Federal Communications Commission v. National Citizens Committee for Broadcasting Brief of Respondent
Public Court Documents
December 20, 1977
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Brief Collection, LDF Court Filings. Federal Communications Commission v. National Citizens Committee for Broadcasting Brief of Respondent, 1977. 8ea22784-b19a-ee11-be36-6045bdeb8873. LDF Archives, Thurgood Marshall Institute. https://ldfrecollection.org/archives/archives-search/archives-item/4bd23e2d-954f-4c69-a316-6b294597e434/federal-communications-commission-v-national-citizens-committee-for-broadcasting-brief-of-respondent. Accessed May 11, 2025.
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IN THE
Supreme Court of the United States
October Term, 1977
Nos. 76-1471, 76-1521,76-1595, 76-1604,
76-1624, 76-1685
F ederal C om m unications Com m ission , et al.,
Petitioners,
vs.
N ational C itizen s Co m m ittee for Broadcasting,
et al.,
Respondents.
On Writ of Certiorari to the United States Court of Appeals
for the District of Columbia Circuit.
Brief of Respondent National Citizens
Committee for Broadcasting.
Charles M. F iresto n e ,
c/o Communications Law Program,
UCLA School of Law,
Los Angeles, Calif. 90024,
E dward J. Ku h lm a n n ,
N olan A. Bow ie ,
Citizens Communications Center,
1914 Sunderland Place, N.W.,
Washington, D.C. 20036,
Attorneys for Respondent.
December 20, 1977
Parker & Son, Inc., Law Printers, Los Angeles. Phone 724-6622
vSUBJECT I N D E X
Opinions Below ..-....... .................... .................. -....... 1
Jurisdiction ..................... ........ .................................. 2
Statutes Involved .......... .................. — ...... ............. - 2
Questions Presented__ ______ ______ ____-....... . 2
Counterstatement of the C ase................................... 3
A. The FCC’s Long-Standing Emphasis on Di
versification of Ownership of the Media of
Mass Communication ....... 3
B. The 1970 Proceeding, Docket 18110 ............ 6
1. The Further Notice of Proposed Rule-
making .................................................... 6
2. The Second Report and Order ............ 8
3. Reconsideration ........ 10
C. The Court of Appeals Decision ..................... 10
Summary of Argument ..... ............ ........................... 13
Argument ............. 16
I.
The Court of Appeals Properly Upheld the Com
mission’s Authority to Adopt a Rule Barring
Future Acquisitions of Newspaper-Broadcast
Combinations ............ ............. .................... — 16
A. Congress Has Given the Commission the
Latitude and Authority to Consider News
paper Ownership in Licensing Broadcast
Stations ................. 16
Page
11.
B. The First Amendment Is Served Rather
Than Abridged by a Content Neutral
Page
Rule Promoting Diversity of Information
Sources to a Local Community................ 21
C. The Commission’s Adoption of Its Pro
spective Ban Is a Reasonable Exercise of
Its Discretion .......................... ................ 23
II.
The Court of Appeals Correctly Found the Com
mission’s Second Report Arbitrary in the Ap
plication of Its New Cross-Ownership Stand
ards to Existing Combinations ........ 26
A. The Commission Erred in Its Assessment
of the Burden of Proof in This Proceeding
.................................................................... 27
B. The Commission Did Not Adequately Ex
plain Why Its Diversification Presumption
in the Prospective Rules Was Denigrated
When Applied to Most Existing Combina
tions ............................................................ 29
C. The Commission’s Grounds for Preferring
Grandfathering Interests of Existing Li
censees Over the Public’s Interest in Diver
sity Are Arbitrary and Unsupported by
the Record ------ -------- ---------------------- 32
1. Local Ownership and Integration of
Ownership and Management______ 32
2. Continuity of Operation ........... 33
3. Economic Dislocation ___ 37
4. Unfairness to Existing Licensees .... 39
111.
Page
a. Divestiture Is Not Retroactive
Rulemaking ............... 39
b. Divestiture Is Not Severe or
Harsh ....... 42
5. Best Practicable Service ................... 44
III.
The Commission’s Standards for Divestiture and
for Ad Hoc Challenge Are Irrational .............. 45
A. The Standard for Divestiture ----------- - 46
B. The Ad Hoc Standard ................. ....... ...... 48
IV.
A Reviewing Court May Instruct an Agency on
Remand Where Fairness and the Public In
terest so Dictate.... .............- ........................... 53
Conclusion .................. .................................. ......— 57
Appendix. 26 U.S.C. § 1071 (a) (1970) ....App, p. 1
IV.
TABLE OF AUTHORITIES CITED
Cases Page
Addison v. Holly Hill Co., 322 U.S. 607 (1944)
.... ................. ............. ..................... .................. 55, 56
Alianza Federal de Mercedes v. FCC, 539 F.2d 732
(D.C. Cir. 1976) _____ _________ __________ 38
American Airlines, Inc. v. CAB, 359 F.2d 624
(D.C.Cir. 1966) (en banc) ............................ 40, 41
Ashbacker Radio Co. v. FCC, 326 U.S. 327 (1945)
..... ............ 40
Associated Press v. United States, 52 F.Supp. 362
(S.D.N.Y. 1943), aff’d 326 U.S. 1 (1945)
................... ......... ................ ................... .....3, 22, 28
Bilingual Bicultural Coalition on Mass Media v.
FCC, 492 F,2d 656 (D.C. Cir. 1974) ................ 27
Buckley v. Caleo, 424 U.S. 1 (1976) ....... 21, 22, 24
California Citizens Band Ass’n v. United States, 375
F.2d 43 (9th Cir.), cert denied, 389 U.S. 844
(1967) ........................ 40
CBS v. Democratic National Committee, 412 U.S.
94 (1973) ............ 3
Citizens Communications Center v. FCC, 447 F.2d
1201 (D.C. Cir. 1971) ............. ........... ....3, 24, 40
Citizens to Preserve Overton Park v. Volpe, 401
U.S. 402 (1971) ________ 24
Crowder v. FCC, 399 F.2d 569 (D.C. Cir. 1968) .. 36
Clarksburg Publishing Co. v. FCC, 225 F.2d 511
(D.C. Cir. 1955) ............ .................. ................ 3
Columbus Broadcasting Coalition v. FCC, 505 F.2d
320 (D.C. Cir. 1974) ................ ......... .......7, 8, 28
V.
F.C.C. v. Pottsville Broadcasting Co., 309 U.S. 134
(1940) .............................................................. 16, 40
FCC v. RCA Communications, Inc., 346 U.S. 86
(1953) .............................. .................................... 24
FCC v. Sanders Bros. Radio Station, 309 U.S. 470
(1940) .................................................................. 40
Fed. Radio Comm’n v. Nelson Bros., 289 U.S. 266
(1933) .................................................................. 40
FPC v. Texaco, 377 U.S. 33 (1964) .................... . 40
General Telephone Co. of the Southwest v. United
States, 449 F.2d 846 (5th Cir. 1971) ..... ..3, 5, 54
Greater Boston Television Corp. v. FCC, 444 F.2d
841 (DC. Cir. 1970), cert, denied 403 U.S. 923
(1971) .............................................. -.............. -6, 18
Grosjean v. American Press Co., 297 U.S. 233
(1936) ............................ ............................... -..... 22
GTE Service Corp. v. FCC, 474 F.2d 724 (2d Cir.
1973) ..................................... 17, 24
Guinn v. United States, 238 U.S. 347 (1914) ....... 53
Hale v. FCC, 425 F.2d 556 (D.C. Cir. 1970) ....
............................ ......... ................................7, 27, 34
Iacopi v. FCC, 451 F.2d 1142 (9th Cir. 1971) .... 5
Joseph v. FCC, 404 F.2d 207 (D.C. Cir. 1968) ....
........................................................................... 18, 57
Mansfield Journal Co. v. FCC, 180 F.2d 28 (D.C.
Cir. 1950) ..... .............. ................. -................ 18, 23
McClatchy Broadcasting Co. v. FCC, 239 F.2d 15
(D.C. Cir. 1956), cert, denied, 353 U.S. 918
(1957) .................................................................. 18
Page
VI.
Metropolitan Television Corp. v. FCC, 289 F.2d
874 (D.C. Cir. 1961) ______________ ____ 5, 54
Miami Herald v. Tornillo, 418 U.S. 241 (1974) .. 22
Mobil Oil Corp. v. FPC, 417 U.S. 283 (1974) ........ 24
Mt. Mansfield Television, Inc. v. FCC, 422 F.2d
470 (2d Cir. 1971) ............................................... 24
National Ass’n of Broadcasters v. FCC, 554 F.2d
1118 (D.C. Cir. 1976) ....... ........ ............54, 55, 56
National Black Media Coalition v. FCC, D.C. Cir.
No. 77-1500 .......... ................. ................... .......... 44
National Citizens Committee for Broadcasting v.
FCC, D.C. Cir. No. 75-1933 (Sept. 22, 1975) .... 5
National Cable Television Ass’n v. United States,
415 U.S. 336 (1974) ..................... 54
NBC v. United States, 319 U.S. 219 (1943) ..... 16, 21
New Orleans v. Dukes, 427 U.S. 297 (1974) .......... 54
Office of Communication of the United Church of
Christ v. FCC, 359 F.2d 994 (D.C. Cir.
1966) ........ 44
Office of Communication of the United Church of
Christ v. FCC, 425 F.2d 543 (D.C. Cir. 1969)
................................................................................. 56
Page
Office of Communication of the United Church of
Christ v. FCC, 465 F.2d 519 (D.C. Cir. 1972).. 23
Palko v. Connecticut. 302 U.S. 319 (1937) ............ 29
Permian Basin Area Rate Cases, 390 U.S. 747
(1969) ___ _____ ____ ______ _________ 18
Pikes Peak Broadcasting v. FCC, 422 F.2d
671 (D.C. Cir. 1969) ..................... ..................... 53
Vll.
Plains Radio Broadcasting Co. v. FCC, 175 F.2d
359 (D.C. Cir. 1949) ....................... ................. 18
Red Lion Broadcasting Co. v. FCC, 395 U.S. 367
(1969) ............................ ........... .........3, 21, 24, 28
Scripps-Howard Radio, Inc. v. FCC, 189 F.2d 677
(D.C. Cir.), cert, denied 342 U.S. 830 (1951)
......................................... 3
SEC v. Chenery Corp., 332 U.S. 194 (1947) .......... 56
Secretary of Agriculture v. United States, 347 U.S.
645 (1954) .................................................. . 57
South Terminal Corp. v. EPA, 504 F.2d 646 (1st
Cir. 1974) .... ................ ......... .................. ......41, 54
Stone v. FCC, 466 F.2d 316 (D.C. Cir. 1972) ........ 7
Transcontinent Television Corp. v. FCC, 308 F.2d
339 (D.C. Cir. 1962) .......................................... 41
United States v. E. I. DuPont de Nemours & Co.,
351 U.S. 377 (1956) .......... ........... ...................... 47
United States v. E. I. DuPont de Nemours & Co.,
366 U.S. 316 (1961) _________________ _____ 43
United States v. Maher, 307 U.S. 148 (1939) ....... 53
United States v. Midwest Video Corp., 406 U.S.
649 (1972) .......................................... 17
United States v. Radio Corp. of America, 358 U.S.
334 (1959) ........................................... 17
United States v. Southwestern Cable Co., 392 U.S.
157 (1968) .............................. ................ 17, 18, 24
United States v. Storer Broadcasting Co., 351 U.S.
192 (1956) .................... ............ ......3, 4, 16, 40, 50
United States v. Wise, 370 U.S. 405 (1961) ....... 19
Page
vm.
WAIT Radio v. FCC, 418 F.2d 1153 (D.C. Cir.
1969) .................... ................................................ 50
WBEN, Inc. v. United States, 396 F.2d 601 (2d Cir.
1968) ...... ............. ............................................40, 42
Williams v. Washington Metropolitan Area Transit
Commission, 415 F.2d 922 (D.C. Cir. 1968)
(en banc), cert, denied, 393 U.S. 1081 (1969) .. 56
WLVA, Inc. v. FCC, 459 F.2d 1286 (D.C. Cir.
Page
1972) ..............................-..................................... 35
Agency Decisions and Orders
A. H. Belo Corp., 46 F.C.C.2d 1075 (1974) .......... 28
Amendment of Multiple Ownership Rules, 9 P&F
Radio Reg. 1563 (1953) ..................................... 4
Amendment of the Multiple Ownership Rules, 18
Fed. Reg. 7796 (1953) ................... ................... 4
American Television Co., 12 F.C.C.2d 518 (1968)
............................................................................... 49
Cable Television Systems, Second Report and Order,
55 F.C.C.2d 540 (1975) ..................... ........-...... 5
CATV Rules, 2 F.C.C.2d 725 (1966) .................... 43
CATV Rules, 36 F.C.C.2d 143 (1972) ............ 43
CATV, Second Report and Order, 23 F.C.C.2d
816 (1970) ....... .......................-.....- .....-..........- 5
Chronicle Broadcasting Co., 16 F.C.C.2d 882
(1969), renewal granted 40 F.C.C.2d 775
(1973) ........... ............. -.......... - .--8 , 23, 27, 47, 49
City of Camden, 18 F.C.C.2d 412 (1969) .......... -- 37
Daily Telegraph Printing Co., 59 F.C.C.2d 185
(1976) ....... .............. - .............. - .......... -............. 27
IX.
Duopoly Rules, 5 Fed. Reg. 2382 (1940) ............. 4
Duopoly Rules, 6 Fed. Reg. 2282 (1941) ............. 4
Duopoly Rules, 8 Fed. Reg. 16065 (1943) .... 4
Effingham Broadcasting Co.. 51 F.C.C.2d 453
(1975) ........ ..................................... ........... ......... 52
Federation of Citizens Ass’ns (D.C.), 21 F.C.C.2d
12 (1969) ........ ............................... ................... 7
Frontier Broadcasting Co., 21 F.C.C.2d 570
(1970), dismissed for voluntary divestiture, 35
F.C.C.2d 875 (1972) .......... ............6, 18, 49, 52
Gale Broadcasting Co., 15 P.&F, Radio Reg. 2d 337
(1969) .................. - _______ _______________ 49
Jonquil Broadcasting Co., 21 F.C.C.2d 178 (1970)
................................... .............................. ............. 49
Lee Enterprises, Inc., 18 F.C.C.2d 684 (1969) ..... 49
McClatchy Newspapers, 40 P&F Radio Reg. 2d
1393 (1977) .... ................... .............. ................ 28
McPherson Broadcasting Co., 54 F.C.C.2d 565
(1975) ................ ....................... ............... 27, 28, 51
Miami Broadcasting Co., 1 P.&F. Radio Reg. 2d 43
(1963) ........ .................... - .....-.......................... - 49
Midwest Radio-Television, Inc., 16 F.C.C.2d 943,
18 F.C.C.2d 1011 (1969), renewal granted 24
F.C.C.2d 625 (1970) ____ ___ 6, 8, 18, 19, 27, 49
Multiple Ownership. First Report and Order,
Docket 18110, 22 F.C.C. 2d 306 (1970) ..6, 24, 25
Multiple Ownership, Further Notice, 22 F.C.C.2d
339 (1970) ..................... ........................-.......-6, 7
Page
X.
