In April 2021, after nearly two decades since the Federal Communications Commission (FCC) first tried to deregulate broadcast media ownership, the U.S. Supreme Court upheld the FCC’s latest attempts to eliminate or modify several long-standing, cross-media ownership and local ownership rules that set limits on the number of radio stations, television stations, and newspapers that a single entity may own in a given market.1 With its unanimous decision, the Court brought to a close a long-running dispute in which the same panel of three judges on the U.S. Court of Appeals for the Third Circuit had continued to stymie the FCC’s repeated attempts to update the FCC’s media ownership rules to reflect the dramatic changes that have occurred in the media marketplace. In its most recent ruling, the Third Circuit criticized the FCC’s failure to conduct detailed empirical assessments on how the ownership rule changes may impact minorities and women.2
June 30, 2021 Feature
The End of an Era: The Supreme Court Upholds New FCC Media Ownership Rules
By Christian F. Binnig, Christopher S. Comstock, and Elaine Liu
This article provides an overview of the Supreme Court’s ruling and its key implications for further consolidation in the media sector.
Statutory Background
Section 202(h) of the Telecommunications Act of 1996 requires the FCC to quadrennially review its broadcast media ownership rules, as well as to repeal or modify those rules that it determines are no longer “necessary in the public interest as the result of competition.”3 Pursuant to this statutory mandate, over the course of more than 15 years, the FCC repeatedly sought to deregulate media ownership in an effort to help broadcasters seeking to consolidate to better compete with cable, internet content providers, and other new competitors.
Third Circuit Decision
Before the Supreme Court was a Third Circuit ruling, which vacated several of the FCC’s most recent actions.
The first vacated FCC action was a final action the FCC took on its 2010 and 2014 reviews of cross-media and local ownership rules (2016 Order).4 This order defined eligible entities—which are given certain preferences under ownership rules—based on revenue, rather than using criteria relating to race or gender. The second vacated FCC action was the FCC’s grant of certain industry groups’ petition for rehearing (2017 Order).5 This order made major changes to media ownership restrictions that had existed in substantially the same form since the 1960s and 1970s. Not only did the FCC eliminate rules limiting newspaper/broadcast and television/radio cross-ownership, but it also modified a local television ownership rule to rescind a requirement that at least eight independently owned stations remain in a local market and to create a discretionary waiver of the prohibition against mergers between two of the top four stations in a local market. The third vacated FCC action was the FCC’s adoption of a radio incubator program to promote diversity (2018 Order).6
In response to a petition for review under the Administrative Procedure Act (APA) by Prometheus Radio Project and other public interest and consumer advocacy groups, the Third Circuit vacated the FCC’s eligible entity definition in the 2016 Order, in addition to vacating the 2017 Order and 2018 Order in their entirety.7 In particular, the court criticized the FCC’s failure to provide a “meaningful evaluation” of the impact of its proposed rule changes on diversity in the industry.8 It directed the FCC to “ascertain on record evidence” the likely effect of its rules, “whether through new empirical research or an in-depth theoretical analysis.”9
Supreme Court Decision
In an April 1, 2021 opinion authored by Justice Kavanaugh, the Supreme Court unanimously reversed the Third Circuit’s decision and upheld and reinstated the FCC’s proposals to relax its media ownership rules.
