White Mountain Broadcasting Co., Inc. v. F. C. C.

• Decision Date: 30 May 1979
• Docket Number: No. 76-2009,76-2009
• Citation: 194 U.S.App.D.C. 355,598 F.2d 274
• Parties: WHITE MOUNTAIN BROADCASTING CO., INC., Appellant, v. FEDERAL COMMUNICATIONS COMMISSION, Appellee.
• Court: U.S. Court of Appeals — District of Columbia Circuit

Page 274

598 F.2d 274

194 U.S.App.D.C. 355

WHITE MOUNTAIN BROADCASTING CO., INC., Appellant, v. FEDERAL COMMUNICATIONS COMMISSION, Appellee.

No. 76-2009.

United States Court of Appeals, District of Columbia Circuit.

Argued Oct. 3, 1978.

Decided April 9, 1979.

Rehearing Denied May 30, 1979.

Jerome S. Boros, Alan B. Kaufman, New York City, was on brief, for appellant.

Thomas R. King, Jr., Robert R. Bruce, Gen. Counsel, Daniel M. Armstrong, Associate Gen. Counsel, and Julian R. Rush, Jr., Counsel, were on brief, Werner K. Hartenberger, Washington, D.C., for F.C.C.

Before LEVENTHAL and ROBINSON, Circuit Judges and HAROLD H. GREENE, ^* United States District Court Judge for the District of Columbia.

Opinion for the Court filed by HAROLD H. GREENE, District Judge.

HAROLD H. GREENE, District Judge:

This is an appeal pursuant to section 402(b) of the Communications Act of 1934, 47 U.S.C. § 402(b), from a decision of the Federal Communications Commission denying the application of appellant, White Mountain Broadcasting Co., for a renewal of its license for two radio stations in Berlin, New Hampshire. ¹ White Mountain Broadcasting Inc., 60 F.C.C.2d 342 (July 12, 1976), Recon. denied, 61 F.C.C.2d 472 (October 12, 1976). The Commission's action was based upon a finding that appellant had engaged in double or fraudulent billing, with the knowing participation of one Robert Powell its president, treasurer, director and sole shareholder. The issue to be decided is whether the Commission improperly failed to distinguish its action here from contrary results reached in what are claimed to be similar cases. For the reasons stated below, we hold that it did not.

I

Double billing is the "furnishing of false information concerning broadcast advertising to any party contributing to the payment of such advertising, the purpose being to induce such party to pay more than the actual rate for the advertising." Fraudulent Billing Practices, 1 F.C.C.2d 1068 (1965). The Commission has condemned this practice as "amounting to the use of broadcast facilities for fraudulent purposes, reflect(ing) adversely on the qualifications of a licensee and, to a degree on the industry as a whole," and impacting adversely upon the public interest, convenience, and necessity which demand "reasonably ethical business practices in the industry," Fraudulent Billing Practices, 23 F.C.C.2d 70, 71 (1970), ² and it has promulgated a rule which expressly prohibits a licensee from engaging or participating in double billing. ³

The record before the Commission in this case showed that White Mountain had engaged in double billing for the approximately five and one half-year period from February 1969 until August 1974. Essentially, appellant's custom was to send to its local advertisers two separate bills one for the true cost and quantity of their advertising, and the other for an inflated amount which the local advertiser would forward to its national supplier or manufacturer as a basis for obtaining reimbursement pursuant to a cooperative advertising agreement. Although Powell became aware of this practice just after he acquired the radio stations in 1969, ⁴ and while at various times he considered a phase-out, he never actually took action to that end. On the contrary, he allowed new accounts to be initiated into the double billing scheme, and the practice continued until its discovery by a Commission investigation.

Powell conceded that he knew of the FCC's prohibition against double billing and he was aware of the risk that it might result in the loss of his stations' licenses; he only claimed that in view of the competitive market the elimination of double billing would have meant a loss of business. ⁵

In April 1975, the Commission designated the matter for an adjudicatory hearing pursuant to section 309(e) of the Communications Act of 1934, 47 U.S.C. § 309(e). After two days of hearings and the submission of briefs and evidence, the Administrative Law Judge made findings of fraudulent conduct, knowing violations of Commission rules, and the absence of mitigating or compassionate circumstances. See White Mountain Broadcasting Co., Inc. (Initial Decision), FCC 76D-10 (January 29, 1976). He did not, however, recommend the denial of White Mountain's application for license renewal, but limited his sanction recommendations to the grant of a one-year renewal conditioned upon restitution of the double billing overcharges, and a forfeiture in the amount of $10,000.