Multiple Ownership, Notice, 33 Fed. Reg. 5315
(1968) _____________ __ _________ ___ ____ 6
National Citizens Committee for Broadcasting, 56
F.C.C.2d 476 (1975), 57 F.C.C.2d 1060 (1976)
..................................................................... 28
Newhouse Broadcasting Corp. (WAPI-TV), 59
F.C.C.2d 218 (1976) ........................ ............ 27, 51
Newspaper Ownership of Radio Stations, 9 Fed.
Reg. 702 (1944) .......... ...............- ....... .............. 5
Policies Relating to the Broadcast Renewal Appli
cant, Stemming from the Comparative Hearing
Process, 40 P. & F. Radio Reg. 2d 763 (1977),
appeal pending sub nom. National Black Media
Page
Coalition v. FCC, D.C. Cir. No. 77-1500 .......... 44
Policy Statement on Comparative Broadcast Hear
ings, 1 F.C.C.2d 393 (1965) ................... .......4, 32
Policy Statement on Comparative Hearings Involv
ing Regular Renewal Applicants, 22 F.C.C.2d
424, recon. denied, 24 F.C.C.2d 383 (1970),
rev’d sub nom., Citizens Communications Center
v. FCC, 447 F.2d 1201 (D.C. Cir. 1971) ___ 44
Public Notice, FCC 76-1197, December 23, 1976 .. 43
RadiOhio, Inc., 38 F.C.C.2d 721 (1975), aff’d sub
nom. Columbus Broadcasting Coalition v. FCC,
505 F,2d 320 (D.C. Cir. 1974) ...... ............ . 28
Report on Chain Broadcasting, Docket 5060, May
1941, affirmed, National Broadcasting Corp. v.
United States, 319 IJ.S. 190 (1943) ------ ------4, 16
Scripps-Howard Broadcasting Company, 31 F.C.C.
2d 1090 (1971) ....................... - .................... 7, 18
XI.
Page
Tax Certificates, 19 P&F Radio Reg. 2d 1831
(1970) .............................. ............. ...................... 31
Tax Certification Policy, 59 F.C.C.2d 91 (1976)
............................................................................... 47
Terre Haute Broadcasting Corp., 25 F.C.C.2d 348
(1970) ......................... ............ ............... ............ 44
Western Connecticut Broadcasting Co., 47 F.C.C.2d
432 (1974) ............................................................ 27
WPIX, Inc., 20 F.C.C.2d 298 (1970) ................. 27
WGAL-Television, Inc., 62 F.C.C.2d 527 (1976)
..........................................................9, 27, 50, 51, 52
WHDH, Inc., 16 F.C.C.2d 1 (1969), aff’d sub nom.
Greater Boston Television Corp. v. FCC, 444 F.
2d 841 (D.C. Cir. 1970), cert, denied, 403 U.S.
923 (1971) ....................... ,...............................6, 27
Statutes
Communications Act of 1934, 48 Stat. 1064, as
amended:
Section 2(a), 47 U.S.C. §152(a) (1970) ....... . 2
Section 4, 47 U.S.C. §154 (1970) ...................... 2
Section 301, 47 U.S.C. §301 (1970) .... ...2, 40, 54
Section 303, 47 U.S.C. §303 (1970) ........... ....2, 16
Section 304, 47 U.S.C. §304 (1970) .............40, 54
Section 307, 47 U.S.C. §307 (1970) ........2, 40, 54
Section 309, 47 U.S.C. §309 (1970)....2, 29, 40, 54
Section 405, 47 U.S.C. §405 ................ ......... . 23
Interna] Revenue Code, 26 U.S.C. Sec. 1071
(1970) ........ ....................... -............... 2, 5, 9, 38, 42
XU.
Revenue Act of 1943, Sec. 123, 58 Stat. 44 (Feb.
Page
25, 1944), 26 U.S.C. Sec. 112(m) .................... 5
United States Code, Title 28, Sec. 1254(1) ............ 2
United States Constitution, Amendment I ............
...................................13, 21, 22, 23, 28, 29, 49, 53
United States Constitution, Amendment X IV .......... 54
United States Constitution, Amendment XV .......... 53
Rules and Regulations of the
Federal Communications Commission:
Code of Federal Regulations, Title 47, Sec.
1.597(a) (1976) ........ ......... ......... ..................... 36
Code of Federal Regulations, Title 47, Sec. 73.35
(1976) ......................... ......... .......................3, 48, 49
Code of Federal Regulations, Title 47, Sec. 73.240
(1976) ..................... .......-............................3, 48, 49
Code of Federal Regulations, Title 47, Sec. 73.636
(1976) ......................................................... 3, 48, 49
Code of Federal Regulations, Title 47, Sec. 76.501
(1975) ................... ............... ............................... 5
Miscellaneous
Barnett, S., “Cross-Ownership of Mass Media in the
Same City.” (Barnett Report) .... .................. .23, 28
Congressional Quarterly Almanac (Vol. XXX), pp.
714-17 (1974) ..... ....................... -........ ..........20
Davis, K., Administrative Law of the Seventies,
(1976) __________ ___________• ---------- 41
Federal Communications Commission Annual Re
ports, 1945 ------------ -------------------- — .......4, 5
Xlll.
Federal Communications Commission Annual Re
ports, 1969-1973 .................................................... 34
Friendly, H., Chenery Revisited: Reflections on Re
versal and Remand of Administrative Orders,
1969 DUKE L J. 199, 223 (1969) ..................... 57
Gormley, W. T., Jr., The Effects of Newspaper-
Television Cross-Ownership on News Homoge
neity, (Univ. of North Carolina, Chapel Hill
(1976)) ................................................................ 33
Green, “Conglomerate Broadcasters Are Faulted in
FCC Pilot Study, Wider Inquiry Slated,” Wall
Street Journal, August 11, 1970, p. 32 ................ 28
H. Rep. No. 93-961, 93d Cong., 2d Sess............ 8, 20
H. Rep. No. 1079, 78th Cong., 2d Sess. (1944) .. 5
H.R. 12993, 93d Cong., 2d Sess., (March 28,
1974) .................................................................... 8
Howard, H., Multiple Broadcast Ownership: Regu
latory History, 27 FED. COM. B.J. 1, 15 (1974)
................................................................................. 4
Johnson & Dystel, A Day In The Life: The Federal
Communications Commission, 82 YALE L. J.
1575, 1607 (1973) ............................................... 28
Koch, E., “WCVB: Carrying the Torch,” 29 Access
Magazine 13 (1976) .............................................. 36
Moore, B. J., Federal Practice (1974) ..... .............. 55
“NAB Presses Drive for Renewal Relief,” Broadcast
ing Magazine, December 4, 1972, p. 38 ............ 19
Senate Report No. 93-1190, 93d Cong., 2d Sess.,
.................................... .................. .................................................... . .8, 20
Page
XIV.
“Two More Cross-Owners Go Thataway,” Broad
casting Magazine, December 12, 1977, p. 1 9 ..... 31
U.S. News and World Report, April 18, 1977, p.
36 ........................................................................... 30
“Whitehead Bill Joins the Crowd Seeking to Ease
Renewal Trauma,” Broadcasting Magazine, Janu
ary 1, 1973, pp. 24-25 ......................................... 19
“WMAL-TV Fetches $100 Million, Trading Rec
ord,” Broadcasting Magazine, April 4, 1977, p.
28 .......................................................................31, 43
Page
IN THE
Supreme Court of the United States
October Term, 1977
Nos. 76-1471, 76-1521, 76-1595, 76-1604,
76-1624, 76-1685
F ederal C om m unications Com m ission , et al.,
Petitioners,
vs.
N ational C itizens Co m m ittee for Broadcasting,
et al.,
Respondents.
On Writ of Certiorari to the United States Court of Appeals
for the District of Columbia Circuit.
Brief of Respondent National Citizens
Committee for Broadcasting.
OPINIONS BELOW.
The opinions of the Court of Appeals are reported
at 555 F.2d 938 (D.C. Cir. 1977) (A. 339-444).1
The opinions of the Federal Communications Commis
sion (FCC) are reported at 50 F.C.C.2d 1046,2
reconsideration, 53 F.C.C.2d 589 (1975) (A. 134-
338).
1Natioml Citizens Committee for Broadcasting v. FCC (here
after, NCCB).
2Second Report and Order, Multiple Ownership (hereafter
Second Report).
— 2—
JURISDICTION.
This Court has jurisdiction under 28 U.S.C. §1254
(1), the Court having granted and consolidated the
various petitions for a writ of certiorari in this review
on October 3, 1977.
STATUTES INVOLVED.
Sections 2(a), 4(i), 4 (j), 301, 303(g), 303(r),
307(a), 307(d), 309(a) and 309(d) of the Communi
cations Act of 1934, 48 Stat. 1064, as amended, 47
U.S.C. §§152(a), 154(i), 154(j), 301, 303(g),
303(r), 307(a), 307(d), 309(a) and 309(d) (1970)
are set forth in the Appendix. (A. 27-32).
In addition, Respondent sets forth Section 1071 of
the Internal Revenue Code, 26 U.S.C. §1071, in the
Appendix to this brief.
QUESTIONS PRESENTED.
Whether the Federal Communications Commission
has the authority to adopt a general rule proscribing
future licensing of broadcast stations to daily news
papers serving the same market.
Whether the Court of Appeals was correct in holding
that the Commission acted arbitrarily and capriciously
when it grandfathered most existing broadcast station-
newspaper combinations.
Whether the Court of Appeals correctly concluded
that the Commission acted arbitrarily in differentiating
among licensees in setting the standard for divestiture
of cross-owned media.
Whether the Court of Appeals acted reasonably when
it ordered the Commission to take further steps to
— 3—
ensure that everyone would be consistently treated under
the general standard against cross-ownership adopted
in the rulemaking proceeding.
COUNTERSTATEMENT OF THE CASE.
These cases present for review a decision of the
United States Court of Appeals for the District of
Columbia Circuit upholding that portion of the Federal
Communications Commission’s multiple ownership rules
(47 C.F.R. §§73.35, 73.240 and 73.636 (1976)) that
prohibit ownership between co-located broadcast sta
tions and newspapers, and vacating that part of the
rules which grandfathers all but 16 current licensees
that are associated with co-located newspapers. The
respondent, National Citizens Committee for Broadcast
ing, seeks affirmance.
A. The FCC’s Long-Standing Emphasis on Diversifi
cation of Ownership of the Media of Mass Com
munication.
The Federal Communications Commission, with the
guidance of this Court3 and the courts of appeals,4
has long recognized that in a licensing scheme where
access by the public is necessarily limited, diversification
of ownership of the media of mass communication
sE.g., United States v. Storer Broadcasting Co., 351 U.S.
192, 203-04 (1956); Associated Press v. United States, 326
U.S. 1, 20 (1945). See also CBS v. Democratic National
Committee, 412 U.S. 94, 122 (1973); Red Lion Broadcasting
Co. v. FCC, 395 U.S. 367, 390 (1969).
4E.g., General Telephone Co. of the Southwest v. United
States, 449 F.2d 846, 857 (5th Cir. 1971); Citizens Communi
cations Center v. FCC, 447 F.2d 1201, 1207, 1213-14, n.
36 (D.C. Cir. 1971); Clarksburg Publishing Co. v. FCC, 225
F.2d 511, 518-19 (D.C. Cir. 1955); Scripps-Howard Radio,
Inc. v. FCC, 189 F.2d 677, 683 (D.C. Cir.), cert, denied
342 U.S. 830 (1951).
-4-
is a strong, if not primary licensing factor.* 1 * * * 5 Thus
the Commission adopted rules (1) in 1941 requiring
NBC to divest one of its dual networks6; (2) in
1941-43 barring common ownership of two local broad
cast stations of the same type (e . g only one AM
radio license in a given market) and requiring divest
iture within six months to conform to the new “duopoly”
standard7; and (3) in 1953 specifying maximum num
bers of TV, AM and FM stations allowed to be under
common ownership nationally.8 * * * * * * 15
As early as 1944 the Commission considered news
paper ownership to be a relevant factor in awarding
licenses. Although it declined to adopt a rule generally
barring newspaper ownership of a local station, the
Commission stated its intention at that time not to
grant licenses “to permit concentration of control in
sE.g., Policy Statement on Comparative Broadcast Hearings,
1 F.C.C.2d 393, 394 (1965) (hereafter, 1965 Policy Statement).
See also cases cited in the Court’s decision below, NCCB,
555 F.2d at 948-49, nn. 26-27 (A. 336-68).
6Report on Chain Broadcasting, Docket 5060, May 1941,
affirmed, National Broadcasting Corp. v. United States, 319
U.S. 190 (1943).
7Duopoly Rules 5 Fed. Reg. 2382 (1940), 6 Fed. Reg.
2282 (1941), 8 Fed. Reg. 16065 (1943). See 1945 F.C.C.
Annual Report, at 12.
8Amendment of the Multiple Ownership Rules, 18 Fed.
Reg. 7796 (1953), affirmed United States v. Storer Broad
casting Co., 351 U.S. 192 (1956). Unlike the instant case,
almost all licensees met this standard at the time it was adopted.
Divestitures were thus considered on a case-by-base basis.
Amendment of Multiple Ownership Rules, 9 P&F Radio Reg.
1563, 1572 (1953). According to one commentator, only two
parties violated the new rule. They were each given three
years to divest their excess stations. FI. Howard, Multiple Broad
cast Ownership: Regulatory History, 27 FED. COM. B.J. 1,
15 (1974).
— 5—
the hands of the few to the exclusion of the many
who may be equally well qualified to render such
public service as is required of a licensee.”9
When adopting ownership diversification rules, the
Commission has regularly imposed divestiture remedies
to achieve its policies.19 Congress has not only specif
ically approved this practice but also fostered it. In
reaction to the Commission’s divestiture requirements
in its 1943 AM duopoly rules, supra, n. 7, Congress
amended the Internal Revenue Code in 1944 to au
thorize the FCC to grant special tax certificates. This
allowed licensees who sold or exchanged their media
properties, in order to effectuate a change in a Commis
sion ownership policy, to defer capital gains by treating
the transactions as involuntary conversions.11 9 10 *
9Newspaper Ownership of Radio Stations, 9 Fed. Reg. 702
(1944).
10In addition to the divestiture orders listed above, the
Commission has required, for example, divestiture of syndication
companies by networks, see Iacopi v. FCC, 451 F.2d 1142,
1147 (9th Cir. 1971); divestiture of cable television systems
by telephone companies, General Telephone Co. of the Southwest
v. United States, supra, n. 4; divestiture of cable television
systems by television networks and by television licensees in
the same market, CATV, Second Report and Order, 23 F.C.C.2d
816 (1970); 47 C.F.R. §76.501 (1975). But see Cable Televi
sion Systems, Second Report and Order, 55 F.C.C.2d 540
(1975), appeal pending sub nom. National Citizens Committee
for Broadcasting v. FCC, D.C. Cir. No. 75-1933 (Sept. 22,
1975) (Amendment of divestiture requirement to conform to
standards established in Docket 18110; case being held in abey
ance pending this review). Also, the Commission has required
divestiture by the networks of spot sales representation for
their affiliates, Metropolitan Television Corp. v. FCC, 289 F.2d
874 (D.C. Cir. 1961).
n Revenue Act of 1943, §123, 58 Stat. 44 (Feb. 25, 1944),
26 U.S.C. §112(m); now 26 U.S.C. §1071. See H. Rep.
No. 1079, 78th Cong., 2d Sess. (1944) at p. 50.
