Supreme Court Overturns Third Circuit Smackdown of Broadcast Dereg

Supreme Court of the United States
(Image credit: Mike Kline (notkalvin) via Getty Images)

In a big victory for broadcasters and the Republican FCC under Ajit Pai, the Supreme Court has reversed the Third Circuit's decision throwing out the FCC's broadcast deregulation under former FCC Chairman Ajit Pai. Current acting chairwoman Jessica Rosenworcel had voted against the deregulatory move.

Also Read: Supreme Court Probes Broadcast Dereg Arguments

In 2017, the FCC had unanimously voted along party lines to eliminate two broadcast ownership rules and adjust a third. Prometheus Radio Project, which has long challenged FCC dereg, challenged again and the Third Circuit vacated the FCC decision, saying it had failed to justify the conclusion that the rule changes would not adversely affect minority or female ownership, so the decision was illegal because it was arbitrary and capricious.

Broadcasters and the FCC appealed that Third Circuit decision.

The Supreme court held that the decision was not arbitrary and capricious and the FCC's conclusion that the rules were no longer in the public interest was reasonable.

Of course that does not prevent a Rosenworcel-led FCC from re-regulating broadcast ownership once there is a Democratic majority on the commission--it is currently tied 2-2.

Also read: SCOTUS Ruling Is Good News For Broadcasters (Guest Blog)

In a statement, Rosenworcel pointed out the court noted the limited data the FCC used to make its non-arbitrary decision. She did not say whether the current FCC would weigh in on the restored rule dereg, but did say: "“While I am disappointed by the Court’s decision, the values that have long upheld our media policies—competition, localism, and diversity—remain strong. I am committed to ensuring that these principles guide this agency as we move forward.”

The opinion was delivered by Justice Brett Kavanaugh, formerly of the U.S. Court of Appeals for the D.C. Circuit which has principal jurisdiction over FCC decisions.

"In assessing the effects of the rule changes on minority and female ownership, the FCC did not have perfect empirical or statistical data," said the court. "But that is not unusual in day-to-day agency decisionmaking within the Executive Branch. The APA imposes no general obligation on agencies to conduct or commission their own empirical or statistical studies. And nothing in the Telecommunications Act requires the FCC to conduct such studies before exercising its discretion...

"In light of the sparse record on minority and female ownership and the FCC’s findings with respect to competition, localism, and viewpoint diversity, we cannot say that the agency’s decision to repeal or modify the ownership rules fell outside the zone of reasonableness.." the court ruled in a brief--12-page--decision.

It was a fast turnaround for the decision. The case was argued Jan. 19.

While it is always tough to predict from oral argument--Justices often play devil's advocate to probe arguments--government attorneys and broadcasters were not unhappy with the tenor of the questioning and one broadcaster had predicted the court would reverse the Third Circuit by at least a 7-2 margin.

"On this record, we conclude that the FCC’s 2017 order was reasonable and reasonably explained for purposes of the APA’s deferential arbitrary-and-capricious standard. We therefore reverse the judgment of the Third Circuit," the Supr4emes said.

"[T]the FCC determined that none of its policy objectives for ownership rules—viewpoint diversity, competition, and localism—justified retaining its rules, the FCC was free to modify or repeal them without considering ownership diversity. Indeed, the FCC has long been clear that 'it would be inappropriate to retain multiple ownership regulations for the sole purpose of promoting minority ownership.' The Third Circuit had no authority to require the FCC to consider minority and female ownership. So in future reviews, the FCC is under no obligation to do so," Said Justice Clarence Thomas in a separate concurring opinion.

Also Read: Supremes to Hear Broadcast Dereg Case

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.

Those changes had been blocked by the Third Circuit, which remanded the decision back to the FCC for a better justification of the decision. 

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. 

Kavanaugh cites one of broadcasters biggest arguments for dereg in explaining why the FCC's decision to base its dereg on a changed marketplace was not arbitrary or capricious: "The FCC adopted [the] rules in an early-cable and preInternet age when media sources were more limited. By the 1990s, however, the market for news and entertainment had changed dramatically. Technological advances led to a massive increase in alternative media options, such as cable television and the Internet."

