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Supreme Court Probes Broadcast Dereg Arguments

Supreme Court
(Image credit: United States Supreme Court)

WASHINGTON—The FCC and National Association of Broadcasters made their virtual arguments to the Supreme Court Tuesday, Jan. 19, on why a lower court (the Third Circuit Court of Appeals) was wrong to invalidate the FCC's 2017 broadcast ownership deregulation decision, a defense that came in the waning hours of the FCC's Republican majority, which had approved the rule changes over the objections of FCC Democrats.

On the other side, the attorney for consolidation opponents said the FCC had failed to do its statutory due diligence and earned the legal smackdown yet again.

While it is always tough to predict from oral argument—Justices often play devil's advocate to probe arguments—government attorneys and broadcasters were likely not unhappy with the tenor of the questioning.

Preston Padden, former top exec with Disney and Fox, tweeted immediately following the arguments: "After listening to FCC v Prometheus SCOTUS oral argument today on the Broadcast Ownership rules - my prediction is that the FCC wins at least 7-2 and that the long industry nightmare of the Third Circuit ends!"

Likely the two in that 7-2 prediction are Justice Sonia Sotomayor and Elena Kagan, who seemed most sympathetic to the backers of the Third Circuit smackdown of the Republican FCC's deregulation.

Justices Neil Gorsuch and Brett Kavanaugh definitely appeared to be leaning toward the government's argument that the FCC had looked at what info it had, made its best predictive judgment, to which court's generally give deference, and interpreting a broad public interest standard, sufficiently broad that it would be hard to say that interpretation was arbitrary and capricious.

Malcolm Stewart, an attorney in the Solicitor General's Office arguing for the FCC, said that the commission had exercised reasonable judgment in concluding the elimination of the newspaper/broadcast cross-ownership rule and other deregulatory changes were in the public interest, which he said was the primary purpose of Congress' mandate that it review its regs every four years; that there was incomplete data on whether eliminating that rule would hurt minority and women ownership; that the FCC had concluded based on the information it had that there would likely not be a negative effect on minority and women ownership; and that absent that, the likely beneficial effect outweighed any speculative harms.

He also argued that competition and diversity of viewpoints were the key goals of structural ownership rules, not their impact on minority or women ownership, and that the goal of Congress in mandating periodic ownership rule reviews was that they not remain on the books due to inertia.

Helgi Walker, representing the National Association of Broadcasters, went further in her arguments than the government, asking that the court resolve the issue of what the statute mandating the quadrennial review actually said, rather than just whether the FCC had made a reasonable judgment based on its reading of the statute.

Broadcasters want the Supreme Court to confirm their interpretation that not only does the FCC not have to include impact on minorities and women in its quadrennial review, but that to do so is beyond the bounds of the statutory mandate.

NAB is not saying minority and women ownership isn't important, or part of the FCC's public interest determination, but that in this instance, as the statute was written, it is not what the FCC is to be looking at,  much less the key factor the court said it was in vacating the newspaper-broadcast cross-ownership rule dereg.

She said that after 17 years and four different attempts to deregulate broadcasting, all smacked down by the same Third Circuit Court of Appeals, the case had finally reached the highest court in the land and it was time for some regulatory—or in this case deregulatory—certainty about the statutory mandate in the quadrennial review. If the court did not provide that guidance, she said, she predicted years more litigation.

In defense of the Third Circuit, Ruthanne Mary Deutsch, representing Prometheus Radio Project, said that the FCC had failed its basic legal requirement to state that it was not considering female and minority ownership or the potential harms the deregulation would cause, and explain why that was the case.

She argued the FCC couldn't explain because it had not really weighed the issue, and for those and more reasons its decision was arbitrary and capricious and the Third Circuit should repeal of the rules be upheld. She said that would allow the FCC's delayed 2018 quadrennial review—on hold pending the resolution of the Supreme Court case—to proceed.

The Justices focused on to what degree the FCC was required to take minority and women into account, if at all, whether not doing so was a change in policy and whether, if so, it needed to explain that change.

Justice Clarence Thomas, who asked numerous questions, focused on the presence of online competition and the FCC argument that that marketplace change was a reason why structural limits on broadcast ownership were less defensible than when the newspaper-broadcast cross-ownership rule went into effect in 1975.

The FCC and NAB both had challenged the Third Circuit repeal, with the cases consolidated in the argument heard Tuesday.

In November 2017, a politically divided FCC voted to eliminate the newspaper-broadcast and the radio-TV cross-ownership rules; allow dual station ownership in markets with fewer than eight independent voices after the duopoly, creating an opportunity for ownership of two of the top four stations in a market on a case-by-case basis (the FCC did not call it a waiver); eliminate attribution of joint sales agreements as ownership; and create an incubator program.

But during oral argument, the only rule change that was discussed was the newspaper-broadcast cross-ownership rule elimination.

The questions the Supremes were asked to resolve, as presented in a document on the Supreme Court web site: "Whether the court of appeals erred in vacating as arbitrary and capricious the FCC orders under review, which, among other things, relaxed the agency's cross-ownership restrictions to accommodate changed market conditions" and "whether the Commission may repeal or modify media ownership rules that it determines are no longer 'necessary in the public interest as the result of competition' without statistical evidence about the prospective effect of its rule changes on minority and female ownership."

The government (the FCC and Justice) and NAB say yes to both, but had the argument come after the inauguration of Democratic President-Elect Joe Biden, the government would likely not have pressed its appeal given Democrats' historic opposition to broadcast deregulation, though even Democratic FCC chairs have conceded the newspaper-broadcast cross-ownership rule is anachronistic.

Tuesday's virtual oral argument was the first time the Supreme Court has heard a challenge to one of a series of Third Circuit smackdowns of FCC Republican administration broadcast deregulation decisions dating back to 2003, when the FCC under then chairman Michael Powell attempted to relax some ownership restrictions citing changes to the market. 

The FCC is under a congressional directive in the 1996 Telecommunications Act to periodically review its regulations—first biennially, then changed to quadrennially—and repeal or modify any it concludes are not in the public interest. 

But, as the Supreme Court website frames it, the Third Circuit "in a series of three appeals spanning the past 17 years, the same divided panel of the United States Court of Appeals for the Third Circuit has repeatedly vacated the FCC's attempts to reform its ownership rules. The effect of those decisions has been to maintain in effect decades old FCC ownership restrictions that the agency believes to be outmoded."

The most recent Third Circuit decision was based only on "the ground that the agency had not adequately analyzed the potential effect of the regulatory changes on female and minority ownership of broadcast stations."

It is unclear when the Supreme Court will render a decision—it is under no timetable and it could be months—and whether if it upholds the Republican FCC, but without going to the statutory language clarification NAB seeks, a new, Democratic FCC, would restore the regs.