— 6—
Subsequently, in the broadcast license renewal con
text, the Commission began in the 1960s to recognize
that the diversification factor, even without proven
abuses, may warrant loss12 or divestiture13 of license.
Seeking to consider the diversification issue on an
industry-wide basis, however, the Commission in 1968
instituted a new rulemaking proceeding, Docket 18110,
to revisit the question of local concentrations of control.
Multiple Ownership, Notice, 33 Fed. Reg. 5315
(1968). In 1970, again “to promote maximum diversi
fication of programming sources and viewpoints,” id.,
the Commission barred future creation or transfer of
TV-radio (AM/FM) combinations. Multiple Owner
ship, First Report and Order, Docket 18110, 22 F.C.C.
2d 306 (1970) (A. 33) (hereafter, First Report). The
Commission held to the view that “60 different licensees
are more desirable than 50, and even that 51 are
more desirable than 50.” Id., 22 F.C.C.2d at 311,
f 21. (A. 43).
B. The 1970 Proceeding, Docket 18110.
1. The Further Notice of Proposed Rulemaking.
Concurrently with its First Report, the Commission
issued a Further Notice of Proposed Rulemaking, Mul
tiple Ownership, Docket 18110, 22 F.C.C.2d 339
12WHDH, Inc., 16 F.C.C.2d 1 (1969), aff’d sub nom.,
Greater Boston Television Corp. v. FCC, 444 F.2d 841 (D.C.
Cir. 1970), cert, denied 403 U.S. 923 (1971) (TV license
granted to competing applicant but case “sui generis” because
renewal applicant had only a four month license). See also
Midwest Radio-Television, Inc., 16 F.C.C.2d 943, 18 F.C.C.2d
1011 (1969) (media concentration issue designated for hearing
apart from questions of abuse), deferred, 24 F.C.C.2d 625
(1970).
lsFrontier Boradcasting Co., 21 F.C.C.2d 570 (1970), dis
missed for voluntary divestiture, 35 F.C.C.2d 875 (1972).
- 7
(1970) (A. 101), proposing to require divestiture with
in five years of all existing newspaper-broadcast or
television-radio combinations in a single market. Future
creation or transfer of newspaper-broadcast combina
tions would also be barred, for, the Commission found,
“ [i]t has now become clear that the most significant
aspect of the problem is the common control of tele
vision stations and newspapers of general circulation.
. . . [T] he public looks primarily to these two sources
for its news and information on public affairs.” Id.,
22 F.C.C.2d at 344, f 26 (A. 111).
As then Chairman Dean Burch described the matter
in his concurring opinion:
There are only a few daily newspapers in each
large city and their numbers are declining. There
are only a few powerful VHF stations in these
cities, and their numbers cannot be increased.
Equally important, the evidence shows that the
very large majority of people get their news in
formation from these two limited sources. Here
then is the guts of the matter. Id., 22 F.C.C.2d
at 350 (A. 124).
During the next five years, while the Commission
considered the concentration question by rulemaking,
it deferred specific license challenges based on undue
concentration of control grounds to this proceeding.14 * 21
u See, e.g., Columbus Broadcasting Coalition v. FCC, 505
F.2d 320, 325 (D.C. Cir. 1974); Stone v. FCC, 466 F.2d
316, 331 (D.C. Cir. 1972); Hale v. FCC, 425 F.2d 556
(D.C. Cir. 1970); Scripps-Howard Broadcasting Company, 31
F.C.C.2d 1090 (1971); Federation of Citizens Ass’ns (D.C.),
21 F.C.C.2d 12 (1969). In Hale, supra, Judge Tamm concurred
to note that Docket 18110 offered “some hope that the Com
mission will finally come to grips with the grave problem
inherent in the rising concentration of ownership in the mass
media. . . .” Id., 425 F.2d at 566.
~ -8 —
Indeed, the Commission even deferred such questions
in ongoing adjudicatory hearings to this rulemaking.1"
2. The Second Report and Order.
Finally, in 1975, after extensive rulemaking proceed
ings, and spurred by Congress and the courts,10 the
Commission issued its Second Report, Multiple Owner
ship, 50 F.C.C.2d 1046 (1975) (A. 134). The Com
mission prohibited the creation of future television-
newspaper combinations in the same community. Even
though it found the record inconclusive on the question
of whether actual abuses stemmed from broadcast-news
paper cross-ownership, the Commission acted to increase
the diversity of media voices.
The Commission also determined that divestiture was
an appropriate remedy to implement its new standard,
but applied it in only 16 of the nation’s smallest
markets, where one entity controlled an absolute mo
nopoly over the local daily newspapers and broadcast
stations. Second Report, 50 F.C.C.2d at 1081-82, 114,
1098 (A. 204-06, 242).
As long as the community had one other signal,
however, the Commission grandfathered the existing
media cross-owner from future license challenge. Re
newal hearings on undue concentration of control issues 15 16
15E.g., Chronicle Broadcasting Co., 40 F.C.C.2d 775, 796
(1973); Midwest Radio-Television, Inc., 24 F.C.C.2d 625, 627
(1970).
16See, e.g., H.R. 12993, 93d Cong., 2d Sess., March 28,
1974 (requiring FCC to resolve Docket 18110 within six
months), H. Rep. No. 93-961, 93d Cong., 2d Sess. (hereafter,
House Report) at p. 23; S. Rep. No. 93-1190, 93d Cong.,
2d Sess. (hereafter Senate Report) at pp. 14-15, 22 (action
required on Docket 18110 by end of calendar year); Columbus
Broadcasting Coalition v. FCC, supra, n. 14, 505 F.2d at
330.
would thereafter be foreclosed unless economic monop
olization under the Sherman Antitrust Act could be
demonstrated. Id., 50 F.C.C.2d at 1088 (A. 218).17
With respect to divestiture, the Commission claimed
that “local ownership,” “continuity of operations,” and
“local economic dislocations” outweighed the suddenly
“abstract,” and “mere hoped for gain in diversity.”
Second Report, 50 F.C.C.2d at 1078 (A. 196-98).
The Commission noted, in addition, that all licensees
who divested to meet the new standard, whether re
quired to divest or not, would receive beneficial tax
certificates under 26 U.S.C. §1071. Id., 50 F.C.C.2d
at 1085, n. 45 (A. 211).18
“ Subsequent cases have shown that the Commission has
not followed this extremely difficult standard. E.g., WGAL-
Television, Inc., 62 F.C.C.2d 527 (1976) (FCC refused to
designate issue on economic monopolization since it had neither
the expertise nor experience to enforce the antitrust laws).
See decision below, NCCB, 555 F.2d at 966, n. 108 (A.
428-29).
18Of the seven Commissioners, six either concurred or dis
sented. Commissioners Lee, Reid, and Washburn concurred;
Commissioners Hooks and Robinson concurred in part and
dissented in part; and Commissioner Quello issued a separate
statement which he did not characterize.
Commissioner Quello objected to the Commission’s failure
to adopt policies or rules requiring operational separation of
commonly owned newspaper-broadcast combinations, and urged
“extreme vigilance on a case-by-case basis.” (A. 277). Commis
sioner Hooks joined him on this point, and also dissented
in part because: “I cannot join my colleagues in limiting divesti
ture to pure monopoly instances while ignoring other circum
stances where the problem could be as bad or worse.” (A.
273).
Commissioner Robinson filed a comprehensive opinion arguing
for a structural rather than a behavioral approach to concentra
tion. He noted that the decisional standard of proof used
by the Commission in evaluating the record reversed the tradi
tional assumption “that a competitive, unconcentrated ownership
structure is prima facie in the public interest” (A. 295). This,
he argued, in essence approves “how some broadcasters regard
their licenses as property,” a view “simply at odds with our
statute.” (A. 296, n. 20).
3. Reconsideration.
On reconsideration, Multiple Ownership, 53 F.C.C.
2d 589 (1975) (A. 317) (hereafter, Reconsideration),
the Commission rebuffed industry pleas to adopt no
rules in this field and reiterated its belief in the guiding
premise of the rule. It noted: “ [W]e again must reject
[the] argument that commonly owned media provide
diversity. It is unrealistic to expect the same level
of diversity as would be offered if the entities were
under separate ownership.” Id., 53 F.C.C.2d at 592,
n. 9 (A. 323).
But the Commission maintained diversity is primary
only “when it can be achieved without hardship or
disruption.” Id. at 592, 51 8 (A. 324). For instance,
the Commission stated that if any new “egregious situa
tions” or effective monopolies should arise due to the
loss of currently existing competitive services, those
stations would not have to divest. Id,, 53 F.C.C.2d
at 590-91 (A. 320).
C. The Court of Appeals Decision.
Upon appeals brought by NCCB, several licensees
facing divestiture, the National Association of Broad
casters, and the American Newspaper Publishers As
sociation, the Court of Appeals unanimously reversed
the Commission (A. 339). It upheld the Commission’s
assertion of authority to act to increase diversity pro
spectively even though the Commission had found no
established record of actual abuses flowing from cross
ownership. But the Court reversed the Commission’s
decision that such a record is necessary before divest
iture of existing cross-ownerships could be ordered
(A. 415-31). The Court examined the reasons put
11—
forth by the Commission for this inconsistent position,
and found them, upon thorough analysis of the record,
to be invalid and unsupported by the record. As it
later summarized:
[W]e were faced with a situation in which the
Commission had treated three indistinguishable
groups very differently. Because of this, steps
had to be taken to restore consistent administra
tive treatment. Since the only consistent and court-
approved policy in this field was that which we
approved in affirming the Commission’s prospec
tive rules, and because no valid reasons had been
given by the Commission for departing from
this policy of giving diversity of media ownership
controlling weight, we ordered the Commission to
take further steps to ensure that everyone would
be consistently treated under the standard already
adopted for new license applicants (subject, of
course, to an appropriate waiver procedure, which
we also ordered the Commission to adopt, but
which it had already indicated would be available
with respect to the egregious 16). NCCB, 555
F.2d 967, 969-70 (A. 443).
The Court supported the above conclusion with the
following analysis:
(1) The Commission had the authority to promul
gate prospective rules prohibiting cross-ownership even
though the record was inconclusive on the question
of whether actual “abuses” flowed from newspaper-
broadcast ownership. Its authority flows from long-
established principles which indicate that the Commis
sion could act to increase diversity of broadcast media.
The Commission’s action based on diversity is sup
ported by the fact that the Commission had consistently
— 12—
acted on diversity principles with the repeated sup
port of the Supreme Court and the courts of appeals
(A. 362-88).
(2) But contrary to these established principles fa
voring diversity, the Commission when it considered
divestiture of presently co-located facilities insisted on
the need for actual evidence of abuses. And while
the Commission made reference to differentiating fac
tors between present and future licensees, the Court
found that the Commission had either no record support
for them or the Commission had weighed them in
a manner inconsistent with past practice. First, in this
regard, the Court reviewed the Commission’s considera
tion of harm to the public interest that might result
from the reduction of the quality of broadcast program
ming if divestiture were ordered. Here the Court found
that the Commission had found no basis in the record
to support such a proposition. Next, the Court examined
the competing policies that the Commission had as
serted to support its shift of emphasis. These the Court
found had in all instances in the past been given
lesser weight than diversity. Moreover, the Court found
that to weigh these new policies in the way the Com
mission had, would require “massive shifts” in Commis
sion practice with respect to license transfers (A. 394-
430).
(3) Finally, the Court held that there was no record
evidence that justified the disparate treatment of the
16 “egregious” cases that were ordered to divest by
the Commission (A. 430).
The Court concluded, 555 F.2d at 960 (A. 431)
that:
For these reasons expressed above, we believe
the opposite presumption is compelled, and that
— 13—
divestiture is required except in those cases where
the evidence clearly discloses that cross-ownership
is in the public interest.
SUMMARY OF ARGUMENT.
The Federal Communications Commission has broad
authority under the Communications Act to prevent
monopolization or concentration of control over the
media of mass communications. The Commission’s long
standing practice of considering newspaper ownership
in determining qualifications for broadcast license ap
plicants on an ad hoc basis has been consistently upheld
by the courts.
Therefore, the FCC’s adoption of a rule barring
future acquisition of newspaper broadcast cross-owner
ships in the same market is a reasonable exercise
of the agency’s authority. Indeed, Congress has recently
expressed its condonance of the Commission’s use of
its rulemaking authority in this way. Structural diversi
fication, furthermore, serves rather than abridges basic
First Amendment principles.
While a federal agency has considerable discretion
to apply its rules and policies as best meets the public
interest, it is restricted from arbitrary and capricious
rulemaking. A court of appeals’ review of an agency
rulemaking is narrow, but searching. Its determination
as to whether an agency has support in the record
for its reasoning is narrowly reviewed by this Court.
Although the Commission has consistently found di
versification to be a primary licensing goal, it denigrat
ed this factor without rational explanation, in consider
ing whether to apply its new one-to-a-market policy
to existing cross-owners. The Commission ignored its
own presumptions and policies favoring diversification,
— 14—
derived from the Communications Act, in placing a
burden on the public to show tangible harm from
such existing cross-ownerships before requiring divest
iture. Furthermore, if it were necessary, the Commis
sion had substantial evidence of tangible harm before
it.
Contrary to the Commission’s view, divestiture is not
a harsh and severe remedy. Nor is it a retroactive
rule, since it allows licensees ample time to comply
with the policy in the future. In any event, broadcasters
have no property right to their licenses, which last
only three years. An applicant seeking renewal, there
fore, is subject to the rules and policies extant at
the time of renewal, not at the time of the original
grant. And broadcasters have long been on notice
of the Commission’s intention to promote structural
diversity.
The Commission claims that it applied a wholly dif
ferent standard to existing operations because it feared
that disruption to the industry might result and also
because it wanted to assure the public of the best
practicable service. However, diversity of ownership
is one element of the “best practicable service” licensing
goal, and the Commission has traditionally found other
individual elements of that standard to be secondary
to the primary goal of diversification. Certainly this
is true for the elements of “local ownership,” “conti
nuity of operation” and “local economic dislocation.”
The Commission’s speculations about harmful effects
in these areas from divestiture are unjustified by reason
or by the record.
There is no reason to believe that new owners would
not provide equal or better local broadcast service,
as well as greater diversity of information sources.
15—
Moreover, licensees have ample time and special tax
benefits which alleviate any legitimate concern over
their private economic interest. The Commission’s prac
tice of approving scores of transfer applications each
year, furthermore, demonstrates the fallacy of the Com
mission’s concern for these makeweight arguments.
The line which the Commission drew to require
divestiture by some but not all licensees is arbitrary
and irrational. It supposedly requires divestiture by
“effective monopolies,” but uses a diversity-based rather
than a monopoly-based criterion to determine whether
concentration in a given locality meets that standard.
