Federal Appeals Court Rejects Relaxed Cross-Ownership Rule

By Harry A. Jessell

TVNewsCheck

In remanding the relaxed 2008 version of the 35-year-old broadcast-newspaper cross-ownership rule to the FCC for another look, the U.S. Appeals Court said the agency's decision to allow common ownership in large markets had "failed to meet the notice and comment requirements" in reviewing the rule as required by law. The court also affirmed the TV duopoly rule and other local owneship limits.

A three-judge panel of the U.S. Court of Appeals in Philadelphia today threw out the FCC's 2008 rule permitting common ownership of broadcast stations and newspapers in large markets, while upholding rules limiting TV station duopolies and other local ownership restrictions. The federal appeals court also ordered a further review of efforts to promote minority and female ownership of media outlets.

The court also said that the FCC failed to demonstrate how its Diversity Order structured primarily to benefit small business entities (and cited in the crossownership rulemaking) would enhance minority and female ownership of media outlets. That has also been remanded to the Commission for further examination. Since the FCC had long ago determined that a return to its previous preferences based on race and/or gender would not pass constitutional muster, the court ruling may not leave the Commission much room to maneuver.

The rules had been challenged by groups opposed to media consolidation who are trying to preserve or strengthen them as well as by broadcasters and newspaper publishers who argued for getting rid of them or loosening them further. In remanding the relaxed 2008 version of the 35-year-old broadcast-newspaper crossownership rule to the FCC for another look, the panel said the agency had "failed to meet the notice and comment requirements" in reviewing the rule as required by law.

In essence, the rule would have allowed newspaper-broadcast combinations in the top 20 markets and in smaller markets under certain limited circumstances. Media owners felt the rule was a modest concession to the previous ban.

In affirming the FCC TV duopoly rule, which limits the markets where a broadcasters may own two stations, the panel said it was not persuaded by the broadcasters' argument that the rule was "overly restrictive."

According to the panel, the FCC, in choosing to retain the rule in 2008, did not ignore the explosion of other media outlets; it simply concluded that the rule remained necessary to promote competition among stations within markets.

The court also affirmed that the ownership rules are constitutional, rejecting arguments that they violated the First and Fifth Amendment rights of broadcasters and publishers.

The panel said the FCC rules do not violate the First Amendment because they "are rationally related to substantial government interests in promoting competition and protecting viewpoint diversity."

And the panel ruled that there is "no basis" for the claim that the rules are aimed at manipulating content. "These rules apply regardless of the content of the programming," it said.

Cox Media Group and Media General argued that the broadcast-newspaper crossownership rule violated newspapers' right to equal protection under the First Amendment by treating newspapers differently from other media.

The panel said the argument lacked merit. "The Supreme Court has upheld this treatment ... and we are bound by that precedent," it said.

The panel also declined to toss out the Supreme Court's long-established scarcity doctrine that says the government may regulate broadcasting because broadcast channels are scarce.

The abundance of non-broadcast media does not render broadcast spectrum less scarce, the court said. "The Supreme Court's justification for the ... doctrine remains as true today as it was in 2004 — indeed, in 1975 ...."

Over the objections of consolidation foes, the court decided not to undo the FCC's grant of permanent waivers of the crossownership rule that allow two companies operate TV stations and newspapers in five markets — Gannett in Phoenix and Media General in Myrtle Beach-Florence, S.C.; Columbus, Ga.; Panama City, Fla., and Tri-Cities, Tenn.-Va.

"Although we have several concerns about these permanent waivers, we conclude that we do not have jurisdiction to reach the merits of ... petitioners' claims," the court said.

Reaction to the ruling from the National Association of Broadcasters was muted. "There have been sweeping changes in the media landscape since most of the broadcast ownership rules were adopted decades ago," said EVP Dennis Wharton in a statement. "NAB believes that modest reform of rules to allow free and local broadcasters to compete successfully in a universe of national pay TV and radio platforms is warranted."

Meanwhile, Free Press, the group that has been leading the charge against structural deregulation, applauded the ruling.

“Today’s decision is a sweeping victory for the public interest,” said Corie Wright, policy counsel of Free Press. “In rejecting the arguments of the industry and exposing the FCC's failures, the court wisely concluded that competition in the media — not more concentration — will provide Americans with the local news and information they need and want.”

The court also affirmed that the rules are "not only constitutional but necessary to preserve competition, as well as to promote diverse sources of news and information for the American people,” said Wright, who argued the case along with Andrew Jay Schwartzman of Media Access Project, on behalf of Prometheus Radio Project, Media Alliance, the Office of Communication of the United Church of Christ and Free Press.

Media owners seeking relief from the rules were awaiting the decision so that the FCC could get on with another review of the ownership rules, which it is mandated by law to do every four years. While the case based on the 2008 action has been pending at the Third Circuit the FCC has been pretty much unable to complete work on its 2010 Quadrennial Review of its ownership rules. The court said the issues it remanded should now be incorporated into the 2010 Quadrennial Review. The FCC is currently undertaking another review of its media ownership rules. In a statement, the agency said that they ‘’should be able to take appropriate steps to ensure that the nation’s media marketplace remains healthy and vibrant.”

Broadcast Union News: The rules struck down by the court had lifted the ban on cross ownership in the 20 largest media markets, reducing diversity and limiting access for new media outlets. ”This decision is a vindication of the public’s right to have a diverse media environment. We won on almost every point,” said Andrew Jay Schwartzman, senior vice president and policy director of the Media Access Project, which represented Prometheus Radio Project in challenging the changes. "The FCC majority knew that its effort to allow more media concentration was politically and legally unworkable, so it tried to end-run the procedural protections that are designed to give the public the right to participate in agency proceedings. ”