The Court began by concluding that the 2017 Order was “reasonable and reasonably explained,” which is all that the APA’s “deferential” arbitrary-and-capricious standard requires.10 The Court found that the 2017 Order was supported by “significant record evidence of dramatic changes in the media market” that rendered the current media ownership rules “no longer necessary” in light of the FCC’s “public interest goals of promoting competition, localism, and viewpoint diversity.”11
The Court also concluded that the FCC reasonably evaluated the potential impact of its proposed rule changes on the diversity of media ownership when it determined that those changes were unlikely to cause harm.12 The Court pointed to the FCC’s repeated solicitations for public comment on this issue, the absence of any data submissions that suggested that the existing rules were necessary to protect or promote minority and female ownership, and the fact that some commenters even suggested that they had the “opposite” effect.13 The Court rejected arguments that the FCC arbitrarily and capriciously relied on “flawed” data and ignored supposedly “superior” studies.14 Rather, it was sufficient that the FCC “acknowledged the gaps” in data and sought, but did not receive, additional data, as well as “simply interpreted” the available studies differently from certain commenters.15
In short, the Court held that the FCC needed only to rely on available record evidence. Observing that a lack of “perfect” data “is not unusual in day-to-day agency decisionmaking,” the Court declared that the FCC had no obligation “to conduct or commission [its] own empirical or statistical studies” before issuing its rules.16
Finally, finding that the Third Circuit vacated the 2016 Order’s “eligible entity” definition and the 2018 Order “based solely” on its reasoning for vacating the 2017 Order, the Court similarly reversed the Third Circuit’s judgment on these two other agency actions and reinstated the FCC’s vacated rule changes from those actions.17
Key Takeaways
The most immediate, practical result of the Supreme Court’s decision is that the FCC’s loosening of its cross-media and local ownership restrictions set forth in the 2017 Order may now take effect. These new rules pave the way for greater consolidation in the broadcast and newspaper industry, allowing more traditional media to better compete with the rise of new media sources.
Moreover, the Court’s ruling eases the FCC’s ability to further deregulate to enable even more consolidation through its section 202(h) quadrennial reviews of media ownership rules. By freeing the FCC of any obligation to conduct empirical studies on the likely impact of its proposals on ownership diversity before the FCC acts, the Court underscores the importance of the public comment process. Individuals seeking to influence an administrative rulemaking will have the burden of providing any data requested by the FCC. In the absence of such data, the FCC will have the latitude to rely on its own “predictive judgment.”18
The Supreme Court’s decision did not reach the alternate argument raised by broadcaster petitioners that section 202(h) does not require the FCC to consider minority and female ownership impacts when contemplating broadcast media ownership rule changes and that the FCC may not consider such topics unless they are part of the FCC’s original basis for an ownership rule.19 Justice Thomas’s concurring opinion, however, addressed that issue, stating that the Third Circuit “improperly imposed nonstatutory procedural requirements on the FCC by forcing it to consider ownership diversity in the first place.” Justice Thomas concluded: “The Third Circuit had no authority to require the FCC to consider minority and female ownership. So in future reviews, the FCC is under no obligation to do so.”20 As a result, future litigation appears likely regarding the extent to which the statutory public interest objective of reducing unnecessary regulation “as a result of competition” and the FCC’s stated public interest goals of promoting competition, localism, and viewpoint diversity impose an obligation on the FCC to promote ownership diversity.
Endnotes
1. FCC v. Prometheus Radio Project, No. 19-1231, 592 U.S. ____, slip op. (2021) (Prometheus V), https://www.supremecourt.gov/opinions/20pdf/19-1231_i425.pdf.
2. See Prometheus Radio Project v. FCC, 373 F.3d 372 (3d Cir. 2004) (Prometheus I); Prometheus Radio Project v. FCC, 652 F.3d 431 (3d Cir. 2011) (Prometheus II); Prometheus Radio Project v. FCC, 824 F.3d 33 (3d Cir. 2016) (Prometheus III); Prometheus Radio Project v. FCC, 939 F.3d 567 (3d Cir. 2019) (Prometheus IV).
3. Telecommunications Act of 1996, Pub. L. No. 104 104, § 202(h) (1996).
4. Second Report and Order, 2014 Quadrennial Regulatory Review, 31 F.C.C.R. 9864 (2016).
5. Order on Reconsideration and Notice of Proposed Rulemaking, 32 F.C.C.R. 9802 (2017).
6. Report and Order—In re Rules and Policies to Promote New Entry and Ownership Diversity in the Broadcasting Services, 33 F.C.C.R. 7911 (2018).
7. Prometheus IV, 939 F.3d at 588–89. On November 20, 2019, a majority of the judges on the Third Circuit voted to deny the FCC’s petition for a rehearing en banc of the panel decision in Prometheus IV.
8. Id. at 585–87.
9. Id. at 587.
10. Prometheus V, 592 U.S. __, slip op. at 2.
11. Id. at 8.
12. Id. at 8–9.
13. Id.
14. Id. at 9–11.
15. Id.
16. Id. at 12.
17. Id. at 12–13 n.4.
18. Id. at 12.
19. Id. at 12 n.3.
20. Id. at 5 (Thomas, J., concurring).