Conversely, in protecting existing licensees against
petitions to deny based on concentration of control
grounds, the Commission adopted a Sherman Act “eco
nomic monopolization” standard, which it has since
admitted it is ill-equipped to administer. The Commis
sion has no provision, furthermore, for considering
divestiture on an ad hoc basis, and will not consider
showings by petitioners that the underlying goals of
the general policy, viz,., diversity and competition, would
be served by divestiture rather than renewal of license.
In sum, this case is simply a court reversal of
arbitrary and capricious action by a federal agency
which has lost sight of its mandate to regulate in
the public, not private, interest. The Court of Appeals
properly reminded the agency of its own long-standing
presumptions, and attendant burdens of proof. On re
mand, the Commission would retain discretion to adopt
a rule which does not draw arbitrary lines aimed at
protecting private interests at the expense of the pub
lic’s.
— 16—
ARGUMENT.
I.
THE COURT OF APPEALS PROPERLY UPHELD THE
COMMISSION’S AUTHORITY TO ADOPT A RULE
BARRING FUTURE ACQUISITIONS OF NEWSPAPER-
BROADCAST COMBINATIONS.
A. Congress Has Given the Commission the Latitude
and Authority to Consider Newspaper Ownership
in Licensing Broadcast Stations.
This Court has consistently upheld the broad authori
ty of the Federal Communications Commission to adopt
regulations interpreting the Congressionally delegated
standards of the “public interest, convenience and neces
sity.”19 The Commission’s power under that standard,
and its mandate generally to “encourage the larger and
more effective use of radio in the public interest,”
47 U.S.C. §303 (g) (1970), allows the agency flexibil
ity to adopt regulations to meet the “fluid and dynamic”
qualities of broadcast regulation, including those relat
ing to concentration of control over ownership of broad
cast stations. Id. “Congress moved under the spur of
a widespread fear that in the absence of governmental
control the public interest might be subordinated to
monopolistic domination in the broadcast field.” F.C.C.
v. Pottsville Broadcasting Co., 309 U.S. 134, 137
(1940).
In United States v. Storer Broadcasting Co., 351
U.S. 192, 203 (1956), the Court upheld the FCC’s
numerical limitation on the number of broadcast licenses
one person could hold nationwide, stating:
Congress sought to create regulation for public
protection with careful provision to assure fair
19NBC v. United States, supra, n. 6, 319 U.S. at 219
(1943).
1 7 -
opportunity for open competition in the use of
broadcasting facilities. Accordingly, we cannot in
terpret §309 (b) as barring rules that declare a
present intent to limit the number of stations
consistent with a permissible “concentration of
control.”
And in United States v. Radio Corp. of America,
358 U.S. 334, 351-52 (1959) the Court accepted
the possibility that
[A]ntitrust considerations alone would keep the
statutory [licensing] standard from being met, as
when the publisher of the sole newspaper in an
area applies for a license for the only available
radio and television facilities which, if granted,
would give him a monopoly of that area’s major
media of mass communication.
More recently, this Court upheld the Commission’s
authority to regulate communications media ancillary
to its authority over broadcasting even absent express
provision in the Act.20
Accordingly, the Commission’s general authority to
take newspaper ownership into consideration in deter-
20United States v. Midwest Video Corp., 406 U.S. 649
(1972); United States v. Southwestern Cable Co., 392 U.S.
157 (1968). Review of the Commission’s attempted regulation
of data processors in GTE Service Corp. v. FCC, 474 F.2d
724 (2d Cir. 1973) is not to the contrary (NAB Br. at
24-25). There the Commission’s authority to regulate activities
of communications common carriers in the computer field was
upheld, but regulations directly controlling the computer industry
were reversed as beyond the Commission’s jurisdiction and intent.
Id., 474 F.2d at 733. The GTE Court specifically distinguished
the newspaper-broadcast cross-ownership situation as within the
agency’s authority. Id., 474 F.2d at 734. In the present case,
the Commission is regulating qualifications for owning broad
cast stations. It is not regulating newspapers. (A. 378, n.
41).
18
mining broadcast licensing qualifications is clear.21
And as this Court has warned, courts should not inter
fere “in the absence of compelling evidence that such
was Congress’ intention * * * to prohibit administra
tive action imperative for the achievement of an agen
cy’s ultimate purposes.” 22
The American Newspaper Publishers Association
(ANPA) and the National Association of Broadcasters
(NAB), along with some amici curiae, argue that
the Commission’s expansive powers do not include the
ability to bar newspapers from acquiring broadcast
stations in the same locality. They base the argument
on (1) a limited and selective review of subsequent
Congressional statements, none of which resulted in
an amendment to the Communications Act; (2) an
opinion of one former FCC General Counsel in 1938,
who was looking at a somewhat different question
under different circumstances, and (3) dicta from a
1942 court of appeals decision. While the petitioners’
arguments were extensively considered below and dis
missed by the Court, NCCB, 555 F.2d at 947-54 (A.
362-88), the vigor with which the petitioners again
assert various Congressional statements requires some
21E.g., Greater Boston Television Corp. v. FCC, supra, n.
12; Joseph v. FCC, 404 F.2d 207 (D C. Cir. 1968); McClatchy
Broadcasting Co. v. FCC, 239 F.2d 15 (D.C. Cir. 1956),
cert, denied, 353 U.S. 918 (1957); Scripps-FIoward Radio,
Inc. v. FCC, supra, n. 4; Mansfield Journal Co. v. FCC,
180 F.2d 28 (D.C. Cir. 1950); Plains Radio Broadcasting
Co. v. FCC, 175 F.2d 359 (D.C. Cir. 1949); Frontier Broad
casting Co., supra, n. 13.
22United States v. Southwestern Cable Co., supra, n. 20,
392 U.S. at 177, quoting Permian Basin Area Rate Cases,
390 U.S. 747, 780 (1969).
1 9 -
exposition beyond the Court of Appeals review. See
also Second Report, 50 F.C.C.2d at 1051-52 (A.
144-46).
ANPA, NAB and some of their amici cite various
Congressional statements made between 1946 and 1952.
They argue that Congress has expressed its intention
that the FCC not “discriminate” against newspaper
owners. They treat certain legislative statements as
if legislation had in fact been adopted precluding FCC
consideration of newspaper ownership in licensing
broadcasters.
Neither the Commission23 nor the Court of Appeals24
was persuaded by Congress’ inaction. Indeed, the
Court noted that the general use of subsequent legisla
tive activity is not useful to determine the meaning
of the original statute, citing United States v. Wise,
370 U.S. 405, 411 (1961). NCCB, 555 F.2d at 952,
n. 41 (A. 378).
Nevertheless, recent Congressional actions conclusive
ly demonstrate Congressional concurrence with the
Commission’s view that it has statutory authority to
bar newspaper ownership of co-located broadcast sta
tions by the rule here in issue. During the pendency
of this rulemaking, and at the instigation of the NAB
and others,25 both the House of Representatives and
23Second Report, 50 F.C.C.2d at 1051 (A. 144-45).
2iNCCB, 555 F.2d at 952 (A. 378).
25See, e.g., “NAB Presses Drive for Renewal Relief,” Broad
casting Magazine, December 4, 1972 at 38; “Whitehead Bill
Joins the Crowd Seeking to Ease Renewal Trauma,” Broadcast
ing Magazine, January 1, 1973 at 24-25.
-2 0
the Senate adopted bills expressing their intention that
the FCC not consider cross-ownership at license renewal
time unless the Commission adopted rules prohibiting
such interests, and gave the renewal applicant a rea
sonable opportunity to divest to conform to the new
rules.26 The House Report quotes from the Further
Notice in Docket 18110, f 34 [A. 116], where the
Commission proposed through rule to require divestiture
of co-located commonly owned daily newspapers and
broadcast stations. It then states that “if cross-ownership
is to be prohibited or management or ownership struc
tures or their composition are to be prescribed, it
must be done by rules. . . .” Id. at 19. There can
be little question that the House Committee viewed
the Commission as having jurisdiction to act as it
proposed in Docket 18110.
Similarly, in the Senate Report, the Committee re
ferred to the Docket 18110 proposal to bar newspaper
cross-ownership of broadcast stations, id. at 14, and
concluded, “The Commission has rules regarding mul
tiple ownership, and there appears to be no reason
why rules regarding cross-ownership would not also
be appropriate.” Id. at 15. Both the House and Senate
adopted measures to require the Commission, in view
of its delay, to conclude Docket 18110 within a certain
time period. House Report, supra, n. 16, at 25; Senate
Report, supra, n. 16, at 14-15, 22; Congressional Quar
terly Almanac, supra, n. 26, at pp. 714-17. However,
conferees were never selected in the House, and the
bills eventually died. Id. No member of the House
or Senate Commerce Committees, however, expressed
26Congressional Quarterly Almanac (Vol. XXX), pp. 714-
17 (1974), House Report, supra, n. 16, at pp. 18-19; Senate
Report, supra, n. 16, at pp. 14-15.
— 21—
the belief that the Commission did not have the au
thority to consider newspaper ownership of broadcast
stations or to adopt the proposal in the Further Notice
in Docket 18110.27
B. The First Amendment Is Served Rather Than
Abridged by a Content Neutral Rule Promoting
Diversity of Information Sources to a Local Com
munity.
ANPA (Br. at 17-26) and the NAB (Br. at 25-
37) argue, again, that their individual right to broadcast
should prevail over the public’s right to diversity of
information sources. This is a tired argument, and
one which this Court has rejected many times.
“No one has a First Amendment right to a license
or to monopolize a radio frequency; to deny a station
license because ‘the public interest’ requires it ‘is not
a denial of free speech.’ ” Red Lion, supra, n. 3,
395 U.S. at 389, citing NRC v. United States, supra,
n. 6, 319 U.S. at 227. “It is the right of the viewers
and listeners, not the right of the broadcasters, which
is paramount.” Id., 395 U.S. at 390.
In upholding the FCC’s Fairness Doctrine, then,
the unanimous Red Lion Court conclusively established
the validity of FCC regulations aimed at promoting
diversity. And the Court in Buckley v. Valeo, 424
U.S. 1, 49, n. 55 (1976), reaffirmed this view where
27ANPA’s argument in this Court to the effect that the
FCC does not have authority to prohibit newspapers from
becoming broadcast licensees is in direct contradiction to its
position before the Commission that the Commission has denied
newspaper ownership in a hearing setting in the past, and
that rather than enact a rule, the Commission should continue
to consider newspaper ownership on an ad hoc basis. ANPA
Comments, Docket 18110 (A. 715-16). See generally Reply
Comments of Stephen R. Barnett (A. 776 ff.).
■22-
it stated that “in contrast to the undeniable effect
of . . . [unconstitutional campaign expenditure limita
tions], the presumed effect of the Fairness Doctrine
is one of ‘enhancing the volume and quality of coverage
of public issues.’ ”
The Fairness Doctrine “may well mark the outer
limits of a permissible diversification policy which relies
on direct government control over the content of broad
cast programs.” NCCB, 555 F.2d at 950 (A. 371).
But the structural ownership rules here under review
are far less restrictive, from a First Amendment perspec
tive, because they are totally content neutral. They
do not ban, punish, or mandate what may be published
or aired.28
The Commission’s rules, moreover, do not restrict
a licensee from publishing a newspaper. While it does
not allow one making that choice to retain a broadcast
license in the same locality, this is consistent with
long-standing prohibitions against monopolization of the
press (Associated Press v. United States, supra, n.
3, 326 U.S. at 20), and against domination of broadcast
frequencies. Thus the Commission will not allow one
entity to obtain two television licenses in the same
locality; it can also refrain from issuing a broadcast
28This distinguishes the Commission’s content neutral, struc
tural diversity rules from the other major First Amendment
cases cited by petitioners. Thus in Grosjean v. American Press
Co., 297 U.S. 233, 250 (1936), the newspaper tax was “a
deliberate and calculated device in the guise of a tax to limit
the circulation of information to which the public is entitled. . . .”
And in Miami Herald v. Tornillo, 418 U.S. 241, 251 (1974),
the Court struck down a right of reply statute which exacted
“a penalty on the basis of the content of a newspaper.” The
Court of Appeals, furthermore, pointed out that “ [fjreedom
of the press "does not necessarily shield newspaper publishers
from regulation that may make publication more difficult.”
Id. (A. 383).
^ 2 3 -
station license to one who has a concentration of
other media of mass communications.
Indeed, content neutral rules aimed at maximizing
information sources and mass media in a particular
locality further rather than abridge the goals of the
First Amendment. In addition, in view of the Commis
sion’s need, at times, to investigate allegations of be
havioral abuses of local cross-ownerships,29 structural
measures taken in advance to prevent the possibility
of such abuses will also promote the public interest
and the First Amendment.
C. The Commission’s Adoption of Its Prospective Ban
Is a Reasonable Exercise of Its Discretion.
In assessing whether or not the Commission was
“arbitrary or capricious” in adopting a particular rule
the courts of appeals have a narrow but searching * 40
29See Mansfield Journal Co. v. FCC, supra, n.21, 180 F.2d
at 35 (“the way the newspaper is operated in relation to
other media of communication is material”). See also Chronicle
Broadcasting Co., 16 F.C.C.2d 882 (1969), renewal granted,
40 F.C.C.2d 775 (1973). As some have suggested, continued
cross-ownerships may invite the government into the newsrooms
of newspapers or broadcast stations in order to investigate
legitimate claims, supported by extrinsic evidence, of news man
agement, and other abuses contrary to the public interest. Oral
Argument of then NCCB Counsel, Frank W. Lloyd (A. 925,
928-29); S. Barnett, “Cross-Ownership of Mass Media in the
Same City.” (Barnett Report) (A. 990, 1001-02, 1011-21,
and articles cited therein).
Petitioners have suggested that the Barnett Report was not
properly before the Court of Appeals because they allege it
was not officially part of the record. Certainly the Commission
had an opportunity to pass upon it, however, since Commission
ers Hooks and Robinson each referred to it in their dissents.
Second Report, 50 F.C.C.2d at 1108, 1120, n. 17 (A. 269,
293). This is sufficient to meet the statutory test of 47 U.S.C.
§405. Office of Communication of the United Church of Christ
v. FCC, 465 F.2d 519, 523 (D.C. Cir. 1972). And as the
Court of Appeals noted, “much of the report consists of discus
sion of cases in the public record. . . .” NCCB, 555 F.2d
at 959, n. 71 (A. 403).
- 2 4 -
scope of review, Citizens to Preserve Overton Park
v. Volpe, 401 U.S. 402, 415 (1971), while that of
this Court is more narrow and circumscribed. Mobil
Oil Corp. v. FPC, A ll U.S. 283, 309 (1974).
