A federal court has struck down the FCC’s prohibition on common ownership of two “top four” television stations in a single market, marking a significant change in the FCC’s media ownership rules.
The Court left other ownership limitations – including the local radio ownership rule – in place.
The Eighth Circuit Court of Appeals’ decision in Zimmer Radio v. FCC is also important because it sheds light on how courts will review FCC and other federal agency decisions under the Supreme Court’s less deferential standard adopted in its 2024 Loper Bright v. Raimondo decision.
Media Ownership. For over two decades, the FCC’s multiple ownership rules were fairly stable. In the largest geographic markets, radio broadcasters could own up to 8 radio stations, with a “subcap” of 5 stations in the same service (AM or FM). Television broadcasters could own up to two TV stations in a Designated Market Area (DMA) but could not own two of the top four rated stations in a DMA without a waiver from the FCC. After 2023, TV broadcasters could not combine two top four program streams by putting one stream on a multicast channel or a low power TV station.
The Telecommunications Act of 1996 requires the FCC to review its media ownership rules every four years to determine whether they remain “in the public interest as the result of competition.” The broadcasters who petitioned the Court to overrule the FCC’s 2023 decision in its 2018 quadrennial ownership review argued that the FCC did not adequately consider non-broadcast competitors, such as virtual MVPDs and video or audio streaming services, in defining the competitive markets for radio and television.
The Court upheld the FCC’s determination that radio and television are separate markets from streaming and other non-broadcast distribution platforms. The Court found that the Telecommunications Act gives the FCC discretion to define the market for broadcast services and that the FCC’s decision was reasonable and not an abuse of discretion.
The Court also upheld the FCC’s decision to keep the local radio ownership limits and AM/FM subcaps. The Court said the FCC’s decision-making process was reasonable and well-supported, and the FCC’s decision could not be set aside just because the broadcasters who challenged the FCC would have drawn the limits differently.
In contrast, the Court found the FCC’s decision to retain the prohibition on common ownership of two top four rated TV stations in a market to have been arbitrary and capricious. The Court said the FCC’s shifting justifications for adopting and retaining the top four prohibition, such as preventing owners from aggregating market power or consolidating Big Four network affiliations and local news programming, were not supported by the record and did not represent reasoned decision making.
Turning to the FCC’s amendment of Note 11 to its multiple ownership rules, which prohibited TV broadcasters from “circumventing” the top four prohibition by placing a top four rated station on a multicast channel or LPTV station, the Court determined that the FCC had exceeded its authority because the Telecommunications Act of 1996 allows the FCC to repeal or relax media ownership rules, but not to tighten them. The Court found that the quadrennial ownership review process is inherently deregulatory.
How Will This Affect Broadcasters? Where does this leave broadcasters who want to increase their ownership of radio or television stations? For radio, the answer is simple: nothing has changed. The radio multiple ownership rules remain in place. For television, the elimination of the top four prohibition will allow broadcasters to acquire two top four stations in a DMA. Television broadcasters will also be able to carry a second top four program stream on a multicast channel or LPTV station.
The Court has not yet issued its mandate to make its decision effective and is giving the FCC 90 days to provide a reason for the Court to modify, accelerate or further postpone the mandate. If a petition for rehearing is not filed, and absent further action by the Court, the mandate on Note 11 should be issued in September, and the mandate on the top four prohibition should be issued in December.
It is unlikely that the current FCC, which is taking a deregulatory approach to media ownership, will file for rehearing on either the Note 11 issue or the top four prohibition, or file to modify or postpone the delayed mandate on the top four prohibition. However, NCTA and the American Television Alliance were granted intervenor status in support of the FCC and probably would be able to file for rehearing, which could delay issuance of the mandates on Note 11 and the top four prohibition.
Are Courts Still Deferring to Agencies? Last year, the Supreme Court overturned forty years of precedent which had required courts to defer to reasonable agency interpretations of unclear or ambiguous statutory provisions. The Court replaced that deferential standard with one requiring that “[c]ourts must exercise their independent judgement in deciding whether an agency has acted within its statutory authority.” Since that decision in Loper Bright v. Raimondo, there has been much debate on the practical impact of the change. The Eighth Circuit’s decision provides insights on that question.
In examining whether the FCC had reviewed if the media ownership rules remained “in the public interest as the result of competition,” the Eighth Circuit looked at the law’s text, its historical context, and how much discretion Congress had given the FCC to determine the meaning of “competition.” Ultimately, the Eighth Circuit determined that Congress gave the FCC broad authority to determine the public interest standard, “so long as that view is based on consideration of permissible factors and is otherwise reasonable.” The Eighth Circuit also determined that the statute gave the FCC discretion to define “competition.”
The Court credited the FCC’s assessment because the agency generally had been consistent in defining key terms since it first interpreted those provisions of the Telecommunications Act of 1996. Also, because the type of decision at issue here – “how much competition must be considered in analyzing the ownership rules” – was not a legal determination that was necessarily a judicial one, but rather an exercise in line drawing, it was appropriately one for the agency.
It remains to be seen whether other circuit courts of appeals will follow the Eighth Circuit’s approach.
Conclusion. While it may be too early for television broadcasters to start signing deals to acquire a second top four station or additional program streams, the Eighth Circuit’s decision, the pending 2022 Quadrennial Review, and FCC Chairman Carr’s statements supporting deregulation of media ownership indicate that those opportunities may soon be on the horizon.
Broadcasters and other media, tech, and telecommunications companies should continue to watch the evolving issue of whether and how courts provide agencies such as the FCC with deference in adopting and interpreting rules.
