The National Association of Broadcasters filed a petition 5/12 at the U.S. Court of Appeals for the D.C. Circuit asking the court to overturn “arbitrary and capricious” FCC presumption against transactions involving sharing arrangements among local television stations.
NAB’s petition comes in response to the FCC’s 3/12 public notice announcing new “processing guidelines” for local TV applications proposing sharing arrangements and contingent financial interests. NAB EVP Dennis Wharton clarifies: “We filed a lawsuit against processing guidelines that the FCC Media Bureau adopted on March 12. We did not file a lawsuit against the Joint Sales Agreements order adopted by the FCC March 31 that cracked down on joint advertising sales among two TV stations in the same market. (We are still waiting for the text of that order to be filed in the Federal Register; no litigation has been filed on that issue.)
The processing guidelines adopted by the FCC Media Bureau on March 12 signaled that the FCC would be giving significantly more scrutiny to both Joint Sales Agreements and Shared Services Agreements by local TV stations during the merger review process. NAB’s lawsuit is based on a belief that the order was arbitrary and capricious and did not follow established FCC practice. Moreover, neither NAB nor any broadcast company was given the opportunity to comment on these guidelines in advance of their issuance. The result of this action is that pending broadcast transactions using JSAs and SSAs are being unfairly held in limbo.”
At issue are the use of joint sales agreements (JSAs) and shared services agreements (SSAs) by a number of local TV stations across the country to better serve communities. NAB notes that JSAs and SSAs help sustain a competitive free and local television station business model in the face of competitive challenges from national pay television platforms.
NAB maintains the FCC’s 3/12 public notice effectively imposes punitive new rules for television stations without following legally required procedures. The new rules are not consistent with existing Commission rules, NAB noted.
NAB also noted that the FCC failed to respond to NAB’s request to withdraw the March 12 public notice and to stop applying the defective new processing guidelines. Many local TV stations are currently being harmed by application of these defective new processing guidelines, according to NAB.
Noted Larry Patrick, Managing Partner, Patrick Communications: “NAB must defend its members’ interests and warned the FCC that this would be the next step in defense of the JSA and SSA rules. The first question is whether the court will issue a stay of the revised rules while it hears the case. This could add some life to the current agreements. Then the NAB will need to defend the merits of its claims and add in the 25-years of approvals of these agreements as drafted and approved by the Commission. There are a dozen or more large groups with these agreements in place who need NAB to defend them to protect the value in their stations.”
Elliot Evers, Managing Director, Media Venture Partners, tells RBR-TVBR: “MVP is very pleased to see the NAB file this petition. In MVP’s view, the FCC’s decision on JSA’s fits squarely within the legal definition of an “arbitrary and capricious” action. The FCC did not provide any evidence to support its March 31 decision; it relied on assumptions and broad, conclusive statements, rather than the factual record that is required of an administrative agency. This is reminiscent of the FCC’s actions in the Janet Jackson “wardrobe malfunction” case, where the Third Circuit US Court of Appeals set aside the FCC’s fine because the FCC had not properly advised broadcasters what conduct was proscribed, and what was allowed. In the present setting, JSA’s and similar arrangements have been part of the broadcast landscape for literally decades. Then, suddenly, without conducting any hearings or otherwise gathering evidence to support its decision, the FCC moved to ban JSA’s, without regard for the many benefits such arrangements have provided for the communities in which these stations operate. We wish the NAB well in their efforts.”
Said Francisco Montero, Managing Partner, Fletcher, Heald & Hildreth, P.L.C.: “When I first read the NAB’s letter of May 1st which objected to the FCC Media Bureau’s JSA Public Notice, my first thought was that the NAB was laying the foundation for a court appeal like this. In fact, in comments about the NAB’s letter that appeared in RBR/TVBR on May 2nd I opined that “what really appears to be happening here is that the NAB is continuing to lay the foundation for what may very well be a Federal court appeal of the FCC’s actions. The letter invokes the federal Administrative Procedure Act (“APA”), including accusing the FCC’s actions of being “arbitrary and capricious” which is a very specific standard under the APA that the appeals courts apply in reviewing the actions of independent regulatory agencies like the FCC.“ So it is not surprising that the NAB followed through and filed the petition in the US Court of Appeals to challenge the FCC’s public notice under the APA. The NAB claims that the FCC overstepped its bounds by issuing the public notice, which effectively constitutes additional regulation of SSAs and which goes beyond the scope of the original March 31st JSA order. In its March 31st order the FCC did not change the way in which it treats shared services agreement (SSAs), however, the April 10th public notice states that SSAs with contingent interests will be given heightened scrutiny. This, according to the NAB’s appeal is a type of regulation that was not included in the March 31 order. The May 1st letter also accused the FCC’s Media Bureau of jumping the gun by issuing the public notice before the FCC had determined the impact of SSAs and even before it had a working definition of SSAs. In those same RBR/TVBR comments, I found it “interesting that the [NAB’s] letter specifically requests that the FCC take action by May 8th, …. because by taking action one way or another it will lay the foundation for the NAB to file a judicial appeal” so it makes sense that the petition notes the FCC’s failure to respond by withdrawing the public notice and stop applying the new processing guidelines.”
And on deadline, Erwin G. Krasnow, the co-chair of the Communications Group of Garvey Schubert Barer, tells us: The NAB is to be applauded for asking the Court of Appeals to review the Media Bureau’s March 12, 2014 Public Notice. The Notice, in the guise of announcing “ processing guidelines” for assignment and transfer application that involves sharing arrangements and contingent or financial interests makes changes in existing law without the benefit of prior notice and comment by interested parties. Hats off to the NAB for standing up for broadcasters whose previously lawful transactions are now considered to be presumptively invalid by the FCC staff The Public Notice represents a classic example of “raised eyebrow” regulation by pressuring broadcasters who want their transfer applications to be approved to conform to a set of criteria whose parameters are yet to be fully articulated. In “Bureaucratic Zoo: The Search for the Ultimate Mumble,” James Borem provided the following guidelines for bureaucrats: (1) When in charge, ponder. (2) When in trouble, delegate. (3) When in doubt, mumble. The Wheeler FCC has pondered about sharing arrangements — delegated the matter to the Media Bureau — which in turn has mumbled.