The Commission need not await the feared result
before acting to prevent the potential for abuses of
concentrations of control over the mass media, and
to foster diversity.30
The Commission has traditionally taken newspaper
ownership into account in licensing broadcast stations,31
and the present rule is a codification and extension
of existing Commission practice. By adopting a rule,
rather than continuing to proceed on an ad hoc basis,
the Commission is protecting newspaper owners from
investing in an operation where renewal expectancies
may in some instances be outweighed at renewal time
by the diversification factor. See Citizens Communica
tions Center v. FCC, supra, 447 F.2d at 1213-14,
n. 36 (1971). 20
30See, e.g., Buckley v. Valeo, supra, 424 U.S. at 29, 49,
n. 55, where the Court upheld a limitation on campaign contribu
tions in part because of the potential for abuse, and alluded
to the Fairness Doctrine’s “presumed effect” to increase the
total amount of speech. Accord: Red Lion, supra, n. 3, 395
U.S. at 393; United States v. Southwestern Cable Co., supra,
392 U.S. at 176-77 (Commission can plan in advance with
cable television, instead of waiting to react to events); FCC
v. RCA Communications, Inc., 346 U.S. 86, 96-97 (1953)
(“the possible benefits of competition do not lend themselves
to detailed forecast” ); GTE Service Corp. v. FCC, supra, n.
20, 474 F.2d at 731 (certain prohibitions imposed against
communications common carriers relating to data processing
affirmed on “potential domination” rationale); Mt. Mansfield
Television, Inc. v. FCC, 442 F.2d 470, 487 (2d Cir. 1971)
(primetime access rule affirmed on potential of curbing competi
tive restraints and network dominance in syndication); First
Report, supra, 22 F.C.C.2d at 311, % 20 (A. 43) (“remedial
action need not await the feared result”).
slSee supra, n. 21.
■25-
Adoption of the rule based on the Commission’s
intent to foster diversity of expression, even without
evidence of past abuses, is reasonable because the Com
mission has long presumed that “it is unrealistic to
expect the same level of diversity [from commonly
owned mass media entities] as would be offered if
the entities were under separate ownership.” Reconsid
eration, 53 F.C.C.2d at 592, n. 9 (A. 323). See
also Second Report, 50 F.C.C.2d at 1050, f 14 (A.
142) (need for diversified ownership). “ [Centraliza
tion of control over the media of mass communications
is, like monopolization of economic power, per se un
desirable.” First Report, 22 F.C.C.2d at 310, f 17
(A. 41).
In sum, as the Court below held, “ [t]he prospective
ban is an attempt to promote diversity without govern
ment regulation or supervision over speech.” NCCB,
555 F.2d at 950 (A. 373). The Court observed after
reviewing the record here that although there is no
guarantee that the prospective ban will increase diver
sity, this did not make the attempt irrational nor was
it unreasonable for the Commission to license an inde
pendent new voice. Id. (A. 374). “The ‘search for
truth,’ ” the Court stated, “will be facilitated by govern
ment policy that encourages the maximum number
of searchers.” Id. at 951. (A. 374).
— 26
II.
THE COURT OF APPEALS CORRECTLY FOUND THE
COMMISSION’S SECOND REPORT ARBITRARY IN
THE APPLICATION OF ITS NEW CROSS-OWNERSHIP
STANDARDS TO EXISTING COMBINATIONS.
Having found that the Commission was authorized
and that it acted reasonably in applying its “duopoly”
rules to local newspaper-broadcast cross-ownerships, the
Court of Appeals then looked to whether the Commis
sion’s enforcement mechanism for applying the new
standard to existing cross-ownerships was reasonable.
For, while the Commission applied the standard to
future acquisitions and certain small licensees who con
trolled absolute monopolies in their cities, it exempted
and indeed immunized all other cross-ownerships in
the country, regardless of the degree of concentration
they held.
The Court thoroughly searched for a rational basis
for the Commission’s action, but found the record
bare of factual support and the premise of its action
unreasoned. The Commission argues that for existing
combinations, other factors such as “best practicable
service” and disruption to the industry and individual
owners come into play. But as we demonstrate below,
the Court correctly held that all of the Commission’s
fears of “harmful effects” from divestiture were ground
less, its application of countervailing factors irrational,
and that the Commission inexplicably abandoned its
traditional presumption in favor of diversification of
media outlets.
— 27—
A. The Commission Erred in Its Assessment of the
Burden of Proof in This Proceeding.
The Court of Appeals correctly held that the Com
mission erred in requiring the public to show evidence
of tangible harm from cross-ownerships before requir
ing across the board divestiture.32
32Moreover if such evidence were necessary, the Commission
had sufficient evidence before it to act affirmatively on the
divestiture issue. Contrary to the Commission’s statements, there
are numerous examples of detriments, including actionable abuses
warranting a hearing on denial of license from co-located
newspaper-broadcast cross-ownerships. E.g., WGAL-Television,
Inc., supra, n. 17 (newspaper preference of TV station); West
ern Connecticut Broadcasting Co., 47 F.C.C.2d 432, 433-35
(1974) (concentration extreme and possible discrimination
against political candidates); WPIX, Inc., 20 F.C.C.2d 298,
300 (1970) (news management, but no concentration of control
issue designated); Chronicle Broadcasting Co., supra, n. 15
(news management); Midwest Radio-Television, Inc., supra, n.
12 (cross subsidizations); WHDH, Inc., supra, n. 12 (lack
of editorializing).
In large part, however, any deficiencies that do exist in
the record can be attributed to the Commission’s unwillingness
to examine such issues when they were presented in licensing
and complaint proceedings. Instead, the Commission has for
years deferred examination of actual evidence in deference to
its overall examination of its policies carried on in this rule-
making. See, supra, nn. 14-15.
Furthermore, the Commission is very reluctant to designate
allegations of abuse of a cross-ownership for hearing unless
the case is well-established. Yet it is nearly impossible to meet
the Commission’s burden for hearing without discovery proce
dures, which, in Catch 22 fashion, are not available until a
case is set for hearing. See, e.g., Bilingual Bicultural Coaltion
on Mass Media v. FCC, 492 F.2d 656, 659 (D.C. Cir. 1974);
Hale v. FCC, supra, n. 14, 425 F.2d at 566 (Tamm, concur
ring).
There were, in addition, many allegations in individual cases
before the Commission which, while perhaps not warranting
a renewal hearing in every case, nonetheless offered the Com
mission the opportunity, had it been truly interested, to pursue
the matter in rulemaking. These include allegations raised in
Newhouse Broadcasting Corp. (W API-TV), 59 F.C.C.2d 218,
231-39 (1976); Daily Telegraph Printing Co., 59 F.C.C.2d
185 (1976); McPherson Broadcasting Co., 54 F.C.C.2d 565
(This footnote is continued on next page)
— 28—
By placing the burden on those who sought diversi
fication over concentration, the Court found, the Com
mission had acted in a manner contrary to the general
presumption that precipitated the rulemaking and ulti
mately the prohibition against future cross-ownerships:
namely that the Communications Act,33 the First
Amendment,34 and the Commission’s long-standing
(1975); A. H. Belo Corp., 46 F.C.C.2d 1075, 1081-88, 1091
(1974); RadiOhio, Inc., 38 F.C.C.2d 721, 751 (1975) (John
son, dissenting), aff’d sub nom. Columbus Broadcasting Coalition
v. FCC, supra, n. 14. See Johnson & Dystel, A Day In
The Life: The Federal Communications Commission, 82 YALE
L. J. 1575, 1607 (1973).
In addition, Professor Steven Barnett’s extensive documenta
tion in “Cross Ownership of Mass Media in the Same City”
(A. 990-1051), lists many instances from public records of
non-coverage, non-editorializing, news management to favor busi
ness interests, economic tie-ins between newspaper and broad
cast station advertising, and the like. Also, the Commission
heard personal testimony at oral argument as to the detrimental
effects of cross-ownerships in several cities. (A. 923, 933-
42). See generally, Commissioner Robinson’s dissent at A. 291.
The Commission’s Conglomerate Study Report might also
have contained important information. Although the pilot study
did reveal abuses, see Green, “Conglomerate Broadcasters Are
Faulted in FCC Pilot Study, Wider Inquiry Slated,” Wall Street
Journal, August 11, 1970, p. 32, the Commission has refused
to reveal large sections of its final report. National Citizens
Committee for Broadcasting, 56 F.C.C.2d 476 (1975), 57
F.C.C.2d 1060 (1976).
Finally, the Commission has recently designated an “undue
concentration of control” issue in a comparative renewal proceed
ing, based on the grandfathered renewal applicant’s proposed
extension of its service, citing the “duopoly” policy as of “over
riding decisional significance” and expressing “concern for divers
ity and competition.” McClatchy Newspapers, 40 P&F Radio
Reg. 2d 1393, 1403-04 (1977).
3SE.g., 47 U.S.C. §303(g) (1970) obligates the Commission
to “encourage the larger and more effect use of radio in
the public interest.” NCCB, 555 F.2d at 962-63. (A. 417).
S4E.g., “The First Amendment ‘presupposes that right con
clusions are more likely to be gathered out of a multitude
of tongues. . . .’ ” NCCB, 555 F,2d at 963 (A. 417-18),
citing Associated Press v. United States, 52 F.Supp. 362, 372
(S.D.N.Y. 1943), aff’d 326 U.S. 1 (1945). See also Red
Lion, supra, n. 3, 395 U.S. at 390.
— 2 9 -
policy35 favored diversification.36 Once the Commission
adopted the general proposition, the Court held, con
sistency required that the burden should properly have
shifted to the cross-owners to demonstrate why their
concentrations serve the “public interest, convenience
and necessity.” 47 U.S.C. §309 (1970). Instead, the
Commission deferred to the private economic interests
of the licensee over diversity and competition in the
media.
The Court’s view is, we submit, beyond cavil, for
if the First Amendment is truly “the matrix, the indis
pensable condition, of nearly every other form of free
dom,”37 then the Commission’s presumption for diver
sity, contained in the first 107 paragraphs of the Second
Report should have been applied for all cross-ownership
situations, absent a valid and reasonable basis for dis
tinction.
B. The Commission Did Not Adequately Explain Why
Its Diversification Presumption in the Prospective
Rules Was Denigrated When Applied to Most
Existing Combinations.
As detailed above, the FCC has established that
separate ownership of a daily newspaper and a broadcast
station in the same market is required in the public
interest. The Commission articulated its rationale as
follows: * 8
35The Court cited numerous such pronouncements at 555
F.2d at 944-45, nn. 6-9 (A. 350-52).
S8Moreover, while the Court found the record inconclusive
for both sides, it suggested that a compelling factual showing
of a pattern of abuses was unlikely, if not impossible. NCCB,
supra, 555 F.2d at 961 (A. 412-13).
aiPalko v. Connecticut, 302 U.S. 319, 327 (1937).
■3 0 -
If our democratic society is to function, nothing
can be more important than insuring that there
is a free flow of information from as many di
vergent sources as possible. . . . [I]t is unrealistic
to expect true diversity from a commonly owned
station-newspaper combination. The divergency of
their viewpoints cannot be expected to be the
same as if they were antagonistically run. Second
Report, 50 F.C.C.2d at 1079-80, % 111 (A. 200).
In part this was based on the Commission’s specific
finding that newspapers and television stations are a
community’s principal source of information on local
issues. Id. at 1083, f 115 (A. 207-08).38
Additionally, the Commission stated that it believed
that “the idea of diversity of viewpoints from antagonis
tic sources is at the heart of the Commission’s licensing
responsibility” (̂ f 111; A. 200). The Commission even
announced a policy of awarding tax certificates to li
censees “in non-divestiture cases where current combina
ssSee also the Further Notice in 18110:
In view of the primary position of the daily newspaper
of general circulation and the television broadcast station
as sources of news and other information, and discussion
of public affairs, particularly with respect to local matters,
it is not desirable that these two organs of mass communi
cation should be under the same control in any community.
A direct parallel would be the ownership of two television
stations in the same community by the same person, which
the Commission without substantial disagreement from
any source, has never permitted. The functions of news
papers and television stations as journalists are so similar
that their joint ownership is, in this respect, essentially
the same as the joint ownership of two television stations.
22 F.C.C.2d 339, 346 (1970) (emphasis added). (A. 115).
See also U.S. News and World Report, April 18, 1977,
p. 36, where decisionmakers placed television second and news
papers tenth of all national institutions in terms of influence.
31—
tions are sold to separate owners in order to come
into compliance with the new [anti-cross-ownership]
policy underlying the rule.” Id., 50 F.C.C.2d at 1085,
n. 45 (A. 211). The Commission could not have
adopted this stance if the general policy had not been
to declare cross-ownership as contrary to the public
interest. Tax Certificates, 19 P&F Radio Reg. 2d 1831,
1832 (1970).
Yet the Commission refused to require that its policy
be implemented by existing combinations. Instead, with
out evidence to support a view contrary to the one
stated above, it held diversity to be “abstract” and
“a mere hoped for gain.” Id., 50 F.C.C.2d at 1078
(A. 197-98). Moreover, it never explained this discrep
ancy, except to refer to the other factors—basically
the Commission’s speculation as to “the possibility of
disruption for the industry and hardship for individual
owners” from divestiture—which it believed outweighed
the diversification criterion. But the other factors do
not explain why diversity would be abstract in the
context of present combinations. In fact, divestiture
would result in a direct, real and obvious gain in
diversity.39
39For instance, in Washington, D.C., recently announced
divestitures by the Washington Star and the Post of their tele
vision licenses will result in six instead of four owners of
major daily newspapers and VHF television stations in the mar
ket. See “WMAL-TV Fetches $100 Million, Trading Record,”
Broadcasting Magazine, April 4, 1977, p. 28, and “Two More
Cross-Owners Go Thataway,” Broadcasting Magazine, Decem
ber 12, 1977, p. 19. Both of the divestitures are still subject
to FCC approval.
— 32—
C. The Commission’s Grounds for Preferring Grand
fathering Interests of Existing Licensees Over the
Public’s Interest in Diversity Are Arbitrary and
Unsupported by the Record.
Basically, this appeal comes down to whether the
Court of Appeals reasonably found that the Commission
lacked record support for its fears of harmful effects
of divestiture as weighed against the presumed benefits.
Without reasoned analysis or record support in this
proceeding, the Commission determined that the pos
sible losses of “continuity of ownership,” “local owner
ship” and “local economic dislocations” outweighed
the public interest mandate for diversity. Second Report,
supra, 50 F.C.C.2d at 1078, f 108 (A. 197). The
Commission’s decision, when viewed against prior de
cisions, policies, and the inconclusive facts of record,
is clearly arbitrary.
1. Local Ownership and Integration of Ownership and Man
agement.
Although the Commission cites the fact that approxi
mately 15% of newspaper-television cross-owners are
locally owned, it did not indicate how many and to
what degree local owners participated in the actual
operation of the stations.40 The Commission has tradi
tionally discounted local ownership as a positive factor
to the extent that the ownership did not participate
in the day-to-day operation of the station. 1965 Policy
Statement, supra, 1 F.C.C.2d at 395. Furthermore,
the Commission did not consider whether local owner
40The great majority of licensees claimed that their news
papers and TV stations were operated separately. “Were it
otherwise [the Commission commented] and the two operated
jointly, it might have been necessary for the Commission to
act to require divestiture in many more situations.” Id. at
1089, 1j 131 (A. 219).
ship is necessarily a positive factor in a cross-ownership
situation.41
In fact, the Court noted that the Commission routine
ly approves voluntary sales to distant, absentee buyers.
Indeed, the Commission’s primary policy in Docket
18110 was to bar local newspapers from acquiring
local television licenses because diversity was found
to outweigh local ownership. And certainly there was
no reason to grandfather absentee owners on the basis
that other cross-owners were local owners. The Commis
sion appears to concede this in admitting that this
consideration “would not apply in every case.” (FCC
Br. at 26).
