3rd Circuit Vacates JSA Rule; New One Seen as Heavy Lift

FCC Chairman Tom Wheeler could face an uphill battle trying to reestablish the joint sales agreement attribution rule vacated by the 3rd Circuit U.S. Court of Appeals in a majority opinion by Judge Thomas Ambro, broadcast attorneys told us. Along with vacating the JSA rule as expected (see 1604190041) in Wednesday’s Prometheus III decision, the 3rd Circuit took the commission to task for delaying the 2010 and 2014 quadrennial reviews and not abiding by the court’s decision in the previous two Prometheus cases (see 1605250016). That was the subject of a Communications Daily Bulletin.

“This is our third go-round with the Commission’s broadcast ownership rules and diversity initiatives,” said Ambro in his opinion. “Rarely does a trilogy benefit from a sequel.” Judge Julio Fuentes signed the opinion. Judge Anthony Scirica concurred in part and dissented in part, saying the court should have gone further to force the FCC to act on the quadrennial review. “A draft proposal by one Commissioner is no guarantee that a final order is forthcoming,” Scirica said in his dissent. “There should be a firm timeline for action.”

The 3rd circuit vacated the JSA rule because the agency hadn’t reviewed its underlying ownership rules as Congress had ordered, not because the JSA rule “didn’t make sense,” Wheeler said in a news conference after Wednesday’s FCC meeting. “Because the rule’s enactment was procedurally invalid, we vacate it and remand the matter to the Commission,” said the majority opinion. Wheeler will circulate a quadrennial review order by June 30, he restated Wednesday, pointing out that the commission would then be able to reestablish the rule.

Broadcasters and broadcast attorneys told us Wednesday that is exactly what they expect Wheeler to try to do but he may not have the votes this time around, they said. The previous JSA rule was passed in a 3-2 vote, but FCC Democrats may not be willing to support the rule after Congress has since expressed displeasure with it by revising the original rule’s grandfathering provision. Commissioner Jessica Rosenworcel still needs to be reconfirmed by legislators, one attorney noted. Republican Commissioners Ajit Pai and Mike O’Rielly said Wednesday they wouldn’t support a reinstatement of the rule.

Though the JSA attribution rules no longer exist, TV stations are unlikely to begin signing such deals in the wake of the court’s decision, broadcasters and broadcast attorneys told us. Since the FCC promised to take up the issue shortly, broadcasters can’t be certain they won’t have to unwind any new JSAs, and they’re unlikely to take the chance, the broadcast industry officials told us: That same uncertainty also makes it unlikely the 3rd Circuit decision will have an effect on Nexstar buying Media General, which does involve sharing agreements. The Media Bureau previously said its stance against JSAs in transactions wasn’t affected by congressional action to lengthen the JSA grandfathering period, and the bureau is expected to take the same position here, the broadcast officials said. Broadcasters could try to exploit the vacated JSA rule by establishing such agreements while it’s vacated and attempting to argue those are existing arrangements that should be grandfathered under a new attribution rule, but that could be a risky strategy, a broadcast lawyer said. The congressional appropriations provision that lengthened the grandfathering terms of the original JSA attribution rules specifically identified the rule it was modifying, and likely has been rendered invalid by the 3rd Circuit order, a broadcast lawyer noted.

The court also ruled that the FCC must enter mediation with public interest groups to take steps to address the lack of minority and female ownership in broadcasting. The FCC has 60 days to agree on a timeline for the mediation, the opinion said. “With 12 years having passed since Prometheus I, we conclude that the Commission has had more than enough time,” the opinion said.

Prometheus Radio Project asked the court to require the FCC to extend its JSA rules to shared service agreements. The 3rd Circuit said this, too, would require the FCC to review its ownership rules as Congress required. NAB, Howard Stirk Holdings and Nexstar asked the court to vacate all ownership rules in response to the FCC's failure to take up the quadrennial review. Ambro compared that to burning down a house “to roast a pig.” Since the broadcasters didn’t request any lesser form of relief, the court didn’t grant them any. Scirica disagreed with that in his dissent.

Public interest groups touted the court's urging the FCC to gather the required data on women and minority ownership quickly. “There is no way that the FCC can continue to ignore the problems with its data,” said Georgetown Law Institute for Public Representation Director Angela Campbell, who argued on behalf of Prometheus. “The United Church of Christ’s media justice ministry, OC Inc., looks forward to sitting down with the FCC to develop a timeline" within the court-ordered 60-day time frame to ensure that the long-awaited studies are undertaken, said public interest lawyer Cheryl Leanza, who represents the church.

Wheeler conceded there are legitimate concerns that the data gathered in such studies are likely to quickly be rendered out-of-date by the impending incentive auction and repacking. That doesn’t modify his plans to offer an ownership proposal in June, he said Wednesday. The FCC should have done such studies well in advance of the incentive auction, Pai said, and now must deal with the consequences. “We are where we are,” Pai said. The FCC doesn’t need to consider the effect of the incentive auction on broadcasting to conclude that the newspaper/broadcast cross ownership rule is outdated, O’Rielly said. Commission officials including General Counsel Jonathan Sallet declined to comment to us, and the offices of Commissioners Mignon Clyburn and Rosenworcel likewise had no comment.

NAB praised the court for highlighting the "irrationality" of the newspaper/broadcast cross-ownership rule, which the majority opinion said likely would have been removed long ago if the FCC had complied with previous 3rd Circuit decisions. "JSAs are clearly in the public interest," said NAB. The decision is "yet more evidence that the FCC is now an agency unmoored from the rule of law," Pai said.