Last week, the FCC approved the long-pending application for the transfer of control of Clear Channel Broadcasting from its public shareholder to several private equity funds. Even though the application had been pending at the FCC for over a year, the Commission’s decision was notable for the paucity of issues that were discussed. The decision approves the transfer, conditioned on certain divestitures by the Company and by the equity funds that will control the new company, including divestitures previously ordered by the Commission in connection with the investment of one of these funds in Univision Broadcasting but not yet completed, and rejects three petitions that, from the Commission’s description, did not involve fundamental issues about the nature of the overall transaction, but were instead devoted to certain limited issues, in two cases involving actions in a single market. The divestiture conditions were approved seemingly as a matter of course, and do not provide any new insights into the law concerning the FCC’s attribution rules (unlike the recent decision approving the transfer of control of Ion Television, about which we wrote here, which contained an extensive detailed discussion of what it takes to make an ownership interest “nonattributable” for purposes of the FCC multiple ownership rules). Given the lack of controversy in the Commission’s order, what is perhaps most noteworthy about the decision are the concurring statements of the two Democratic Commissioners, which may provide some indication of the concerns of the Commission should we have a Democratic-controlled Commission following this year’s Presidential election.
Of course, as we’ve described in our posts about the FCC’s Localism Notice of Proposed Rulemaking (here), and the new rules regarding Enhanced Disclosure requirements for television broadcasters (here), the Commission has already begun to act in a far more regulatory manner than any other Commission in the past 20 years. Yet the issues raised by the Democrats in this decision are in areas not yet considered by the Commission. Commissioner Copps expresses his concern about the role of private equity in broadcast ownership, and whether such ownership is in the public interest. In numerous proceedings and in response to the presentation made at the FCC’s January meeting by the Media Bureau, Copps has suggested that private equity should be investigated, both to determine whether the Commission is fully aware of all ownership ties of the companies involved, and also (as emphasized in this case) for the potential economic impact on the operations of the broadcast stations caused by the new debt involved in the acquisition. Here, Commissioner Copps questions whether the announcement of a potential downgrade of the bonds of the Company if these deals occur should have been of more concern to the Commission. Private equity should be aware that, in a future FCC, an investigation of the economics of their operations should be expected.
Commissioner Adelstein, on the other hand, was concerned not so much about structural issues of the major investors, but instead about the operational affects of consolidated ownership. He has expressed these sorts of concerns previously in connection with questions of payola and other pay-for-play situations that may exist at broadcast stations, and in connection with the selection of music at radio stations owned by big owners. Here, his concern was about the advertising practices of consolidated owners, and as to whether these practices made it difficult for non-consolidated owners to compete. A petition was filed against the transaction alleging that Clear Channel unfairly competed by giving advertisers who spend 100% of their budget on Clear Channel stations some sort of discount or benefit. While the Commission found no concerns with such discounts (implying that they would be more concerned with a requirement that an advertiser, in order to buy any time on a station, spend 100% of its budget on co-owned stations), Commissioner Adelstein suggested that the Commission should have spent more time analyzing the advertising practices to insure that they were in the public interest.
These comments may provide a hint of where Commission policy will go in the future. Already, the Democratic Commissioners have been incredibly successful for members of the minority party in pushing their agenda at the Commission. If they become a majority, who knows what will happen?