Finally, as the Court of Appeals pointed out, about
one quarter of the cross-owned licensees are themselves
absentee owners, so divestiture could improve those
situations. “ [T]here is no reason to suppose that local
entrepreneurs will not find television an attractive in
vestment.” NCCB, 555 F.2d at 964. (A. 421).
2. Continuity of Operation.
The Commission stated that divestiture might disturb
“continuity of operation . . . as the new owner would
lack the knowledge of the community and would have
« See e.g., W. T. GORMLEY, JR., THE EFFECTS OF
NEWSPAPER-TELEVISION CROSS-OWNERSHIP ON NEWS
HOMOGENEITY, (Univ. of North Carolina, Chaptel Hill (1976)
at 214-15. Professor Gormley observes that local cross-owner
ships involve a greater tendency of news overlap and therefore
less actual diversity, as employees would perceive the owner’s
interests and pursue them. His findings include (1) 9.3% of
television stations owned by a newspaper receive carbons of
the latter’s stories on an exclusive basis as opposed to 1.1%
of comparable non-affiliated television stations; (2) cross-owner
ship increased news story overlap by 16.7%; and (3) 52%
of the cross-owned television stations never editorialize, as op
posed to 25% of non-affiliated stations. Id. at pp. 112, 210-
12.
—34
to begin raw.” Second Report. 50 F.C.C.2d at 1078.
(A. 197).42 But as Commissioner Robinson pointed
out, holdovers in high-level management often smooth
the transition period (id. at 1128; A. 309), even
assuming some unusual disruption from divestiture. Fur
ther, 79 television divestitures over a five-year period,
for example, simply do not constitute disruptions incon
sistent with the public interest. If they did, the Commis
sion’s position would again be at odds with its practice
of routinely approving license assignments. In the five-
year period 1969-1973, for example, the Commission
processed 165 voluntary television transfers.43 In addi
tion, the number of necessary divestitures is now further
reduced, and the Commission did not really consider
that in many instances companies can be expected
to retain the television station and sell the newspapers.
Nor did the Commission explain in its decision
how the alleged break in continuity would disserve
42Presumably, this is also what the Commission meant when
it said that it would not order divestiture because of the “possi
bility of disruption for the industry.” Id. at 1078, f 109.
(A. 198). Ironically, after five years of deferring to this rule
making, virtually all ad hoc challenges on concentration of
control grounds—in order to consider the matter on an industry
wide scale (see, e.g., Hale v. FCC, supra, n. 14)—the Com
mission refused to require widespread divestiture partially on
grounds of “disruption to the industry.” However, the Commis
sion elsewhere admitted that “trading of stations would tend
to lessen concern based on financial losses or investment uncer
tainty.” Second Report, 50 F.C.C.2d at 1080, n. 29. (A.
201). And the Commission failed to take into account the
net gain, in terms of stability, resulting from the reduction
of petitions to deny and competing applications based on a
challenge to a licensee’s “undue concentration of control.” See
supra, n. 32.
iHSee F.C.C. Annual Reports 1969-1973, pp. 130, 144,
148, 167, 201, respectively. In the six years prior to the
Second Report, the Commission approved without hearing 678
license assignments, at least 40% of which were not pro forma.
NCCB, 555 F.2d at 964, n. 99. (A. 423).
— 35-
the public, as opposed to the private interests. As
the Commission itself stated, “the Commission’s func
tion is not to protect stations from competition and
the public interest is not disserved even at a station’s
demise, so long as another takes its place in providing
public service programming.” Second Report, 50
F.C.C.2d at 1075, n. 20 (A. 190). Similarly in WLVA,
Inc. v. FCC, 459 F.2d 1286 (D.C. Cir. 1972), the
Court held that where a licensee complains of insuffi
cient funds in the market for a new entrant—a “Carroll”
issue—the existing licensee must not only show that
the insufficient revenues would lead to a net reduction
of its public service programming, but also that this
loss of public service programming “will not be offset
by the increased non-network programming proposed
to be offered by the applicant.” Id. at 1297.
The Commission, however, cited no evidence to the
effect that new licensees would be inferior to prior
owners. NCCB, 555 F.2d at 964, n. 98 (A. 423).
This latter point is reinforced by the Commission’s
statement that whatever superiority in performance
their staff found in newspaper-owned television stations,
it “was in no way shown to be a result of the fact
of owning a newspaper. . . .” Reconsideration, 53
F.C.C.2d at 592 (A. 324).44
Indeed, the record shows that new owners are often
more responsive to the local community. Usually a
new entity in town tries harder to be accepted, see,
e.g., Testimony of James Alexander, Executive Director
44This Commission statement directly contradicts its own
claim before this Court that “Divestiture introduced the danger
of disrupting this proven, superior service—to the detriment of
the public interest.” FCC Br. at 24. It also disposes of Channel
Two’s similar claims in its Brief at 48.
■36—
of FACT, Inc., New Haven, Conn. (A. 941-42), where
as existing cross-owners do not have similar incentives.
See, e.g., Testimony of Nancy Schmidt, Chairperson,
St. Louis Broadcast Coalition (A. 951-53). Thus the
evidence in the record directly contradicted the Commis
sion’s speculations. Every representative of the listening
or viewing public who presented evidence spoke in
favor of divestiture; none spoke for retention of exist
ing stations’ programming service. In the only case
where a newspaper licensee was replaced, moreover,
the new licensee has performed excellently, and con
sistently rates at the top of all stations in the country
in airing locally produced programming at prime
time.45
Channel Two and the Commission also argue that
continuity is a positive good in itself, citing the Com
mission’s anti-trafficking rules. (Channel Two Br. at
46-47; FCC Br. at 24). But as the Commission’s
citation to Crowder v. FCC, 399 F.2d 569 (D.C.
Cir. 1968) demonstrates, trafficking offends the public
interest mainly because it is the acquisition of a license
with the intent to keep huge profits rather than to
serve the public. Id. at 571. Loss of continuity of
service is a footnote, which when applied to the cross
ownership rules becomes “makeweight.”46 Second Re
port, 50 F.C.C.2d at 1128 (A. 308) (Robinson, dis
senting).
i5See, e.g., E. Koch, “WCVB: Carrying the Torch,” 29
Access Magazine 13 (1976) (showing high national rankings
of the station that replaced WHDH-TV in Boston).
46Moreover, even in the context of trafficking the Commis
sion presumes, in the normal course, that questions with regard
to continuity will arise only if a license is transferred within
the first three year license period. See 47 C.F.R. §1.597 (a)
(1976).
— 37—
Furthermore, as the Court of Appeals pointed out,
“A one-time alteration in the ownership structure of
the broadcast industry should not affect the public’s
interest in quality programming because the new owners
will become the beneficiaries of any unofficial policy
of continuity.” NCCB, 555 F.2d at 964. (A. 422).
Finally, the Commission has in the past prevented
transfers where the applicant proposes to diminish serv
ice to the public. City of Camden, 18 F.C.C.2d 412
(1969). It can do so again if the problem arises
in the context of these divestitures.47
3. Economic Dislocation.
The Commission’s third countervailing consideration
was that “local economic dislocations” would in some
way affect the public interest. (FCC Br. at 26-27).
The Commission explains that the demand for equity
capital might lead to a reduction of working capital
available for programming, with a resultant possibility
of diminution in public affairs programming.48
This rationalization, however, also lacks a reasonable
or factual basis. The Court observed, for example, * 26
47The Commission’s inaccurate claims (FCC Br. at 24-
26) that it has not generally required divestiture upon adoption
of new ownership rules is answered supra, n. 10.
“ Channel Two notes references in the Commission’s opinion
for these statements (Channel Two Br. at 49, n. 79), as
does the Commission (Br. at 27). However, their references
to f f 57 and 77 of the Commission’s decision are to the
Commission’s summary of broadcasters’ allegations. The Commis
sion conclusions, however, were totally speculative: “Local eco
nomic dislocations are also possible as a result of the vast
demand for equity capital and widescale divestiture could in
crease interest rates and affect selling price too.” Second
Report, 50 F.C.C.2d at 1078, <1 108 (emphasis added). (A.
197). In fact, the Commission itself had elsewhere found that
the pessimism towards reduced selling prices “may be exagger
ated.” Id. at 1072, f 95 (A. 186).
•38
that the same concern for availability of capital would
be present in the case of voluntary transactions, which
the Commission does permit. NCCB, 555 F.2d at 965
(A. 425).
Furthermore, the Commission has heretofore taken
an approach to licensing directly contradictory to that
it now claims overrides diversity. Thus, in Alianza
Federal de Mercedes v. FCC, 539 F.2d 732, 737-
38 (D.C. Cir. 1976), the Court of Appeals affirmed
the Commission’s refusal to look at finances for pro
gramming as an element of the public interest. Unwilling
to look at renewal time to the amounts or percentages
of revenues a licensee reinvests into public service
programming, the Commission cannot turn around and
claim this same factor as overriding the diversity stand
ard.
Similarly, the Commission cannot look to the long
continuity of ownership by its newspaper cross-owners
and then suggest that they would lose money by selling
their licenses. These licensees have long ago recouped
their investments, will receive indefinite deferral on
capital gains taxes, 26 U.S.C. §1071 (1970), and
if they still cannot recoup a fair price, the Commission
will consider a waiver, 50 F.C.C.2d at 1085, f 119,
n. 46 (A. 211). Furthermore, while interest rates
could conceivably be increased by numerous divesti
tures, prices would be reduced. The Commission made
absolutely no factual evaluation of this question.
The petitioners admit that this criterion and the
local ownership factor “are of relatively peripheral im
portance” (Channel Two Br. at 49) and “ [not suffi
cient] in itself [to] outweigh the benefits possibly to
be derived from divestiture” (FCC Br. at 27). As
39—
we have demonstrated, they are also unsupported by
reason, the record, or law.49 50
4. Unfairness to Existing Licensees.
The Commission expresses, in addition, a concern
that it had earlier encouraged newspaper owners to
enter the field, that these licensees have in many cases
displayed good records of service, and that uprooting
them would work “an inherent hardship, quite apart
from any question of financial gain or loss.” (FCC
Br. at 27). The Commission refers to these factors
as “legitimate renewal expectancies,” which it now
claims, “should not be destroyed without good cause.”
Id.60
a. Divestiture Is Not Retroactive Rulemaking.
However, this approach to divestiture misapplies the
relevant law. A broadcaster has no vested right to its
“ Petitioners also appear to have abandoned any suggestion
that divestiture would be detrimental to co-located newspapers.
The argument was assessed by the Court at A. 425-26, and
by Commissioner Robinson at A. 311-13. Both concluded that
there is no record support for any such fears, and that if
there were a “failing newspaper,” waiver could be granted.
Furthermore, if newspaper support were a Commission concern,
there is no valid reason why a newspaper cannot be subsidized
by profits from a broadcasting station in another city or through
other investments made from the sale of the co-located facility.
50These factors are, of course, ones involving private inter
ests rather than the public interest. For example, the Commission
expresses concern for those newspaper owners who were allegedly
encouraged to start broadcast stations in their communities
by the Commission. But the fact of the matter is that these
broadcasters have benefited from obtaining the most powerful
frequencies in their cities which, if anything, warrant concern
in the context of this proceeding because of their strength
in preventing the entry of competitors. It should also be noted
that the Commission’s order extends this concern for the private
interest to even those licensees who must divest within five
years by shielding them from statutorily provided challenges.
See Second Report, 50 F.C.C.2d at 1088-89, 1! 130 (A. 218-
19).
- 4 0 -
license beyond its three-year term.51 Furthermore, the
same public interest criterion applies to both initial
and renewal applications. As this Court stated in Ash-
backer Radio Co. v. FCC, 326 U.S. 327, 332 (1945),
“licenses for broadcasting stations are limited to three
years, the renewals being subject to the same consid
erations and practice which affect the granting of orig
inal applications.”52
The courts have also held that an agency may adopt
rules of general applicability without having to hold
hearings on every application which such rules affect.53
And broadcast renewal applications are subject to rules
5147 U.S.C. §§301, 304, 307, 309(h) (1970) (A. 27-
31); FCC v. Sanders Bros. Radio Station, 309 U.S. 470 (1940).
Section 304, not reprinted in the Appendix, provides:
No station license shall be granted by the Commission
until the applicant therefor shall have signed a waiver
of any claim to the use of any particular frequency or
of the ether as against the regulatory power of the United
States because of the previous use of the same, whether
by license or otherwise.
Section 309(h) provides in pertinent part:
[E]ach license shall contain . . . a statement of the
following conditions to which such license shall be subject:
(1) The station license shall not vest in the licensee
any right in the use of the frequencies designated in the
license beyond the term thereof. . . .
52See also FCC v. Pottsville Broadcasting Co., 309 U.S.
134, 138 (1940) (“although investment in broadcasting stations
may be large, a license may not be issued for more than
three years”); Fed. Radio Comm’n v. Nelson Bros., 289 U.S.
266, 282 (1933); Citizens Communications Center v. FCC,
447 F.2d 1201, 1207 (D.C. Cir. 1971) (“the Communications
Act itself places the incumbent in the same position as an
initial applicant.” )
63FPC v. Texaco, 377 U.S. 33 (1964); United States v.
Storer Broadcasting Co., supra, n. 3; WBEN, Inc. v. United
States, 396 F.2d 601, 618 (2d Cir. 1968); California Citizens
Band Ass’n v. United States, 375 F.2d 43 (9th Cir.), cert,
denied, 389 U.S. 844 (1967); American Airlines, Inc. v. CAB,
359 F.2d 624 (D.C.Cir. 1966) (en banc).
in effect not when the initial grant was made, but
at the time of renewal.84
Thus, application of revised ownership rules to exist
ing licensees at the time of renewal is not a “retroactive
rule.”5 * * * 55 Had the Commission proceeded to revoke
— 4 1 -
5iE.g., Transcontinent Television Corp. v. FCC, 308 F.2d
339, 342 (D.C. Cir. 1962). See also the dissent in American
Airlines, Inc. v. CAB, supra, n. 53, where even the dissenting
judges agreed that the FCC, unlike the CAB, could act retro
actively because “the Communications Act of 1934, . . . [un
like the Civil Aeronautics Act of 1938] gives the FCC broad
powers to make frequencies available by rule amendment.”
359 F.2d at 635, n. 3 (Burger, J., dissenting).
5SThe extensive documentation by some petitioners and amici
of the ability of an agency not to apply a rule retroactively
is thus inapposite. In any event, the Court of Appeals here
reversed primarily on the Commission’s arbitrariness in the
manner it treated the issue, not that an agency must always
apply its rules retroactively. See Counterstatement, supra, Sec
tion C.
Channel Two and the Commission have also misconstrued
the case law. Both citing to, among other cases, South Terminal
Corp. v. EPA, 504 F.2d 646, 674 (1st Cir. 1974), they
claim that the courts have upheld “routine grandfathering”
(Channel Two Br. at 40, n. 60), and that the EPA has
refrained from applying “more stringent standards to existing
facilities.” (FCC Br. at 28).
