unauthorized transfer of control

Here are some of the regulatory actions of the last week of significance to broadcasters, with links to where you can go to find more information as to how these actions may affect your operations:

  • FEMA announced that it has canceled the 2020 test of the Integrated Public Alert and Warning System (IPAWS), which is

Here are some of the regulatory and legal actions of the last week—and some obligations for the week ahead—of significance to broadcasters, with links to where you can go to find more information as to how these actions may affect your operations.

  • The comment cycle was set in the FCC’s annual regulatory fee proceeding. On or before June 12, the Commission wants to hear from interested parties about the fees that it proposes to impose on the companies that it regulates – including broadcasters.  The FCC proposes to complete the implementation of its change to computing fees for television stations based on population served rather than on the market in which they operate, a move it began last year (see our Broadcast Law Blog article here on the FCC decision last year to initiate the change in the way TV fees are allocated).  The FCC also asks for ideas about how the Commission can extend fee relief to stations suffering COVID-19-related financial hardship.  Reply comments are due on or before June 29.  (Notice of Proposed Rulemaking)
  • FCC Chairman Ajit Pai and Chris Krebs, director of the U.S. Department of Homeland Security’s Cybersecurity and Infrastructure Security Agency, wrote to the nation’s governors asking them to, among other things, declare radio and TV broadcasters as essential to COVID-19 response efforts and to afford broadcasters all appropriate resources and access. (News Release)
  • In a good reminder to broadcasters that transactions involving the sale or transfer of control of a broadcast station must be authorized in advance by the FCC, the Media Bureau entered into a consent decree with two companies that sold an FM station and FM translator without getting approval from the Commission. The parties mistakenly believed filing license renewal applications that reflected the assignment was sufficient approval.  The consent decree includes an $8,000 penalty.  (Consent Decree).  See this article on past cases where the FCC has warned that even transactions among related companies that change the legal form of ownership of a broadcast station without changing the ultimate control need prior FCC approval.
  • The Commission granted approval to Cumulus Media, Inc. to exceed the Commission’s twenty-five percent foreign ownership threshold. The Commission will allow Cumulus to have up to 100 percent aggregate foreign investment in the company, although additional approvals will be needed if any previously unnamed foreign entity acquires 5% or more of the company or if any foreign entity desires to acquire control.  (Declaratory Ruling).  This decision shows the process that the FCC must go through to approve foreign ownership above the 25% threshold and the analysis needed to issue such approvals.  See our articles here and here about the evolving FCC policy in this area.
  • President Trump signed an executive order that seeks to, among other things, address online censorship and rollback certain protections afforded to online platforms, which include social media sites like Twitter, Facebook, Instagram, and YouTube, but which also protect any site that hosts content created by users – which could include the Internet platforms of many broadcasters. Under federal law, Section 230 of the Communications Decency Act, these online platforms generally enjoy legal immunity for what users post on their platforms.  The President directed the Department of Commerce to ask the FCC to open a rulemaking to review this immunity and asked the FTC to review whether platforms were adhering to their terms of use when commenting on or limiting third-party content.  Other government entities, including state attorneys general and the Department of Justice, were also asked to review online platforms.  For his part, FCC Chairman Ajit Pai said “This debate is an important one. The Federal Communications Commission will carefully review any petition for rulemaking filed by the Department of Commerce.”  (Executive Order).  Watch for an article on the Broadcast Law Blog this coming week on implications of this order for broadcasters and other media companies.
  • Anyone looking to hand deliver documents to the FCC needs to learn a new address, and it is not, as you might expect, the address of the FCC’s future headquarters. Deliveries by hand must now be brought to 9050 Junction Drive, Annapolis Junction, MD 20701.  The address change is to enhance security screening and is part of winding down operations at the current 12th Street headquarters.  (Order)


Continue Reading This Week at the FCC for Broadcasters: May 23, 2020 to May 29, 2020

