Prometheus IV Widely Expected to Go Against FCC

Oral argument that appeared to go against the FCC Tuesday at the 3rd Circuit U.S. Court of Appeals is expected to result in media ownership rules being remanded or possibly vacated (see 1906110073). That's called unlikely to slow broadcast dealmaking or affect existing combinations. It could affect the agency’s plans for the 2018 quadrennial review, academics, broadcasters and their lawyers told us this week.

“Unfortunately, the queries from the bench this week reveal a mindset that thinks it’s still 1975,” emailed former Commissioner Robert McDowell of Cooley. “Although assessing appellate risk is always a factor in every FCC decision, I don’t think the three Republicans will be intimidated by the judges’ questions at oral argument" in Prometheus IV.

Ownership rules that apply to already approved or pending deals are caught up in the case, including FCC repeal of the eight-voices test and the newspaper/broadcast cross-ownership rule. But the court's repealing or remanding those rules won’t lead to the FCC unwinding existing deals, said numerous attorneys. The agency would likely issue waivers to preserve existing combinations, said University of Minnesota School of Journalism assistant professor-media law Christopher Terry.

Broadcast lawyers said comments from the bench lead them to expect a narrowly targeted remand, with the FCC required to collect data to justify rule changes. But in every past Prometheus ruling, the 3rd Circuit has vacated part of the rules, said United Church of Christ attorney Cheryl Leanza. Leanza argued for anticonsolidation petitioners including Prometheus Radio Project in Tuesday’s hearing.

The FCC “shouldn’t be approving mergers“ or issuing media ownership rules while Prometheus IV is under judicial review, Leanza said. Nexstar buying Tribune shouldn’t be allowed to proceed until there's a decision, Leanza said. Nexstar and the FCC didn’t comment. The agency hasn’t historically taken big steps to alter rules in response to 3rd Circuit remands, noted professor Danilo Yanich of the University of Delaware Biden School of Public Policy and Administration.

Data the commission used as support for proposals in the 2018 QR NPRM -- such as proposed relaxation of radio subcaps -- is the same as that challenged under the case, Leanza said. It’s hard to get around the areas where the regulator lacks have data, Yanich said. A remand could mean the agency would need to collect new data or come up with a new basis for relaxing the subcaps if that proposal were to become a rule, Leanza said. Presiding Judge Thomas Ambro expressed interest in the 2018 review’s progress, asking FCC Associate General Counsel Jacob Lewis for specifics that Lewis was reluctant to provide. That could be seen as an indication the court is hoping that rulemaking will address some of the questions raised, Terry said.

Broadcast attorneys see the case’s speedily scheduled oral argument date as a sign that a decision could come relatively quickly, even late summer or early fall. Since a final rulemaking isn’t expected until late in 2019, the agency could have time to respond to a remand or vacated rules, they said. A remand and new data collection requirements would likely involve a lengthy process, countered Leanza. It’s also possible the FCC could seek to appeal the case after so many losses at the 3rd Circuit, further drawing the matter out.

Station owners are unlikely to see a negative outcome in the case as a barrier to dealmaking because the FCC has lost every previous Prometheus, said broadcasters and their attorneys. “Historically, the Third Circuit has been the Rip Van Winkle court with a regulatory outlook that has been stuck in the past,” McDowell said.