On appeal, the Commission traced the history of its double billing policy ⁶ and reaffirmed the principle that fraudulent conduct by licensees is neither excused nor mitigated by the knowledge or acquiescence of cooperative advertisers. See White Mountain Broadcasting, Inc., 60 F.C.C.2d 342 (1976). Emphasizing the seriousness with which it viewed the violations in light of its repeated public warnings and rulemakings on double billing, the Commission concluded that the appropriate sanction was to deny White Mountain's application for renewal of the license. ⁷ Appellant's motion for reconsideration on the ground that Powell neither knew of nor condoned the double billing was denied as without record support. This appeal followed.

II

The principal issue before the court ⁸ is appellant's contention that the Commission failed in the obligation, first explicitly imposed upon it by Melody Music, Inc. v. Federal Communications Commission, 120 U.S.App.D.C. 241, 345 F.2d 730 (1965), ⁹ to explain its reasons for departing from prior precedents and, where it relies on factual differences with such precedents, to explain the relevance of the differences to the Commission's purposes and those of the Federal Communications Act. Specifically, appellant claims that other licensees whose conduct posed a greater threat to the public interest than the double billing practices found to exist in this case have been granted renewal, and that the Commission has failed to provide a rationale for the difference in treatment.

The Commission argues initially that since this contention was not raised at any stage of the administrative proceedings, the matter is not properly before the court. Alianza Federal De Mercedes v. Federal Communications Commission, 176 U.S.App.D.C. 253, 539 F.2d 732 (1976). However, the doctrine of exhaustion of administrative remedies is not absolute, ¹⁰ and insofar as appellant's difference-in-treatment argument is based primarily upon a determination made after the instant controversy had run its administrative course, it is appropriate for the court to consider the issue.

In Melody Music, Inc., supra, this court examined the Commission's decision not to renew the broadcast license of a Hollywood, Florida radio station whose sole shareholders had engaged in the deceptive practice of giving covert assistance to contestants on a network quiz show. The Commission found that the prolonged deception of the viewing public was contrary to the public interest, ¹¹ and that accordingly the station owners lacked the requisite character qualifications for a license. At the same time, although the National Broadcasting Company had participated in these quiz shows, turned its back on evidence that they might be counterfeit, and acted only when compelled to do so by outside factors, the NBC network stations had been granted license renewals without as much as a reference to the network's role in the episode. ¹²

Faced with these disparate results, this court held that the Commission was required at a minimum to explain the difference between the treatment meted out to the Hollywood station and that accorded the network station license holders. We also noted that, while in other instances the FCC had granted renewals to licensees guilty of criminal violations of the antitrust laws, in the Hollywood case the agency found non-criminal conduct to be a sufficient basis for a failure to renew a difference in treatment which was likewise held to call for an explanation in terms of its relevance to the purposes of the Federal Communications Act. Then, significantly in terms of the instant appeal, the court went on to state that, since the differences in the misconduct at issue were not "so 'obvious' as to remove the need for explanation," the case would have to be remanded to the Commission for further proceedings. ¹³

Thus, in terms of the Melody Music precedent, which we regard as sound and reaffirm today, the issue here is whether the differences between the conduct of White Mountain Broadcasting, whose license was not renewed, and that of others who were not denied renewals, are "so obvious as to remove the need for explanation." We hold that they are.

III

Appellant claims that the Commission's license renewal to stations owned by the Columbia Broadcasting System in CBS, Inc., 69 F.C.C.2d 1082 (1978), and the contemporaneous denial of its application for renewal, constitutes the kind of disparate treatment which calls for an explanation under Melody Music. ¹⁴ It thus becomes necessary to examine the facts and the Commission's actions in the CBS proceeding.

In February 1975, the CBS television network broadcast the first of a series of four tennis matches, extensively advertised as being played for $250,000 "winner-take-all." In fact, all of the participants received prize monies in various amounts depending upon their general standing and reputation as tennis professionals rather than upon their winning or losing the particular televised tournament. ¹⁵ After conducting its own investigation, and after giving due consideration to the so-called "Lane-Black report" (an investigation by outside counsel) and a House of Representatives subcommittee investigation, the FCC determined that "prize" references made by CBS in connection with the matches were false and misleading, and that, at a minimum, CBS officials demonstrated a pattern of negligent conduct coupled with an apparent disregard for known facts....