Last week, the FCC released a Consent Decree where a broadcast company admitted to certain unauthorized transfers of several stations, even though actual control of the stations, for the most part, did not change. Stock of the company was transferred into a trust by the company’s shareholder without FCC approval, even though the shareholder

The potential perils of foreclosing on a radio station were evident in a Consent Decree released by the FCC’s Media Bureau yesterday, agreeing to an $11,000 penalty to be paid to the FCC U.S. Treasury before a station could be sold by a receiver to help pay off the debts of an AM radio station owner. The fine was imposed both for an unauthorized transfer of control of the licensee of the station, and because of the failure of the receiver appointed by the Court to keep the FCC fully appraised of the status of the control of the licensee company while FCC approval for the receiver’s control of the station was still pending before the FCC. What this case really shows is that in any foreclosure on a broadcast station where there are competing creditors, an uncooperative debtor or anyone else who could possibly contest the process, anyone attempting to collect obligations owed by a broadcaster needs to proceed very carefully, keep the FCC fully informed of the entire process surrounding the exercise of the creditor’s rights, and be advised by an attorney or advisor very familiar with FCC process in addition to counsel in the local court proceedings. Plus, local counsel and FCC counsel need to work together at each stage of the process to make sure that the proper approvals are obtained from the FCC before the local court actions are implemented.

This case demonstrates, like a case we wrote about last week, the complicated interplay between the actions of local courts enforcing private actions and the FCC enforcing the Communications Act. In this case, the orders of the local courts and other authorities dealing with the receivership of station assets and the stock of the licensee company changed over time. The failure to keep the FCC appraised of those changes really led to the $11,000 fine. The receiver initially asked that he be approved to become the “assignee” of the station, as the court order appeared to indicate that he would receive the assets of the debtor’s estate. In the FCC’s eyes, an “assignment of license” is when the assets and license of a station change hands, so that a new licensee is now the operator of the station. Here, later action of the local court changed the nature of the action to one where the receiver, instead of getting the assets of the debtor, would instead be receiving its stock. Where the licensee remains the same, but a new owner takes control, as was the case here where the receiver took control of the stock of the licensee, the FCC deems that to be a “transfer of control.” That was significant to the FCC in this case.
Continue Reading Broadcast Creditors Beware – $11,000 Fine Imposed for FCC Reporting Shortcomings in an AM Foreclosure Action

How far can a court go in ordering broadcasters to comply with the terms of a contract?  By trying to get a court to enforce a contract signed with a broadcaster, is the suing party infringing on a licensee’s control over its broadcast station license? These questions are addressed in a letter that the FCC released this week, sent to a federal district court in connection with a dispute between two big TV companies over the termination of a Joint Sales Agreement between TV stations in Georgia.  In the case, Media General is seeking to enforce a JSA against a TV station in Augusta that had been owned by Schurz Communications, which was recently acquired by Gray Television.  As a condition of the sale of Schurz to Gray, to obtain FCC approval, the parties agreed to terminate the Augusta JSA.  Media General sued, and on February 26 it obtained an injunction from a Georgia state court barring Gray from operating the station or selling the station’s spectrum in the upcoming incentive auction.  The FCC’s letter states that it believes that the courts cannot order the relief that Media General seeks without infringing on the licensee’s rights to control the station.

While there have been procedural developments in the underlying dispute dealing with the court that will hear the case, it is the substance of the FCC’s letter that is important.  The FCC’s conclusion was based on two findings.  First, it found that Media General could not enforce the JSA because its termination was a requirement of the FCC in connection with the sale of Schurz – so a court cannot order the station to violate the FCC’s own order.  But more fundamentally, the FCC determined that Media General’s efforts infringed on the obligation under Section 310 of the Communications Act that the licensee (now Gray) maintain control over its station unless the FCC has approved a transfer of that control.  In the FCC’s eyes, control includes control over the programming of the station – which would be infringed by the JSA.  It also includes control over the ultimate disposition of the station, which would be infringed by any order forbidding its participation in the incentive auction.  According to the FCC, an element of control of a station is being able to decide whether or not to sell it.  While the FCC acknowledged that Gray and/or Shurz might be liable to Media General for monetary damages and penalties for any breach of the contract provisions, Media General could not get a court to make the station comply with these alleged obligations.  This is not the first time that the FCC has made such a pronouncement.
Continue Reading FCC Says No to Court’s Enforcement of Contractual Rights that Limit Broadcast Licensee’s Control Rights – What Does this Mean for Broadcast Contracts? 

