QR Legal Challenges Expected to Focus on Quadrennial Statute, 1st Amendment

Broadcasters' expected argument is that Section 202(h) of the Communications Act doesn’t allow the FCC to tighten regulations on top-four combinations because it directs the agency to determine whether its broadcast ownership rules are “necessary in the public interest as the result of competition.” The statute “requires the Commission to either eliminate or at least loosen it,” NAB said of the top-four prohibition in a December ex parte filing.

“The broadcasters always try to hide behind the First Amendment, but the public has First Amendment rights, too,” Andrew Schwartzman, Benton Institute for Broadband & Society's senior counselor and longtime opponent of broadcast deregulation, said in an email. “The Supreme Court and the weight of scholarship is that content-neutral, viewpoint-neutral ownership rules do not restrict content.”

The 2018 QR order's text appears to indicate that the FCC also expects arguments about what it can do during the review process (see 2312260063). “We decline NAB’s invitation to re-interpret section 202(h) in order to find a presumption in favor of deregulation, and we disagree with the assertion that section 202(h) only allows for the repeal or relaxation of a rule,” the order said. The statute allows the FCC to make rules more or less stringent after reviewing the state of media competition, the agency said. The U.S. Supreme Court’s review of the previous QR didn’t reach the issue of whether Section 202(h) limits the FCC to consider competition or regulation, the order said. The courts haven’t historically seen Section 202(h) as “a one-way ratchet,” Schwartzman said.

A court’s interpretation of whether the 2018 QR order complies with the statute could hinge on whether it sees the extension of the top-four prohibition as a major alteration of the rules, said Pillsbury broadcast attorney Scott Flick in an interview.

“If the FCC makes minor tweaks, a court is usually not going to leap in on that,” but more significant changes that clearly aren’t deregulatory could cause a judicial panel to scrutinize the statute’s intent, Flick said: “There's no argument that this is a regulatory change.” In the QR order, the FCC says the additional limits on LPTV and multicast streams are “modest adjustments to reflect changes that have occurred in the television marketplace.” However, Holland & Knight broadcast attorney Charles Naftalin said the order is a “vast expansion” of the FCC’s control of television stations. “The order reverses decades of established precedent and practice with respect to LPTV stations and television program service offerings at a time when broadcast television is facing the most competition for audience ever in history.”

Each of the top four networks has at least 20 affiliates on a multicast channel or LPTV station, and one of the networks has more than 45 affiliates on either LPTV or multicast, according to a December ex parte filing by Fox, Disney and Paramount Global. Said an American Television Alliance spokesperson in a release: "For too long, these loopholes have allowed broadcasters to control distribution of two, three, or even all four major networks in markets throughout the country." Broadcast attorneys we spoke with said rule changes in the QR order appear targeted to prevent future moves like Gray’s purchase of network affiliation from another broadcaster and by Sinclair to shift programming to multicast streams in several markets.

Broadcast attorneys also expect those challenging the order will argue that the FCC’s extension of the top-four prohibition constitutes the agency claiming authority over broadcasters' content choices and is a free speech violation. Gray Television made similar arguments in its attempted appeal of an FCC enforcement action over its purchase of a network affiliation in Anchorage (see 2301040059). Oral argument in that case is set for March in Miami. The FCC “has no authority over Gray’s programming choices,” Gray said in a filing in that case. Said Flick, “If I'm a low power, I can put any programming on my station that I want, except for this one thing.”

The FCC’s rule change “to prevent other means of circumventing the top-four prohibition is not a content-based restriction on speech,” said the QR order in a footnote. “The prohibition on affiliation acquisitions involving two top-four stations does not consider content but rather market concentration.” Arguments based on characterizing the rule change as content regulation may not win the day, Schwartzman said. “While these rules do not regulate content, even if some court were to think otherwise, I am not sure that [that] would be unpopular with much of the federal judiciary,” he said.

One complication to handicapping the outcome of legal challenges to the QR is that it isn’t yet clear what circuit would hear an appeal. Though QRs have long been the province of the 3rd Circuit U.S. Court of Appeal, that ended with the Supreme Court's Prometheus IV ruling. The circuit would now be determined by a lottery, although parties can ask for the case to be moved to another circuit. Approaches to the case could be affected if the matter were to end up in one of the circuits seen as more hostile to federal agencies, such as the 5th U.S. Circuit, attorneys told us.