Court Rejects Relaxed Crossownership Rule

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 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 … [p]etitioners’ 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.

All is not lost for media owners seeking relief from the rules. The FCC was awaiting the decision so that it could get on with another review of the ownership rules, which it is mandated by law to do every four years.