In an eagerly anticipated case involving TV stations in the Honolulu market, the FCC’s Media Bureau determined that a programming swap that permitted one company to hold the licenses of both the NBC and CBS affiliates in a single market, and to also provide technical and office services and news programming to a third station in the market, was permissible under current rules.  However, the Commission warned that it would consider in its upcoming Notice of Proposed Rulemaking in its Quadrennial Review of the multiple ownership rules whether similar situations should be permitted in the future, and seemingly implied that even this combination could be subject to further review in future licensing proceedings.  The permissibility of shared services agreements has been a question raised by public interest groups for quite some time (see our post here), and has also been raised by certain cable and satellite television operators as such combinations can result in one broadcaster negotiating carriage agreements for multiple stations in a market.  Based on this case, and the issues raised in connection with previous decisions, this will no doubt be a very controversial topic when the Commission considers the upcoming multiple ownership proceeding.

The Honolulu case began with one owner – Raycom – holding two licenses in the market – one an NBC affiliate, and the other an affiliate of the MyTV Network.  As there are 8 independently owned television stations serving Honolulu, the combination of these two stations, only one of which is a Top 4 station in the market, was permissible.  Raycom then entered into a deal with the owner of the local CBS affiliate, where the parties swapped call letters and network affiliations.  Raycom also purchased many of the non-license assets of the station, and received an option to purchase the station, and agreed to pay the licensee, over time, $22 million.  Raycom also entered into a shared services agreement with the owner of the station that had become the MyTV affiliate where Raycom would provide back office services, sales personnel, and a physical location for the station’s studio and transmitting antenna, in exchange for 30% of the stations revenues, and a flat monthly payment.  As detailed below, the Commission determined that the swap of call letters and network affiliations was not subject to review at this time as there was no licensing transaction before the FCC, and the shared services agreement did not violate current FCC policies.


Continue Reading FCC Says TV Shared Services Agreement and a Combination of Two Top 4 Network Affiliates in One Market is Permissible – For Now

$15,000 per station was the cost of a broadcast licensee’s failure to adequately supervise two stations of which he was the licensee, but which were operated pursuant to time brokerage agreements or LMAs. Like many stations in these tough economic times, this licensee decided to allow a third party to provide the bulk of the programming and retain the bulk of the sales revenues, in exchange for a payment. However, as the licensee remained the licensee, he was required to maintain and exercise control over the station’s operations, and maintain a meaningful staff presence at the station. In reviewing the operations of these stations, the FCC’s Enforcement Bureau in recent decisions (here and here) concluded that the adequacy of that control was insufficient – providing a warning to other station licensees operating under LMA agreements that they must maintain operational control over the stations that they own.

The FCC has long said that a licensee must maintain a meaningful staff presence at a station, even if the station receives the vast majority of its programming from some other source – whether that is a network or programming provided under an LMA. Meaningful presence has required that at least two employees at the station be employed by the licensee, one of whom must be managerial and perform no services for the broker providing the programming under the LMA. This case makes clear that these required licensee employees must be physically present at the station’s main studio on a regular day to day basis – they cannot be located at some distant location supervising the station remotely or only periodically present at the main studio. Failure to have the station’s main studio manned by the required personnel in and of itself accounted for $7000 of the fine in this case.


Continue Reading FCC Issues $15,000 Fines For Unauthorized Transfer of Control and Main Studio Staffing Violations for LMA Done Wrong

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