In fact, however, the South Terminal Court held to the
contrary. At the cited page the Court affirmed a new air
quality plan for Boston, “ [p] ending opportunity to review the
proposed variance provision. . . .” Id. This is akin to a
requirement for waiver provisions. Furthermore, the Court went
on specifically to uphold the plan’s application of reduced
parking space requirements to a garage which was under con
struction on the date the plan was promulgated. In language
directly analogous in the context of the licensing scheme for
broadcasting, the Court of Appeals stated:
We do not see any “retroactivity” here. The regulations
do not penalize South Terminal for any conduct which,
when engaged in, was permitted. At most they abrogate,
for the future only, expectations South Terminal may have
acquired in the past. But all changes in the law dash
expectations when they make tomorrow’s rules different
from yesterday’s. . . . South Terminal, supra, 504 F.2d
at 678, quoted with approval in K. DAVIS, ADMINIS
TRATIVE LAW OF THE SEVENTIES, p. 166 (1976).
— 42-
all licenses not in accordance with its new standards,
the licensees would have a valid argument of retroactive
application. But here, licensees required to divest would
have an extensive five-year time period within which
to comply with the rules.
Certainly when the Commission changed its rules
and policies to require licensees to abide by new hours
for presunrise operation, for example, no licensee had
any ground to complain of retroactivity or of denial
of their rights to a hearing. WBEN, Inc. v. FCC,
supra, n. 53. The only difference is that the rules
here in issue look towards ownership of the license
itself, as opposed to modifications of the rules for
the times certain stations may broadcast.
b. Divestiture Is Not Severe or Harsh.
Congress has long recognized, however, that changes
in FCC ownership rules may require divestiture. Indeed,
in 1944 Congress amended the Internal Revenue Code
to foster such divestitures by means of tax certificates.
These certificates allow for deferred payment of capital
gains taxes on properties sold or exchanged to effectuate
a change in FCC ownership rules. 26 U.S.C. §1071
(Appendix herein). Thus, divestiture is at worst a spe
cial case which Congress has specifically approved of
and provided for in the context of FCC ownership rule
changes. This legislation, furthermore, diminishes any
view of the remedy as “severe” or “harsh.”
In fact, divestiture does not impose a forfeiture of
any kind on licensees. While a licensee is prohibited
by law from holding a property interest in its license,
many licenses are sold for great sums beyond the
tangible property value, basically on the value of having
a government enforced monopoly over a given fre
43-
quency in an assigned city.* 5 56 Moreover, waivers are
allowed if licensees cannot obtain “fair value” for their
facilities.57
In the past the Commission has not taken the view
that divestiture is “harsh” when it was required in
order to effectuate a change in ownership policies.
Indeed, while there are some exceptions, the Commis
sion has usually adopted a divestiture requirement in
such circumstances.58 Most often when the Commis
sion has grandfathered, it has served the purpose
of continuing a certain level of service or of diversity.59
Finally, the divestiture remedy is commonly employed
for concentrations of control in antitrust cases. United
States v. E. I. DuPont de Nemours & Co., 366 U.S.
316, 326-35 and nn. 11-13 (1961).
seSee, e.g., “WMAL-TV Fetches $100 Million, Trading Rec
ord,” Broadcasting Magazine, supra, n. 39, describing sale of
one television station for approximately $100,000,000. Under
recent FCC orders, licensees currently pay no fees to the govern
ment for use of the frequency. Public Notice, FCC-1197, De
cember 23, 1976.
67Second Report, 50 F.C,C.2d at 1085, ^ 119 and n. 46
(A. 211).
5S$ee list of Commission ordered divestitures, supra at n. 10.
This disproves the Commission’s argument at p. 28 of its
Brief that it has usually and routinely grandfathered licensees in
adopting multiple ownership rules.
59Thus, the Commission’s list of instances where it has
grandfathered (FCC Br. at 28) includes allowing CATV to
continue importation of distant signals, CATV Rules, 2 F.C.C.
2d 725, 785 (1966) and 36 F.C.C.2d 143 (1972), and allowing
radio stations to continue to serve certain areas. However,
the grandfathering there was to allow the audience to keep
the diversity of signals they already had. E.g., CATV Rules,
supra.
Requiring divestiture, on the other hand, would simply replace
one owner with another, the latter presumably to provide the
community with a greater diversity of expression. The Com
mission, furthermore, has specifically found that any small
superiority in past broadcast service by newspaper owners “was
(This footnote is continued on next page)
5. Best Practicable Service.
Furthermore, the Commission’s concern with “best
practicable service,” (FCC Br. at 5, 23-24) is misplaced
insofar as it fails to consider diversity. Diversity, the
Commission has recently pointed out, is one element
of the general goal of “best practicable service” even
in renewal proceedings.60 Moreover, when the Com
mission has in the past weighed diversity against the
best practicable service in a non-renewal situation, diver
sity has prevailed. Terre Haute Broadcasting Corp.,
25 F.C.C.2d 348 (1970). For instance, in McClatchy
Broadcasting Co. v. FCC, supra, n. 21, the Commission
preferred the applicant serving the diversification goal
— 44—
in no way shown to be a result of the fact of owning a
newspaper, but rather could just as well be explained in terms
of journalistic tradition and pioneering broadcast operations.”
Reconsideration, supra, 53 F.C.C.2d at 592 (A. 324).
60As the Commission stated, in discussing an earlier Policy
Statement on Comparative Hearings Involving Regular Renewal
Applicants, 22 F,C.C.2d 424, recon. denied, 24 F.C.C.2d 383
(1970), rev’d sub nom. Citizens Communications Center, supra,
n. 4:
Under this policy, consideration of the characteristics nor
mally explored in a comparative hearing involving new appli
cants, i.e., diversification of the media . . . as well as
other elements of the “best practicable service” objective
[citing the 1965 Policy Statement, supra] would not be
necessary [where a licensee’s past operation was solid].
Policies Relating to the Broadcast Renewal Applicant, Stemming
from the Comparative Hearing Process, 40 P. & F. Radio
Reg. 2d 763, 765 f 4 (1977), appeal pending sub nom. National
Black Media Coalition v. FCC, D.C. Cir. No. 77-1500.
NCCB cites this as the most recent Commission statement
on this issue, although it would appear that this characterization
is not completely consistent with past cases. Nevertheless, it
is logical that if diversity is a primary goal, it would in fact
be one element in any determination of the best practicable
service. It is certainly preferable, as a content neutral measure
ment, to any governmental attempts to delve into the content
of particular programs, although the latter may be necessary
in extreme cases. E.g., Office of Communication of the United
Church of Christ v. FCC, 359 F.2d 994 (D.C. Cir. 1966).
— 4 5 -
over a competing applicant who was superior in all
other comparative criteria.
These decisions are consistent, moreover, with the
1965 Policy Statement, supra, where the Commission
considered diversification the single most significant
factor in selecting a licensee, while “past broadcast
record” is only sixth in importance. Surely here, in
the context of a rulemaking, diversification should take
precedence over local economic dislocations, local own
ership (without regard to whether the owners are inte
grated into management), “continuity of service” and
the private interests of certain licensees.
* * *
In sum, then, the Court of Appeals correctly found
that the evidence did not support the Commission’s
grounds, that the grounds were unreasonable, and that
the Commission failed to apply its own statutory and
administrative presumption in favor of diversity to the
hard facts before it.
III.
THE COMMISSION’S STANDARDS FOR DIVESTITURE
AND FOR AD HOC CHALLENGE ARE IRRATIONAL.
The Court of Appeals, in summarizing its decision,
stated the effect of the Commission’s rule as follows:
[T]he lines thus drawn between future and present
co-located combinations and between the 16 egre
gious cases [that must divest] and all other present
co-located combinations were arbitrary and capri
cious.
NCCB Order on Motion for Stay of Mandate, 555
F.2d at 968-69 (A. 440).
The Court thus found the two lines, drawn among
the three groups, irrational. The first line—that of
4 6 -
distinguishing between future and existing licensees—
has been addressed in the previous section. The Com
mission did not have a rational basis for preferring
certain lesser policy criteria over the Commission’s
strong interest in diversification.
The second Line—that of differentiating among exist
ing licensees—is perhaps more complex because it in
volves two separate criteria. The first is that criterion
for placing existing licensees in the divestiture category,
or, to, in effect, treat existing cross-ownerships like
future ones. As we explain below, the Commission used
an “effective monopoly” standard here.
The second aspect of this line is the standard for
considering whether any remaining licensee not required
to divest under the “effective monopoly” standard (“the
egregious 16”) should also be placed in the divestiture
category. This is the so-called ad hoc standard, and
it too was arbitrary and capricious.
Generally both the divestiture standard and the ad
hoc standard suffer from the irrationality of the Com
mission’s failure to relate the standards to the underly
ing purposes of the rule in issue.
A. The Standard for Divestiture.
The Commission imposed divestiture in 16 “egre
gious” cases of what the Commission described as
“effective monopolies.” Second Report, 50 F.C.C.2d
at 1081 (A. 203). Yet its standard for selecting such
effective monopolies did not use Sherman Act or other
monopoly definitions but rather a diversity-based stand
ard. Licensees were exempt unless there were no other
incoming signals in that broadcasting service of city-
grade strength.
-—47-
The Commission’s “one incoming signal” standard,
which, if met, places a concentrated licensee in the
more favored class,91 immediately exempts cross-own
ers in every medium-sized and large market in the
country. Yet, under various criteria measuring concen
tration of control, certain licensees required to divest
are not as concentrated as some who are grandfathered.
Compare, e.g., Albany, Georgia with Elkhart, Indiana
in RAND’s “Concentration Indices.” (A. 979). And,
if diversity is truly the Commission’s goal, it has not
accounted for its finding from the record in Chronicle
Broadcasting Co., 40 F.C.C.2d 775, 782 (1973) that
10% of the population of the San Francisco metropoli
tan market, or over 400,000 people, receive their news
exclusively from the now grandfathered Chronicle out
lets.
The approach is quite clearly irrational. Reason
would dictate that in setting a per se standard for
divestiture by “effective monopolies,” the Commission
might resort to a Sherman Act or other antitrust-
type standard.62 Further, in setting a standard for * 83
61The Commission has recently ruled that all grandfathered
licensees will have the benefits of tax deferral when they do
divest, even 20 years from now, by declaring that its tax
certificate policy will no longer require a causal connection
(such as a three-year time period) between the adoption of
the Commission’s new ownership policy and the sale or exchange
“appropriate” to effectuate such a rule change. Tax Certifi
cation Policy, 59 F.C.C.2d 91 (1976), petition for reconsidera
tion pending.
83(Jnder the Sherman Act, 75% concentration has been
held to be prima facie monopoly, United States v. E. I. DuPont
de Nemours & Co., 351 U.S. 377, 391 (1956). The Commis
sion, however, has grandfathered many licensees who control such
an extensive share of the market. The Commission sought
to restrict “monopolies,” but did not take into account what
constituted a monopoly under the antitrust laws. Ironically, it
did apply a strict antitrust standard where it should have used
a diversity-based standard.
• 4 8 -
ad hoc challenge, the Commission would rationally
continue to take a diversity-based approach towards
concentration, allowing parties to plead facts which
meet the underlying bases for the rules.83 Regardless
of what the numbers may be,63 64 a reasonable rule
short of across-the-board divestiture would have to be
similarly designed.
B. The Ad Hoc Standard.
In describing the Commission’s action with respect
to existing licensees, the parties speak generally in
terms of grandfathering those interests. The Commis
sion, however, did not simply grandfather. Rather, it
entrenched those licensees into their concentrated posi
tions by adopting a stricter, near impossible standard
for ad hoc challenges to those licenses based on undue
concentration of control grounds. NCCB, 555 F.2d
at 968-69 (A. 440) (“challenges to renewal of
. . . [grandfathered] stations’ licenses would have
to meet tougher threshold requirements.”)
In a brief passage in the Second Report, the Commis
sion held that
63The multiple ownership rules, at one point, provide that
a license shall be granted if it would result in a concentration
of control of broadcasting contrary to the public interest. Al
though the rule goes to the national limit of stations, the
Commission’s “considerations . . . to the facts of each case”
are instructive here. They include “the size, extent and location
of areas served, the number of people served, classes of stations
involved and the extent of other competitive service to the
areas in question.” 47 C.F.R. §§73.35(b), 73.240(a)(2),
73.636(a)(2) (1976) (A. 243-44, 250-51, 257-58).
64NCCB suggested that 30% concentration warrant per se
divestiture, and 20%-30% prima facie concentration. (A. 840).
Commissioner Robinson adopted a similar standard (A. 278),
and the Court of Appeals contemplated that this kind of ap
proach was possible on remand. (A. 393, n. 53).
[Ajbsent a showing of economic monopolization
that might warrant actions under the Sherman
Act, it would not be our view that [petitions
to deny renewals based on questions of undue
concentrations of control] . . . would raise valid
issues necessitating the designation of renewal ap
plications for hearing.
Id., 50 F.C.C.2d at 1088, f 130 (A. 218). The Com
mission gave no indication of its reasoning for adopting
this standard, and the Court of Appeals found that
the Commission “without reasoned discussion,” had
“abandoned its former policy of allowing petitioners to
deny the opportunity to demonstrate in any one of
several ways that cross-ownership harms the public in
terest.” NCCB, 555 F.2d at 966, n. 108 (A. 428).* 47 * * * * * * * S5 * * * * * * * *
The Court pointed out that “ [tjhe Commission’s deci
sion to substitute an antitrust standard for this open-
ended test is inconsistent with the Order’s emphasis on
First Amendment considerations,” and that this “unrea
sonably curtails the interests of petitioners to deny.” Id.
6BThe Commission’s previous policy was to consider charges
of undue concentration of control in various manners. See
47 C.F.R. §§73.35(b), 73.240(a)(2), 73.636(a)(2)(1970).
In the renewal context the Commission had designated separate
hearing issues on undue structural concentration, absent abuses
or monopolization in, for example, Frontier Broadcasting Co.,
supra, n. 13 (Cheyenne, Wyoming); Midwest Radio-Television,
Inc., 16 F.C.C.2d 943, 18 F.C.C.2d 1011 (1969), later deferred
to Docket 18110, 24 F.C.C.2d 625, 626-28 (1970) (Minne-
apolis-St. Paul); Chronicle Broadcasting Co., 16 F.C.C.2d 882
(1969) (San Francisco) later deferred to Docket 18110, 40
F.C,C.2d 775, 796 (1973). In other contexts the Commission
also found undue structural concentration to raise public interest
questions. E.g., Transfers: Jonquil Broadcasting Co., 21 F.C.C.
2d 178 (1970); Gale Broadcasting Co., 15 P.&F. Radio Reg.
2d 337 (1969); Miami Broadcasting Co., 1 P.&F. Radio Reg.
2d 43 (1963); Initial applications: Lee Enterprises, Inc., 18
F.C.C.2d 684 (1969); American Television Co., 12 F.C.C.2d
518 (1968).
— 50—
(A. 429). The Court noted, in passing on the reason
ableness of the Commission’s action, that the Commis
sion had based its grandfather rule on the fact that
the record did not contain evidence documenting the
harmful nature of cross-ownership. If the grandfather
policy had been supportable at all, the Court observed,
the Commission should have encouraged “showings of
harm in individual markets rather than effectively to
prohibit it.” Id. (A. 428-29).