"We lost, and that is unfortunate," said attorney Andrew J. Schwartzman.  "However, the Court rejected the NAB's efforts to obtain a ruling that would have essentially removed the FCC's power to impose limits on broadcast ownership.  This will enable our clients to enforce and improve ownership limits in the future."

Schwartzman was referring to the fact that the court conceded that the FCC has historically considered diversity as part of its analysis of the public interest and not just as a means to greater viewpoint diversity, which means it should be harder to challenge FCC actions taken to boost diversity.

“NAB commends today’s unanimous decision by the Supreme Court that the FCC’s recent and long-overdue modernization of its broadcast ownership regulations was lawful and appropriate," said National Association of Broadcasters President Gordon Smith. "It is critical that the Commission continue to examine its media ownership rules to ensure that America’s broadcasters are able to compete and meet the needs of local communities across the nation in today’s media landscape. We look forward to working with the Commission on this effort given the essential role radio and television broadcasters play for all Americans."

Commissioner Brendan Carr, the commissioner still on the commission who voted for the broadcast dereg item,  praised the court ruling as vindication for that policy and called on the FCC to immediately reinstate the incubator program that was in limbo during the remand. 

"“Today’s unanimous opinion from the U.S. Supreme Court leaves no doubt that the FCC’s modern approach to media regulation that we adopted in 2017 was the right decision."

“For years, newsrooms have been shuttering in communities around the country, and journalists that have worked for decades to bring truth to light have been laid off  at an alarming pace," said Carr. "This continuing decline in local news gathering is part of a broader and disruptive trend in media. The Internet and digital platforms fundamentally reshaped the business of collecting and disseminating news and information.

"Yet for years the FCC’s media regulations failed to account for this disruption. In the meantime, our outdated rules only made it harder for traditional media outlets to invest in local news gathering, while providing their digital competitors with another regulatory advantage.

“In 2017, the FCC finally acted. We did so by modernizing our media ownership rules and incentivizing greater investment in journalism and additional resources for local reporting in the face of dramatic new competition from digital platforms. The benefits of our reforms were worth fighting for, and I am glad that the Supreme Court unanimously agreed that the revised rules must be upheld."

Commissioner Geoffrey Starks looked at the bright side, which was the Supreme Court's deference to the agency's decisionmaking.

“The Supreme Court spoke clearly, coming out strongly in favor of agency deference under the Administrative Procedure Act," he said. "We can now move forward confidently to address media ownership in future Quadrennial Reviews in a manner that is data-driven and otherwise fully consistent with our duty to promote and ensure competition, localism, and diversity in the public interest. And to be clear, nothing in the Court’s holding upsets our long-established ruling that media ownership decisions must take into account how diversity will be affected.”

“The Media Institute applauds the Supreme Court’s unanimous decision upholding the FCC’s effort to streamline media ownership regulation," said Media Institute President Richard Kaplar. "The Federal Communications Commission got it right in 2017 when it eliminated two broadcast ownership rules and modified a third. The FCC’s action at that time was neither arbitrary nor capricious, as the Supreme Court affirmed today." 

“Since the 1990s, the Institute has urged the repeal of the newspaper/broadcast cross-ownership ban and similar outdated ownership regulations. As the media marketplace has continued to expand, the need to modernize the regulatory regimen has only become more acute. Today’s decision by the Supreme Court is a much-needed and long-overdue step toward that goal.”

John Eggerton

Contributing editor John Eggerton has been an editor and/or writer on media regulation, legislation and policy for over four decades, including covering the FCC, FTC, Congress, the major media trade associations, and the federal courts. In addition to Multichannel News and Broadcasting + Cable, his work has appeared in Radio World, TV Technology, TV Fax, This Week in Consumer Electronics, Variety and the Encyclopedia Britannica.