It also sharply criticizes the commission for failing to complete the last two mandated reviews of its rules, with special attention paid to ownership regulations.
The U.S. Court of Appeals in Philadelphia today struck down the FCC’s two-year-old ban on joint sales agreements between TV broadcasters and scolded the agency for its failure to complete the last two of its congressionally-mandated quadrennial reviews of all its broadcast ownership rules.
The commission cannot ban JSAs “unless it has, within the previous four years, fulfilled its obligation to review that rule and determine whether it is in the public interest. Here the commission put the cart before the horse,” the court said.
“Nearly a decade has passed since the commission last completed a review of its broadcast ownership rules. These rules lay the groundwork for how the broadcast industry operates and have major implications for television, radio, and newspaper organizations. Although federal law commands the commission to conduct a review of its rules every four years, the 2006 cycle is the last one it has finished; the 2010 and 2014 reviews remain open.
“Several broadcast owners have petitioned us to wipe all the rules off the books in response to this delay — creating, in effect, complete deregulation in the industry. This is the administrative law equivalent of burning down the house to roast the pig, and we decline to order it. However, we note that this remedy, while extreme, might be justified in the future if the commission does not act quickly to carry out its legislative mandate.”
The commission’s delay keeps five broadcast ownership rules in limbo: the local television ownership rule, the local radio ownership rule, the newspaper/broadcast crossownership rule, the radio/television crossownership rule, and the dual network rule.
Regarding the newspaper/broadcast ban, the court noted: “The … ban remains in effect to this day even though the FCC determined more than a decade ago that it is no longer in the public interest. This has come at significant expense to parties that would be able, under some of the less restrictive options being considered by the commission, to engage in profitable combinations. The delay also hampers judicial review because there is no final agency action to challenge.”
The court invited the FCC to take a second look at its JSA ban. “On remand, if the commission is able to justify (by finding they are in the public interest) the existing ownership rules to which television JSA attribution applies — or, in the alternative, if it replaces the current rules with new ones it determines to be in the public interest — nothing in our opinion would prevent it from readopting the JSA rule at that time.”
FCC Chairman Tom Wheeler has promised to circulate an ownership proposal among the other commissioners by the end of June. However, there is no telling when the full commission might act on the proposal, which is certain to be politically charged.
Armstrong Williams, the African-American owner of Howard Stirk Holdings and its seven TV stations, said he was the lead petitioner on the complaint “because it was important to fight to preserve the vital role JSAs provide for minority and underserved communities to obtain and maintain a seat at the broadcast ownership table.”
“JSAs were one of the few tools minority broadcasters had to obtain financing and operate successfully in the highly competitive media market,” he said.
Williams said that two of his stations now have JSAs and he wants them for his other five.
FCC Commissioner Ajit Pai, who has opposed the commission’s position on JSAs, said he was pleased with the ruling. “When the commission adopted this arbitrary rule two years ago, I warned that any attempt to change our treatment of joint sales agreements without also completing our statutorily mandated review of the local television ownership rule would violate the law.
“And today, a unanimous Third Circuit panel said precisely the same thing. The court’s decision will help broadcasters continue to serve the public interest — particularly in smaller media markets, where joint sales agreements are critical to the survival of television stations and their ability to provide viewers with local news.”
NAB EVP of Communications Dennis Wharton, issued this statement: “NAB could not be more pleased with the Third Circuit decision. At long last, this opinion directs the FCC to do its job and adopt broadcast ownership rules that reflect the modern world.
“We’re particularly delighted the court highlights the irrationality of a rule that bars broadcast/newspaper combinations in the same market. This rule needs to be ended immediately.
“And finally, we’re pleased the court strikes down the FCC’s punitive joint sales agreement order. JSAs are clearly in the public interest — as Congress has decided — and allow free and local broadcasters a chance to compete against national pay TV conglomerates.”
Wells Fargo analyst Marci Ryvicker commented on the news: “While we don’t have all of the details just yet, we view this as a very positive step for the broadcast industry — especially for Nexstar Broadcasting Group and Sinclair Broadcast Group, who have the greatest number of JSAs among the peer group.”
A proponent of the JSA ban, Andrew Schwartzman of Georgetown University’s Law School’s Institute for Public Representation, cautioned against reading too much into the court’s decision.
“The court stressed that it was not expressing a view on the soundness of the JSA rule, but only that the FCC didn’t have authority to adopt it unless and until it reaffirmed the underlying local TV ownership rules.
“It said that if the FCC does so in the forthcoming quadrennial Review decision, the commission can re-adopt the JSA rule ‘at that time.'”