Court Throws Out JSA Rule

Chastises FCC over late quadrennial review, directs it to define eligible entity

The U.S. Court of Appeals for the Third Circuit has thrown out the FCC's decision to make some joint sales agreements attributable as ownership interests, saying the FCC "improperly" enacted the rule.

The court also chastised the FCC for not completing its quadrennial review of media ownership rules and concluded the FCC had "unreasonably delayed" action on defining an "eligible entity," which is key to its promoting of minority and female ownership. The court ordered the FCC and the parties pushing for a definition to engage in mediation and, within 60 days, come up with a timetable for final agency action, or the court would impose one.

RELATED:D.C. Weighs In on FCC JSA Smackdown

Failing to complete the quadrennial review proved to be a key to the court's decision to vacate the JSA rule tightening.

"We agree with Deregulatory Petitioners that the Commission violated § 202(h) by expanding the reach of the  ownership rules without first justifying their preexisting scope through a Quadrennial Review," the court said. 

"We are not dealing with a Quadrennial Review that is merely flawed, but rather with one that has never been completed," wrote judge Thomas Ambro for the majority. "Before defining ownership more restrictively, as it does when it enacts an  attribution rule, the Commission must at a bare minimum show that it is even in the public interest to regulate ownership in the first instance."

The decision was 3-0, with Judge Julio M. Fuentes supporting and Judge Anthony Scirica concurring in part and dissenting in part. The court did not throw out all the meida rules, as broadcasters had asked citing the FCC delay in reviewing them.

The three-judge panel of the court was clearly peeved at the FCC's contribution to the extended timeline -- 12 years -- of court review of its ownership rules.

"Although courts owe deference to agencies, we also recognize that, '[a]t some point, we must lean forward from the bench to let an agency know, in no uncertain terms, that enough is enough,' " said the court.  

The court left open the possibility the FCC could restore the JSA rule.

It made it clear that the reason the rule was vacated was that it had not provided reasoned analysis [the 202(h) reference above] -- again, the failure to complete a quadrennial review first.

"On remand, if the Commission is able to justify (by finding they are in the public interest) the existing ownership rules to which television JSA attribution applies -- or, in the alternative, if it replaces the current rules with new ones it determines to be in the public interest -- nothing in our opinion would prevent it from readopting the JSA rule at that time," the panel said. "The rule, if readopted, might be challenged on grounds that extend beyond what we decide today, and we offer no opinion on the merits of any such attacks. We merely note that our decision to vacate is unrelated to the question of whether television JSAs should be attributable interests."

At a press conference Wednesday (May 25) following the decision, Wheeler signaled that the JSA rule could be coming back once the FCC had weighed in on the underlying media ownership rules via its quadrennial review.

At stake in the case was how free broadcasters can be in the digital age to compete with multibillion-dollar distributors of pay programming over land (cable), over the air (satellite) and over-the-top.

Congress grandfathered existing JSAs via a rider on the budget bill that passed last December. Now both old and new TV JSAs will be allowed without triggering ownership issues.

In addition to vacating the JSA decision, the court directed the FCC to act promptly to come up with a "designated entity" definition.

Judge Scirica supported the action on eligible entities and the JSA rule, but dissented on the quadrennial part. He said the court should have set a firm timeline for action: it only 'reminded' the FCC of its obligation. He recognized Wheeler had signaled a draft would be circulated in June, but said "a draft proposal by one Commissioner is no guarantee that a final order is forthcoming. At oral argument, the Commission would not agree to any firm deadline for action." Scirica would have issued a write of mandamus (court order), requiring a final decision on a media ownership review within six months.

"I am pleased that the U.S. Court of Appeals for the Third Circuit has struck down the FCC’s unlawful attempt to sharply restrict television stations’ ability to enter into joint sales agreements," said FCC commissioner Ajit Pai, who opposed the move. "When the Commission adopted this arbitrary rule two years ago, I warned that any attempt to change our treatment of joint sales agreements without also completing our statutorily mandated review of the local television ownership rule would violate the law."

“NAB could not be more pleased with the Third Circuit decision. At long last, this opinion directs the FCC to do its job and adopt broadcast ownership rules that reflect the modern world," said National Association of Broadcasters spokesman Dennis Wharton. NAB was among those challenging the FCC's JSA decision.

FCC chairman Tom Wheeler has said he will circulate a quadrennial review item next month.

“We’re particularly delighted the court highlights the irrationality of a rule that bars broadcast/newspaper combinations in the same market. This rule needs to be ended immediately," said Wharton. “And finally, we’re pleased the court strikes down the FCC’s punitive joint sales agreement order. 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.”

Cheryl Leanza, policy advisor for UCC OC Inc., which has pressed the FCC on promoting diversity, said it was ready to help the FCC come up with the 'designated entity' definition.

"Since 2004 the U.S. Court of Appeals for the Third Circuit has been reviewing the FCC’s media ownership rules—pressing again and again for FCC action to accompany the FCC’s words in support of increasing media ownership diversity," said Leanza. "The Third Circuit has confirmed that the time for delay is over.  The FCC has promised studies on minority and female ownership for more than two decades and today the court has concluded, if the FCC 'needs more data' to find a definition that will improve minority ownership, 'it must get it.' The United Church of Christ’s media justice ministry, OC Inc., looks forward to sitting down with the FCC to develop a timeline within the court-ordered 60-day timeframe to make sure that the long-awaited studies are undertaken."

"The Court appropriately ruled on JSAs," said Adonis Hoffman, chairman of Business in the Public Interest and former chief of staff to FCC Commissioner Mignon Clyburn. "From the beginning, there were questions about the timing, the propriety and the constitutionality of the ruling, and many of those questions did not see the light of day.  Additionally, we must question the wisdom of a policy that results in fewer, not more, diverse owners of broadcast properties, or that makes it extremely more difficult to become owners."