Moreover, the Court found that the right granted
by the Commission was as a practical matter a right
foreclosed. In the first case where such issues were
presented, the Commission backed away from its new
standards, claiming it had neither the “expertise” nor
“experience” to enforce antitrust laws and, moreover,
that it believed to do so would be “inappropriate.”
WGAL-Television, Inc., supra, n. 17, 62 F.C.C.2d
at 531 (1976). Quite clearly, the Commission, in
adopting its “grandfather rule” has made it impossible
for “safety valve” procedures to be employed in deter
mining whether the purposes of the rule would better
be served by its non-application. See United States
v. Storer Broadcasting Corp., supra.™
Additionally, the Commission’s ad hoc Sherman Act
standard does not fully relate to the underlying purposes 66
66As Judge Leventhal observed in W AIT Radio v. FCC,
418 F.2d 1153, 1157 (D.C. Cir. 1969):
The agency’s discretion to proceed in difficult areas through
general rules is intimately linked to the existence of a
safety valve procedure. . . . That an agency may discharge
its responsibilities by promulgating rules of general appli
cation . . . does not relieve it of its obligation to seek
out the “public interest” in particular individualized cases.
■51
of the rules. It neither takes the goal of diversity
into account,67 nor does it sufficiently allow for full
exploration of the competitive aspect of the rule, short
of “economic monopolization.”68 Thus, the Commis
sion does not consider extreme concentration, short of
an intent to monopolize,69 and it appears from subse
quent cases to be unable even to apply its own standard.
The seriousness of the Commission’s lack of reason
able standards is best demonstrated by the facts pre
sented in the WGAL case, where the Commission
refused to examine the competitive issues, WGAL-Tele-
vision, Inc., 62 F.C.C.2d 527 (1976). In that case,
petitioners alleged that one family had owned a monop
oly in Lancaster, Pennsylvania, of the daily and Sunday
newspapers, the only VHF station in the region, two
radio stations, and the city’s only cable system. They
estimated that this family controlled 89% of local
advertising revenues and, among other things, that the
daily newspaper carried only television listings of its
own station. The licensee had been grandfathered be
67Thus, in McPherson Broadcasting, Inc., 54 F.C.C.2d 565,
566 (1975), where the licensee was the owner of the only
newspaper and only radio stations assigned to McPherson, Kan
sas, but the city received signals from neighboring Salina, the
Commission refused to consider evidence of 22.4% verbatim
overlap of local news stories between the commonly owned
newspaper and radio station, stating, “Here petitioners have
failed to allege specific facts which might warrant action under
the antitrust laws of the United States.” Id.
e8See, e.g., Newhouse Broadcasting Corp., supra, n. 32.
69The Commission has stated that if a grandfathered licensee
later meets the standard for divestiture—that is, where the
only competing signal has been withdrawn from the market
for some reason-—it will not later require divestiture. Reconsid
eration, supra, 53 F.C.C.2d at 590-91 (A. 320).
- 52-
cause a UHF station, assigned to Lebanon-Lancaster,
technically placed a city-grade signal over the city,
although petitioners submitted affidavits from local resi
dents that they could not receive an adequate signal
without subscribing to the licensee’s cable system, and
over 15,000 residents did not have UHF receivers.
Although the Commission did designate WGAL’s
application for hearing, it narrowly limited the issue
to a determination of facts and circumstances surround
ing three specific abuses, id., 62 F.C.C.2d at 535,
declining to look into “economic monopolization,” id.,
62 F.C.C.2d at 532, n. 11. The Commission stated:
The Commission has neither the expertise nor
the statutory authority to enforce the antitrust
laws in its regulation of the broadcast industry.
In our view, enforcement of the Sherman Act
and similar statutes rests properly with other fed
eral agencies entrusted with the expertise and juris
diction over these matters. Id., 62 F.C.C.2d at
531.
The Commission also ignored the petitioners’ request
for special relief from the grandfather rule, looking
towards divestiture as a remedy instead of looking
only to license forfeitures.70
The Commission’s emphasis on economics in the
ad hoc standard is all the more puzzling in view
of its sole reliance on the diversity standard for deter
70In Frontier Broadcasting, supra, n. 13, the Commission
contemplated in a renewal proceeding that an undue concentra
tion of control finding might warrant the remedy of divestiture.
However, the Commission’s ad hoc standard adopted in Docket
18110 does not contemplate divestitures as a remedy. Cf. Effing
ham Broadcasting Co., 51 F.C.C.2d 453, 457 (1975) (ad
hoc standard, if met, would have merited renewal hearing for
licensee already required to divest).
—53
mining which licensees would be required to divest.
There, the Commission rejected an antitrust approach,
stating that its concern was “diversity in ownership
as a means of enhancing diversity in programming
service to the public.” Second Report, 50 F.C.C.2d
at 1079, f 110 (A. 199).
IV.
A REVIEWING COURT MAY INSTRUCT AN AGENCY
ON REMAND WHERE FAIRNESS AND THE PUBLIC
INTEREST SO DICTATE.
This Court has previously struck down arbitrary
grandfather clauses.71 A fortiori it should affirm
71Grandfathering began as attempts by some States to disen
franchise black voters by imposing a strict literacy requirement
to vote, exempting all those whose relatives voted prior to
1866. They were found contrary to the Fifteenth Amendment.
Guinn v. United States, 238 U.S. 347 (1914). Claiming a
state interest in having a well-informed electorate, Oklahoma
had exempted most of the population from its literacy test
in order to favor white voters.
Similarly, claiming the need to promote the public’s First
Amendment interest in diverse information sources, and to pro
tect the public from concentrations of control over the media,
the Commission has arbitrarily exempted many of the nation’s
large population centers from the benefits of that policy, instead
designing a rule to favor the established interests.
Nor may the Commission be presumed in good faith here.
As the Court of Appeals once warned, “Our experience with
the problem of grandfathering in the communications industry
has been such that I am unwilling to accept blithely the Com
mission’s assurances of good intentions.” Pikes Peak Broadcasting
v. FCC, 422 F.2d 671, 685 (D.C. Cir. 1969) (Bazelon, C.J.,
concurring).
The Court in United States v. Maher, 307 U.S. 148 (1939),
cited by petitioners (FCC Br. at 29; NAB Br. at 44, 46;
Channel Two Br. at 42) simply reviewed whether the Interstate
Commerce Commission properly found that the petitioner did
not fall within the grandfather clause of the Motor Carrier
Act. It did not prohibit a court from overturning an irrational
grandfather clause.
(This footnote is continued on next page)
-54—
the lower court’s reversal of an arbitrary system which
not only grandfathers, but irrationally shields concen
trated licensees from equitable enforcement of the public
interest standard of the Communications Act.
The petitioners argue that the Commission, like other
agencies, should be allowed discretion to determine
whether or not to apply a new rule to existing li
censees. But this begs the question. The Commission
decided to require some licensees to divest; the Com
mission’s authority to impose divestiture requirements
is by now beyond question;72 and the issue then
becomes simply whether the grandfather exception
which swallowed the rule is arbitrary and capricious.
Even if divestiture were regarded as retroactive, de
spite the three-year license limitation contained in the
Communications Act,73 the NAB can hardly complain
of a Court of Appeals reversal of the FCC’s failure
to apply a rule or decision retroactively. In National
Ass’n of Broadcasters v. FCC, 554 F.2d 1118 (D.C.
Cir. 1976), the Court required the Commission to
apply National Cable Television Ass’n v. United States,
415 U.S. 336 (1974), retroactively, and refund excess
fees collected under an improper fee schedule.
New Orleans v. Dukes, A ll U.S. 297 (1974), affirming
a grandfather clause over a Fourteenth Amendment equal pro
tection challenge, looked to whether the remedy in question
was reasonably related to the goal of the ordinance. Here
the Court of Appeals correctly found that the Commission had
no record support or rational basis for the distinctions in its
remedies. As we have shown, the grandfathering is not reasonably
related to the goals of the rule.
72General Telephone Co. of the Southwest v. FCC, supra,
n. 4; Metropolitan Television Corp. v. FCC, supra, n. 10.
7347 U.S.C. §§301, 304, 307, 309(h) (1970). The First
Circuit has held that application of new environmental standards
to a parking lot already under construction is not retroactive
rulemaking. South Terminal Corp. v. EPA, supra, n. 55.
— 55—
As Judge McKinnon wrote in NAB, “The general
rule of long-standing is that judicial precedents normally
have retroactive as well as prospective effect.” Id.,
554 F.2d at 1130. The NAB Court later expands,
quoting from B. J. MOORE, FEDERAL PRACTICE
at 0.402 [3.-2-2] (1974), that “consistency in the ad
ministration of justice is a desirable goal, to be pursued
in the absence of compelling circumstances justifying
another result.” Id. at 1131. The NAB Court went on to
apply this reasoning to the FCC’s fee schedule rules.
In analyzing the normal bases for applying a decision
prospectively only, the Court considered the factors
of “ (1) the extent of justifiable reliance upon the
rejected precedent or rule; (2) the purpose of the
newly announced rule; (3) the degree of finality
. . . and (4) the element of surprise.” Id., 554 F.2d
at 1132.
Here, the purpose of the newly announced rule is
to promote diversity throughout the country. It should
apply to those concentrations of control in existence
now as well as those in the future. Further, newspaper
owners cannot now claim surprise at the implementation
by rule of a policy which has been applied on an
ad hoc basis for decades, nor can they claim that
“justifiable reliance” or “degree of finality” is properly
weighed on the side of entities which are entitled
to no more than a three-year license. Simply, the NAB
case is analogous to the instant one, and supports
the Court’s decision below.
Similarly, this Court in Addison v. Holly Hill Co.,
322 U.S. 607 (1944) ordered an administrator of
the Fair Labor Standards Act to prepare a new regula
tion to be applied retroactively. Justice Frankfurter
stated, for the Court,
— 56—
[A] gainst retroactivity we balanced the considera
tions that made retroactivity the lesser evil.
In short, the judicial process is not without the
resources of flexibility in shaping its remedies,
though courts from time to time fail to avail
themselves of them. The interplay between law
and equity . . . has properly been drawn upon
in working out accommodating relationships be
tween the judiciary and administrative agencies.
And certainly in specific cases . . . it is consonant
with judicial administration and fairness not to be
balked by the undesirability of retroactive action.
Id., 322 U.S. at 622. See also SEC v. Chenery Carp.,
332 U.S. 194, 202 (1947) (upholding retroactive agen
cy rule). Cf. Williams v. Washington Metropolitan
Area Transit Commission, 415 F.2d 922, 943 (D.C.
Cir. 1968) (en banc), cert, denied, 393 U.S. 1081
(1969) (Court ordered refund of transit fares collected
under invalid fare structure).
There are other examples of strong judicial orders
where the agency loses sight of its purpose. In Office
of Communication of the United Church of Christ
v. FCC, 425 F.2d 543 (D.C. Cir. 1969), for example,
the Court of Appeals found a renewal hearing beyond
repair and itself lifted the license, allowing the renewal
applicant to reapply on an equal footing with competi
tors. The point in that case, NAB, Addison, and Chen
ery is that the public interest prevails. And here the
Commission simply lost sight of the public when looking
at the powerful licensees it must regulate.74
74As Judge Friendly has characterized the propriety of orders
such as the one here under review, “There are those cases
where, although the Court speaks of inadequate findings, the
- 57-
While the Court of Appeals had the authority to
require the Commission to adopt an equitable rule,
the Court did not go so far as the petitioners, in
their zeal for reversal, indicate. The Court of Appeals
simply ordered the agency to act rationally and con
sistently with its authorizing statute, and its own poli
cies. It therefore did not, as petitioners argue (e.g.,
FCC Br. at 37; Dispatch Printing Co. Br. at 19),
usurp the role of weighing competing factors. Instead,
it required the Commission to act reasonably in applying
its own standards, and to explain its departure from
prior norms in the relative weights accorded diversity
and the other lesser factors the Commission considered.
See Secretary of Agriculture v. United States, 347
U.S. 645, 653 (1954).
Finally, the Court of Appeals left the Commission
with discretion as to the particular form any rule
on remand would take.75
CONCLUSION.
The paramount principles involved in this case,
NCCB suggests, were summed up almost ten years
ago when the Court of Appeals stated in Joseph v.
FCC, 404 F.2d 207, 211-12 (D.C. Cir. 1968):
The public welfare requires the Commission to
provide the “widest possible dissemination of infor
real trouble is that the agency has misconstrued the statute.
Here there must be reversal and usually a direction rather
than a discretionary remand.” H. Friendly. Chenery Revisited:
Reflections on Reversal and Remand of Administrative Orders,
1969 DUKEL.J. 199, 223 (1969).
75This is evidenced by the Court’s recognition at n. 53
(A. 393) that the Commission might “adopt on remand a
policy of requiring divestiture where combinations have over
30% of the market. . . .” This is hardly a statement which
could be made by a court ordering divestiture of all co-located
combinations.
— 58—
mation from diverse and antagonistic sources” and
to guard against undue concentration of control
of communications power.
* * *
[A]n agency may change its standards prospective
ly, though that power is not in derogation of
the duty to change them retrospectively when that
better furthers the overall public interest.
For the foregoing reasons, Respondent NCCB re
spectfully requests this Court to reinstate the decision
of the Court of Appeals and to affirm its judgment.
Respectfully submitted,
C h arles M. F ir e s t o n e ,
E dward J. K u h l m a n n ,
N olan A . B o w ie ,
Attorneys for Respondent.
December 20, 1977
Counsel wish to acknowledge the research work of UCLA
law students Ms. Fern Kaplan and Ms. Linda J. Lacey.
APPENDIX.
26 U.S.C. § 1071(a) (1970):
§ 1071. Gain from sale or exchange to effectuate
policies of F.C.C.
(a) Nonrecognition of gain or loss.— If the sale
or exchange of property (including stock in a corpora
tion) is certified by the Federal Communications Com
mission to be necessary or appropriate to effectuate
a change in a policy of, or the adoption of a new
policy by, the Commission with respect to the ownership
and control of radio broadcasting stations, such sale
or exchange shall, if the taxpayer so elects, be treated
as an involuntary conversion of such property within
the meaning of section 1033. For purposes of such
section as made applicable by the provisions of this
section, stock of a corporation operating a radio broad
casting station, whether or not representing control
of such corporation, shall be treated as property similar
or related in service or use to the property so converted.
The part of the gain, if any, on such sale or exchange
to which section 1033 is not applied shall nevertheless
not be recognized, if the taxpayer so elects, to the
extent that it is applied to reduce the basis for determin
ing gain or loss on sale or exchange of property,
of a character subject to the allowance for depreciation
under section 167, remaining in the hands of the tax
payer immediately after the sale or exchange, or ac
quired in the same taxable year. The manner and
amount of such reduction shall be determined under
regulations prescribed by the Secretary or his delegate.
Any election made by the taxpayer under this section
shall be made by a statement to that effect in his
return for the taxable year in which the sale or exchange
takes place, and such election shall be binding for
the taxable year and all subsequent taxable years.
Service of the within and receipt of a copy
thereof is hereby admitted th is.................... day
of December, A.D. 1977.