On Tuesday, as has been covered in most of the broadcast trade press, the US Supreme Court held its oral argument in the Prometheus case. In this case, the FCC and a number of media companies seek to overturn the Third Circuit’s decision that threw out the FCC’s 2017 media ownership rule changes. As we wrote here, these changes included the abolition of the newspaper-broadcast and radio-TV cross-ownership rules, the abolition of the “rule of eight” that requires that there be eight independent TV owners in a market to allow the common ownership or control of two TV stations in a market, the allowance in some cases of the common ownership of two of the top 4 TV stations in a market, and the determination that TV joint sales agreements are not attributable. When the Third Circuit overturned the 2017 decision, those changes were undone (see our article here). In addition, the Third Circuit’s basis for its decision was that the FCC had done an inadequate job assessing the effect that relaxations in the media ownership rules might have had on minority ownership in the past and how diversity of ownership would likely be affected by the 2017 changes (looking for historical information the FCC claimed not to have). As a result, all other changes in the FCC’s media ownership rules have been put on hold, including proposed changes to relax the radio ownership rules because if the Third Circuit decision is upheld, any further changes in the local ownership rules have to make that same showing.
The argument on Tuesday went like so many court arguments – there were lots of questions directed by the Justices to all parties in the case. While there were some questions about whether the FCC had adequately justified its 2017 decision, there seemed to be many questions focused not on whether to overturn the Third Circuit decision, but instead on whether to overturn it on narrow grounds (that the FCC had justified the need for reform of its ownership rules despite any impact it might have on minority ownership and the courts should defer to the opinion of the expert agency), or whether to come out with a more sweeping ruling that says that the statute calling for Quadrennial Reviews of the FCC’s ownership rules makes competition issues the guiding factor in assessing whether or not to relax existing ownership rules, and that ownership diversity is at most a collateral or secondary consideration. If the Court in fact decides to overturn the Third Circuit, the basis of the decision could impact future ownership proceedings. What is next for those proceedings?
First, we need to see what the Supreme Court does in its decision. That decision is expected in late Spring or early Summer before the Court recesses for the summer. If the Court does overturn the Third Circuit, the 2017 rules would likely be reinstated. The FCC would then have to deal with its pending Quadrennial Review of the ownership rules, begun in 2019. That proceeding principally looks at the radio rules – but also includes a review of the dual network rule (whether common ownership of 2 of the Top 4 TV networks should be permitted), the Top 4 rule for TV ownership (trying to decide if there are more definitive criteria that can be established as to when two of the top 4 TV stations in a market can be commonly owned); and whether there should be any rules limiting shared services agreements between non-commonly owned stations. The FCC may well ask for further comments on the issues raised in the Quadrennial Review in light of whatever standards are set out in the Court’s decision. So, even if a Supreme Court decision overturning the Third Circuit comes out in May, June or early July, don’t expect a quick resolution to any of the pending matters.
There are other factors at play as well. Of course, the Supreme Court could uphold the Third Circuit decision, in which case the FCC would have to try to gather historical data on ownership diversity before moving forward on any changes in its ownership rules. Also, no matter which way the Court rules, we will have a new FCC considering the ownership rules. As of yesterday, Commissioner Rosenworcel became Acting Chair Rosenworcel with her appointment to lead the agency while the new President determines who will lead it permanently (and she may well be one of the candidates). She dissented from the 2017 media ownership changes and expressed concerns about some of the further relaxation of the ownership rules proposed in 2019, and those decisions may well inform her view of further changes to the rules. Commissioners Starks and Simington were not on the FCC when either of these actions were taken, so we will have to see how they react both to the Court decision and to the record developed in the comments filed in the FCC’s proceeding.
So, as is so often the case in any broadcast proceeding, we may not see any changes in the FCC’s ownership rules in the short-term except those that may result directly from the Supreme Court decision, to the extent that the Court’s decision reinstates the 2017 changes. As we wrote here, in one of his final speeches Chairman Pai called for a relaxation of more of the ownership rules given the real and growing competition to the broadcast services coming from digital media. We will be waiting to see how the new FCC reacts to that changing competitive environment, and the instructions from the Supreme Court that may well guide the FCC’s decisions.