What is good for the goose is good for the gander. The saying often finds application in Washington, when a principle formerly benefiting one ideological side suddenly benefits the other due to the vagaries of the ballot box. The filibuster is a classic example. The respect that courts accord to agencies is another. In FCC v. Prometheus Radio Project, the Supreme Court reversed the Third Circuit and unanimously upheld the FCC’s relaxation of its media ownership rules, a significant deregulatory policy of the Trump Administration. But the wide latitude that the Supreme Court gave the Commission’s factual findings has become a valuable tool in the hands of the Biden-era FCC, as the FCC can command the same respect for crucial factual findings needed in support of quite different initiatives, such as new net neutrality rules. Meanwhile, in the proceeding at hand, media ownership, the Commission has subsequently issued a public notice to update the record in the 2018 Quadrennial Review proceeding for its media ownership rules and extended the comment and reply comment deadlines to September 2, 2021 and October 1, 2021, respectively.
Under section 202(h) of the Telecommunications Act, the FCC must review its media ownership rules every four years and will repeal or modify rules that are no longer in the public interest. The FCC’s public interest analysis supports the goals of promoting competition, localism, and viewpoint diversity.
In Prometheus Radio Project v. FCC, 824 F.3d 33 (3d Cir. 2016), the Third Circuit vacated part of the Commission’s 2014 order, which was issued as part of the 2010 and 2014 media ownership reviews. The 2014 order proposed modifications to the broadcast ownership rules and adopted the Television Joint Sales Agreement (“JSA”) Attribution Rule, which determines that, for purposes of the Local Television Ownership rule, a station is not independently owned when another station has sales over 15% of the first station’s weekly advertising. The Local Television Ownership rule only allows an entity to own up to two stations under certain circumstances.
Following this decision, the Commission completed its 2010 and 2014 reviews of its media ownership rules and adopted the 2016 order. The Commission concluded that its existing media ownership rules were still in the public interest and retained the rules with only minor modifications:
- The Newspaper/Broadcast Cross-Ownership Rule, which prohibits common ownership of a full-power broadcast station and a daily newspaper in the same local market (modified to loosen the rule’s general prohibition);
- The Radio/Television Cross-Ownership Rule, which prohibits an entity from owning more than two television states and one radio station in the same market, unless the market meets a certain size (updated to reflect transition from analog to digital television service);
- The Local Television Ownership Rule, which allows an entity to own up to two television stations if: (1) the digital noise limited service contours of the stations do not overlap; or (2) at least one of the stations is not ranked among the top-four stations in the market (known as the “Top-Four prohibition”) and at least eight independently owned television stations would remain in the market following the combination (known as the “Eight Voices” test).
- The Local Radio Ownership Rule, which permits an entity to own a certain number of radio stations based on the number of radio stations in that market and the number that provide the same service (retained with no modifications); and
- The Dual Network Rule, which permits common ownership of multiple broadcast networks but prohibits a merger between or among the top-four networks (retained with no modifications).
Besides retaining the existing rules, the 2016 order also reinstated revenue-based eligible entity standards as a race-neutral means of facilitating diversity and readopted the Television JSA Attribution Rule from the 2014 order.
With the change in administration in 2017, the Commission granted reconsideration of its 2016 order and performed a new public interest analysis. In this 2017 reconsideration order, the FCC undid many substantive changes from the 2016 Order and implemented other substantive changes:
- Eliminated the Newspaper/Broadcast and Radio/Television Cross-Ownership Rules;
- Modified the Local Television Ownership Rule by (a) eliminating the Eight Voices test and (b) allowing applicants to now seek case-by-case review to determine if the Top-Four prohibition may be unwarranted;
- Declined to modify the market definitions relied on in the Local Radio Ownership Rule, but provided a presumption for certain embedded market transactions;
- Eliminated the Television JSA Attribution Rule; and
- Retained the disclosure requirement for shared service agreements (SSAs) involving commercial television stations.
In considering the 2017 reconsideration order in Prometheus Radio Project v. FCC, 939 F. 3d 567 (3d Cir. 2019), the Third Circuit held that the FCC failed to adequately consider the effect its new rules would have on ownership of broadcast media by women and racial minorities and vacated and remanded the FCC’s 2017 reconsideration order.
After the 2019 decision, then-Chairman Pai expressed disappointment that the Third Circuit had “block[ed] any attempt to modernize these regulations to match the obvious realities of the modern media marketplace.” The FCC appealed the case to the Supreme Court.
Justice Kavanaugh, writing for the Court, reversed the Third Circuit and held that the FCC properly considered the data in the record when it assessed the impact of the changing rules on minority and female ownership. While the data may have been incomplete, the court found that the FCC acknowledged the gaps in the data, asked for more data on the issue that it did not receive, and was not required to conduct its own studies. Additionally, the court found that the FCC did not ignore two studies that Prometheus considered “superior evidence,” but instead interpreted the studies differently, as allowed under the Administrative Procedure Act (“APA”).
In his concurrence, Justice Thomas argued that the FCC had no obligation to consider minority and female ownership because it was not a statutory requirement under section 202(h), and that diversity in media ownership has been used as a proxy for diversity in viewpoints.
By the time the Supreme Court issued its decision, the FCC had changed administrations. In response to the Supreme Court’s decision, Acting Chairwoman Rosenworcel stated she was “disappointed by the Court’s decision” but that she was “committed to ensuring principles [of competition, localism, and diversity] guide the agency as [it] moves forward.” Commissioner Starks stated that the Commission could “move forward confidently to address media ownership in future Quadrennial Reviews in a manner that is data-driven.”
Implications Going Forward
The Court was quite deferential towards the Commission in its affirmance of the 2017 reconsideration order. The Commission will soon develop new rules in the next quadrennial review that should receive from courts the same wide latitude under the APA for factual findings in light of the Supreme Court’s decision. As the original comment period for the 2018 quadrennial review has passed, the Commission’s new public notice seeks to update the record.
Parties can provide new studies that address the gaps in the data that the Commission identified regarding the effect of broadcast ownership rules on female and minority ownership. These new studies could focus on a more direct causation from the ownership rules to women and minority ownership and also conduct a statistical analysis of the future effects of FCC rule changes.
The Commission could also look at other issues that were not addressed by the Supreme Court’s decision. The elimination of the Eight Voices test was fiercely disputed at the Commission, with arguments over whether broadcast duopoly or non-duopoly markets best serve the local community.
Beyond the broadcast ownership rules, this opinion also has implications for other FCC decisions, such as a new net neutrality order. If such an order were to be challenged (which is likely), the Commission’s factual findings are more likely to be upheld because of the Prometheus Radio decision. This would be consistent with the wide latitude given to the Commission by the D.C. Circuit in its review of the prior two net neutrality orders.