In a case just released by the FCC, a broadcaster was fined for enforcing a non-compete agreement that was entered into when a broadcaster sold one of its stations in a market in and agreed that it would not compete in the same format if it ever acquired another station in the same market. The agreement had prohibited the Seller from competing with the Buyer in a news-talk format. After the closing of the sale of the station, the Seller acquired another station in the market and adopted a format that a local court found was covered by the non-compete clause in the contract. The local court issued an injunction against the continuation of the news-talk format. At that point, the Seller filed a complaint with the FCC, arguing that, by obtaining the injunction, the Buyer had engaged in an unauthorized assumption of control of the station covered by the injunction, without FCC approval. The FCC agreed with the Seller, and fined the Buyer $8000 for exercising control over the station that Seller had bought.
The FCC’s reasoning in this case, citing a similar letter decision from 2006, is that the restriction on format impedes a licensee’s control over its own programming, and restricts its ability to adjust its operations to account for changing market conditions. The Commission concluded that, barring the licensee from utilizing a particular format, even for the limited period of the non-compete agreement, was contrary to the public interest. By obtaining the injunction to prevent the Seller from using the news-talk format, the Buyer had impermissibly exercised control over the station that it had already sold. In fact, the Commission went further, and found that the exercise of control over the programming, personnel or finances of the station would be a violation of the rules. Continue Reading Format Noncompete Agreements Can Lead to FCC Fine