The FCC yesterday announced a consent decree with Media General by which Media General agreed to pay a $700,000 “settlement payment” to the US Treasury to settle the investigation of its attempts to enforce the provisions of a Joint Sales Agreement with Schurz Communications. Media General had tried to enforce the JSA when Schurz tried to terminate that agreement in order to sell its station to Gray Television. Media General tried to get an injunction from a state court seeking to stop the sale, continue the JSA, and prevent Schurz or Gray from putting the station into the incentive auction. As we wrote here when the case first arose, the FCC wrote to the court, contending that the injunction would not only violate the conditions placed on the sale by the FCC (that the Schurz station be sold before the Gray deal could close) but, more importantly for the general broadcast community, that the restrictions on the sale of the station, and its participation in the incentive auction, were improper restrictions on the control rights of the licensee. Essentially, the FCC was saying the licensee’s right to sell the spectrum it had was not one that could be conveyed to a third party. The FCC even stated its intention to initiate a proceeding to determine whether Media General’s FCC licenses should be revoked.
What we wrote when the case came out, and what we wonder now, is what the FCC considers the degree to which a licensee’s ability to sell its spectrum can be limited by contract or agreement. Yesterday’s release provides no guidance, as it was simply a settlement agreement. The consent decree recites what the FCC was initially concerned with, but Media General did not admit any liability, and the consent decree does not reach any conclusion as to the actual basis of the settlement payment. So it is conceivable that the FCC was actually only worried about the attempts by Media General to require that the station be kept and the JSA stay in place, even though the FCC ordered that it end. It may not have been a case dealing principally with control at all, but instead one dealing with grandfathered JSAs and whether those JSAs can stay in place after the sale of one of the television stations involved in the arrangement. Otherwise, if the case was really about putting limits on the degree to which contracts can limit the ability of a licensee to sell its station, that issue could have had much broader implications than the FCC may have intended.
Continue Reading $700,000 to Be Paid By Media General to End Inquiry on its Attempts to Enforce a JSA – What are the Limits on the Enforceability of a Contractual Restriction on an FCC Licensee’s Sale of its Station?