When the FCC last month reinstated the UHF discount (see our article here), it opened the door to ownership consolidation in the television industry, and immediately deals were announced based on the discount being back in place. But public interest groups in DC, fearing too much consolidation, asked the FCC to stay the effect of the rules. When the FCC did not act, the public interest groups last week asked the US Court of Appeals in the District of Columbia for a stay to put the rules on hold. In response, the Court order expedited briefing on the stay request, with the FCC filing its brief Thursday (here) and the public interest groups scheduled to file their brief shortly. Then late yesterday, the Court issued what it termed an “administrative stay” – temporarily putting the rules on hold while it considers the briefs filed by the parties. The Court was careful to say that this administrative stay was not any sort of judgment on the merits of the stay request – it was just putting everything on hold while the Court considered the arguments of the parties.
While there seems to be a rush to put everything on hold, it is interesting to note that there does not seem to be any imminent risk of anything happening, as the FCC procedurally does not seem to be in a position to imminently grant any application that would create new combinations taking advantage of the reinstated UHF discount. Regardless of this anomalous rush to a decision, the issue to be considered by the Court in assessing any stay request is whether the public interest groups have a likelihood of success on the merits of the case, and whether there is irreparable injury if the stay is not issued (see our article here discussing the standards for a judicial stay). In this case, the Court will be assessing whether the new FCC’s reinstatement of the UHF discount was an arbitrary and capricious decision to overturn the FCC’s abolition of the discount – which took place just last August (see our article after the full text of that order was released in September, here).
The Court will weigh whether the August decision, based on the fact that UHF stations are no longer technologically inferior to VHF stations, was reasonably overturned by the new FCC which relied on the argument that, even if the technological inferiority of UHF stations no longer justifies the discount, the video marketplace is so changed that the public interest requires that the FCC examine the impact of the repeal of the discount on that marketplace before it takes any action to repeal that discount. Specifically, the FCC should not do away with the UHF discount without reviewing whether the effect of the elimination of the discount on TV station group owners’ compliance with the 39% national ownership cap is in the public interest. As the FCC pointed out in its brief, this is very similar to the reasoning behind the decision of the US Court of Appeals for the Third Circuit when it overturned FCC rules that required the unwinding of Joint Sales Agreements without first considering whether changes in the video marketplace justified these local combinations of stations (see our article here on that case).
It appears the consideration of these arguments will play out very quickly. So stay alert for upcoming developments to see what comes next in the saga of this new FCC’s attempt to roll back some of the regulatory actions of the prior Chairman.