As we reported last week, the United States Supreme Court has agreed to hear appeals by the Federal Communications Commission (“FCC” or the “Commission”) and the National Association of Broadcasters (“NAB”) of a decision by the US Court of Appeals for the Third Circuit that overturned a 2017 decision by the FCC attempting to relax its media ownership rules. After almost twenty years, is it possible that this may finally bring an end to the Third Circuit’s hold on media ownership? It seems possible, although, in this proceeding, the years have taught us not to expect too much.
As readers (or at least those with long memories) know, this saga truly began in 2003, when the FCC under then-Chairman Michael Powell fundamentally restructured its rules regarding media ownership. Appeals were filed in numerous federal appellate courts and, after a judicial lottery, those appeals were consolidated in the Third Circuit Court of Appeals in Philadelphia. To the great consternation of much of the broadcast industry, and the FCC, the proceeding has remained under the control of that court ever since.
The 2003 rule changes, and subsequent changes, were adopted as a result of a provision of the Communications Act of 1996 that required the FCC to review its media ownership rules on a biennial basis (now modified to a quadrennial review). Since that 2002 review, each of the FCC’s subsequent decisions has ended up being at least partially overturned by the Third Circuit, which in addition to rejecting those rule changes has retained jurisdiction over the FCC’s responses to those rulings. As a result, basically none of the FCC’s attempted rule changes have gone into effect, meaning that the media ownership rules in place now are essentially the same as those that existed in 2002 (and in some cases for many years prior to that).
The most recent FCC attempt to revise its ownership rules was a 2017 Order on Reconsideration completing the quadrennial review begun in 2014. That 2017 Order (which we reported on here), eliminated the Newspaper/Broadcast and Radio/Television Cross-Ownership rules and relaxed the local television ownership rules. On appeal, the Third Circuit overturned those changes, finding that the FCC had not properly considered how its rule changes would impact female and minority ownership. The NAB and FCC each petitioned the Supreme Court for writs of certiorari, which now have been granted.
So, what does this actually mean for the FCC’s ownership rules and the broadcast industry? Not surprisingly based on the history of this proceeding, the answer is not entirely clear. Perhaps as a final example of how nothing related to this case is straightforward, the news of this review comes during both the possible confirmation of a new Supreme Court justice, and an extremely contentious presidential election which may result in a changed majority on the Commission. Even if majority control of the FCC does not change, at least two Commissioners, including the current Chairman, are expected to be replaced in the coming months.
Taking all that into consideration, what are the odds that the Supreme Court overturns the Third Circuit? I am not a gambling man, but I would put them at greater than 50 percent, particularly if Amy Coney Barrett is confirmed to the Court and participates in the ruling, but certainly no sure thing. While the conservative justices currently on the court are no great fans of unfettered agency discretion, in this case it seems, at least to this author, likely that a majority may be swayed by the argument that the deregulatory bent of the 1996 Telecom Act and the quadrennial review requirements at issue here support judicial deference towards deregulatory actions by the Commission.
If the Supreme Court indeed overturns the Third Circuit and determines that the FCC did not need to further consider female and minority ownership, the most immediate impact would be that the FCC’s 2017 ownership rule changes would go back into effect in the near term. If that were to occur, it could lead to increased broadcast deal-making, and potential consolidation, particularly among television stations in mid-size markets. The practical impact, however, could be limited in a Biden presidency in which the FCC switched to Democratic control. The manner in which the Court overturns the Third Circuit (if it does) is also likely to have a. major impact on what happens going forward.
If the FCC does switch to Democratic control, that new Democratic Commission would in 2021 be in a position to complete the currently pending 2018 quadrennial review or make other re-regulatory changes to the ownership rules. (As a reminder, the quadrennial review proceedings are also separate from any review of the FCC’s national television ownership cap and related UHF discount, both of which could be revisited in a new Democratic Commission). Of course, any re-regulatory changes would once again raise the long-debated question of whether the quadrennial review provisions of the 1996 Telecom Act justify additional regulation or are only deregulatory in nature. That question is something that the Supreme Court could address in this proceeding, but if not, it will almost certainly be raised again. Even if the 2017 rules are allowed to continue unchanged under a Democratic FCC, applicants could likely expect a tighter review of waivers of the top-four prohibition on television duopolies.
In the event the Supreme Court upholds the Third Circuit, the 2017 rule changes would be sent back to the FCC for further review and consideration in light of their effect on female and minority ownership. That review would likely be consolidated into the pending 2018 quadrennial review. The outcome of any such review would, of course, also be significantly impacted by whether a Republican or Democratic-controlled FCC is conducting that review. It would also raise the possibility of a significant delay in reaching a final decision, as one of the problems pointed out by the Third Circuit was that the FCC did not have the data necessary to determine the impact of its rules on female and minority ownership. If this Third Circuit decision is upheld, the FCC’s task would be two-fold – first to gather the necessary data, and second to analyze it and adopt rules accordingly
A secondary issue the Supreme Court may address is whether the Third Circuit is allowed to retain jurisdiction over further appeals. To this point, the Third Circuit has considered all of the Commission’s media ownership rulings since 2004 since each of those in part addressed a remand of previous changes from the Third Circuit. The NAB, FCC, and many broadcast owners have long wanted to remove the case from the Third Circuit, but have thus far been unable to do so. If the Supreme Court does end up overturning the Third Circuit, it is certainly possible that they could also rule on whether the Third Circuit could retain jurisdiction over further appeals. Even if the Supreme Court upholds the Third Circuit, they could speak to that Court’s ability to exert authority over reviews of subsequent quadrennial review decisions. In either case, however, even if the Supreme Court does not allow the Third Circuit to assert jurisdiction on its own, there is always the possibility that another judicial lottery could send a subsequent appeal back to the Third Circuit anyway.
While any of these outcomes are reasonably likely, there are any number of other far more unlikely outcomes of the case. One such unlikely outcome that has been discussed would be for the Supreme Court to use this case to undermine or narrow the scope of Chevron deference. Under Chevron, federal courts have long afforded significant deference to regulatory agencies such as the FCC when they interpret vague statutory directives. Certain conservative members of the Supreme Court have questioned whether Chevron deference is really appropriate in most cases; if a new conservative Justice is added to the bench before this case is decided, the theory goes, the Court could question how much deference the FCC’s decisions should receive. One of the problems with this theory, however, is that it would essentially require that the Supreme Court reject the FCC’s attempt at deregulation and uphold the decision, if not the reasoning of the Third Circuit. The Third Circuit decision in effect found that the FCC had exceeded its authority by not considering the impacts of its decision on female and minority ownership. In short, a case where the agency decision under review is one that was deregulatory in nature would not seem the most likely candidate for a challenge to Chevron.
Of course, it is possible to come up with any number of other potential outcomes of the Supreme Court review (and if 2020, not to mention the history of this proceeding, have taught us nothing, it is to never rule out an outlandish outcome), these seem the most likely. And it is worth remembering that whatever happens with this review, the FCC has not yet completed its mandated 2018 quadrennial review, and another such review must start in 2022. If past experience is any guide, whatever decisions the FCC adopts in those proceedings are likely to be appealed by one or more parties. As always, the saga of the FCC’s media ownership rules has a ways to go.