation of proposed changes to its rules. It would not be surprising for the FCC to also ask for an update of the comments filed in 2019 to reflect the state of current marketplace. In other words, any change in the radio ownership rules will not come quickly.
The FCC may also ask for other comments on other ownership rules in light of the Court’s decision – including potentially revisiting some of the issues decided in 2017 (particularly the combinations of top 4 TV stations as, in the 2019 ownership proceeding, the FCC had asked for comments on when such combinations should be allowed). With a new Commission that will in the not-too-distant future have a third Democratic Commissioner, the attitudes toward relaxation of the ownership rules may well be far different than they were in 2017. In fact, Acting Chairwoman Rosenworcel issued a statement expressing her disappointment in the Court’s decision. In contrast, Commissioner Carr, one of the Republican holdovers, stated his wholehearted approval of the Court’s decision.
So this decision, while reinstating the changes made in 2017, sets the stage for more ownership debates to come. Watch for developments on these issues in the coming months.
David Oxenford is MAB’s Washington Legal Counsel and provides members with answers to their legal questions with the MAB Legal Hotline. Access information here. (Members only access).
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