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Appeals Court Strikes Down FCC Ban on Station Joint Sales Agreements

A federal appellate court is pushing the FCC to complete a review of broadcast ownership rules, but also delivered a win for broadcasters after it struck down an agency rule restricting joint sales agreements.

The decision by the 3rd Circuit Court of Appeals, issued on Wednesday, also cited the FCC’s “stalled efforts to promote diversity in the broadcast industry.” It said that the agency has “unreasonably delayed action on a definition of an “eligible entity,” key terms for determining action in minority and women ownership of media entities.

Broadcasters had opposed the FCC’s action in 2014 that prohibited so-called “sidecar deals” among stations in the same market. FCC Chairman Tom Wheeler said that it was closing a loophole that essentially allowed major media entities to skirt media ownership rules restricting control of two or more stations in the same market. The joint sales agreements are pacts between stations to jointly sell advertising.

The appellate court judges concluded that the FCC expanded ownership limits without justifying their scope by completing a review of the media ownership rules. The judges noted that the last review was completed in 2006, even though they are to be done every four years. The 2010 and 2014 reviews are still pending.

The court urged the FCC to act on media ownership, noting that the delay has prevented changes to a rule prohibiting ownership of a station and newspaper in the same market. The judges wrote that it has been of “significant expense to parties that would be able, under some of the less restrictive options being considered by the Commission engage in profitable combinations.”

Dennis Wharton, a spokesman for the National Assn. of Broadcasters, said that they “could not be more pleased” with the ruling.

“We’re pleased the court strikes down the FCC’s punitive joint sales agreement order,” he said. “JSAs are clearly in the public interest — as Congress has decided — and allow free and local broadcasters a chance to compete against national pay TV conglomerates.”

The FCC had no immediate comment. An FCC official noted that the judges found fault with procedure, but did not render an opinion on whether the FCC can consider whether joint sales agreements are tantamount to an ownership interest in another station. The FCC can take the matter up again as the media ownership rules are reviewed.

The court rejected an effort to vacate the broadcast ownership rules because of the agency’s delay in its reviews. They said that would be “the administrative law equivalent of burning down the house to roast the pig.” Wheeler plans to circulate an order on media ownership by June 30, with the expectation that it would be finalized by the end of the year.

An FCC official said that the commission has committed to resolve the definition of eligible entities in the very near future. The court ordered that the parties engage in mediation within 60 days to determine a timetable. If there is no agreement, the court will determine a schedule.

“This is our third go-round with the Commission’s broadcast ownership rules and diversity initiatives,” the judges said. “Rarely does a trilogy benefit from a sequel. To that end, we are hopeful that our decision here brings this saga to its conclusion.”
The full decision is here.

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