Health and Medicine Policy Research Group v. F.C.C.

Decision Date08 January 1987
Docket NumberNo. 85-1837,85-1837
Citation807 F.2d 1038,257 U.S.App.D.C. 123
PartiesHEALTH AND MEDICINE POLICY RESEARCH GROUP, et al., Appellants, v. FEDERAL COMMUNICATIONS COMMISSION, Appellee, Metromedia Radio & Television, Inc., Fox Television Stations, Inc., Intervenors.
CourtU.S. Court of Appeals — District of Columbia Circuit

Andrew Jay Schwartzman, with whom David W. Danner, Washington, D.C., was on the brief, for appellants.

David Silberman, Counsel, F.C.C., with whom Jack D. Smith, General Counsel, and Daniel M. Armstrong, Associate General Counsel, F.C.C., Washington, D.C., were on the brief, for appellee.

Howard M. Squadron, New York City, of the Bar of the United States Supreme Court, pro hac vice by special leave of Court for intervenor, Fox Television Stations, Inc., Joel H. Levy, Brian M. Madden, Michael R. Gardner and James P. Denvir, Washington, D.C., were on the brief, for intervenor, Fox Television Stations, Inc.

Thomas J. Dougherty and Gene P. Belardi, Washington, D.C., were on the brief, for intervenor, Metromedia, Inc.

Before STARR and BUCKLEY, Circuit Judges, and GASCH, * Senior District Judge.

Opinion for the Court filed by Circuit Judge STARR.

STARR, Circuit Judge:

This case presents a challenge to the FCC's grant of a waiver from its cross- ownership rules in connection with the assignment of six television station licenses from Metromedia Radio & Television, Inc. to Fox Television Stations, Inc. 1 Specifically, the FCC granted Fox a temporary waiver from its rule prohibiting ownership of both a television station and a newspaper within the same geographical area, thereby providing Fox with a two-year period within which to dispose of its pre-existing ownership interest in the newspapers. Appellants, a consortium of individuals and public interest groups, unsuccessfully complained to the FCC that the upshot of a waiver would be to reduce the diversity of broadcast voices in the affected areas. This appeal followed. See 47 U.S.C. Sec. 402 (1982). Inasmuch as we are persuaded that granting the waiver was properly within the FCC's discretion, we affirm.

I

The media empire that once was popularly known as Metromedia has now been largely dismantled. This case involves the sale of one significant portion of Metromedia's once proud stable of broadcast properties. In May 1985, Fox entered into an agreement with Metromedia to purchase seven of the latter's television stations in as many major U.S. cities, namely New York, Chicago, Los Angeles, Washington, D.C., Dallas, Houston, and Boston. See Joint Appendix (J.A.) at 377-85. Pursuant to this agreement, Metromedia and Fox filed applications for FCC approval of the former's assignment of its licenses to Fox in June 1985. 2

In its application, Fox requested a waiver of the FCC's "cross-ownership rules," which, as their name suggests, prohibit (among other things) a broadcast licensee from owning a daily newspaper within the same area. 47 C.F.R. Sec. 73.3555(c) (1985). A waiver from the strictures of cross-ownership prohibition was necessary because Fox's owner, K. Rupert Murdoch, owned newspapers in two of the seven cities. Specifically, Mr. Murdoch controlled the New York Post and the Chicago Sun-Times, daily newspapers within the broadcast area of the New York and Chicago television stations. 3 In support of its request, Fox attached a twelve-page statement as to why a waiver would be in the public interest. Fox's primary contention was that a waiver would avoid a "distress sale" of the two newspapers, a recognized basis for waiver. J.A. at 28-39.

Fox's application in general, and its waiver request in particular, met with substantial opposition. Appellants filed a lengthy petition to deny, pointing out a number of alleged improprieties infecting Fox's application and, most relevantly to this appeal, asserting that granting a waiver would be inappropriate. See J.A. at 46-93. These arguments, and responses to them, were more fully developed through a series of oppositions, replies, and supplemental petitions. See, e.g., J.A. at 132-73, 178-202, 227-48. In particular, one of Fox's submissions set forth a further discussion supplementing its original twelve-page submission as to why waiver of the cross-ownership rules would be consonant with the public interest. J.A. at 151-66. Fox also attached to this submission a supporting affidavit from its investment banker (and board member) expressing the view that a waiver would be necessary to permit an orderly disposition of the two newspapers. J.A. at 170-72.

In due course, the FCC denied appellants' petitions. In addition to approving the Metromedia-Fox assignment, the Commission granted Fox a two-year waiver of the applicable cross-ownership rule. In re Applications of Metromedia Radio & Television, Inc., 59 Rad.Reg.2d (P & F) 1196 (1985).

After disposing of several points not germane to our purposes, the Commission turned to the waiver issue. The Commission first reviewed the arguments pressed by each party and then set forth the following conclusion:

[W]e believe [the cross-ownership rule] may be temporarily waived consistent with the public interest. The existence of the numerous media outlets serving New York, Chicago and surrounding areas supports our conclusion that no undue concentration of the media would result from a limited waiver. Further, we recognize that market factors associated with sales of daily newspapers may be different from those affecting broadcast properties making them more difficult to sell and therefore believe a waiver for a period of 24 months would be appropriate here. That period represents a reasonable balance between the policies expressed in the [cross-ownership] rule and our belief that, in divestiture cases, reasonable accommodations may be made to avoid the risk of distress sales.

59 Rad.Reg.2d (P & F) at 1205 (footnotes omitted). On appeal, the challengers, not surprisingly, take issue with the Commission's conclusion. Appellants' primary argument is that Fox made an inadequate showing to qualify for a waiver. 4

II

The FCC-granted waiver permits Fox to maintain, for a two-year period, a cross-ownership pattern that would otherwise be prohibited. 47 C.F.R. Sec. 53-3555(c) (1985). At bottom, the cross-ownership rules are designed to serve the public interest through encouraging diversity of media voices by requiring diversity of media ownership. The Commission was concerned about local media monopolies, where one individual or company owned some combination of a radio station, a television station, or a newspaper within the same area. To reduce the undesirable homogeneity of views that could presumably eventuate from such combinations, the Commission promulgated various proscriptions of media cross-ownership. For example, in 1970 the Commission prohibited ownership of both a radio and television station within the same area. See 47 C.F.R. Sec. 73, 3555(a) (1985); see also First Report and Order, 22 F.C.C.2d 306 (1970) (original promulgation of radio-television cross-ownership rules).

At the same time, the Commission proposed a similar ban on television-newspaper cross-ownerships. See Further Notice of Proposed Rulemaking, 22 F.C.C.2d 339 (1970). The rulemaking procedures for these television-newspaper rules continued for five years and culminated in January 1975 with the issuance of the regulatory predecessor to the current rule. See Second Report and Order, 50 F.C.C.2d 1046 (1975), aff'd sub nom. FCC v. National Citizens Commission for Broadcasting, 436 U.S. 775, 98 S.Ct. 2096, 56 L.Ed.2d 697 (1978); id. at 1099, App. F (text of original cross-ownership rule). To limit the dislocations these cross-ownership rules would inevitably cause, the FCC "grandfathered" most then-existing combinations. Id. at 1080. The Commission indicated that these rules would "apply to new ownership patterns however created, whether by initial application and construction or by acquisition." Id. at 1076.

Notwithstanding the sweep of the cross-ownership prohibitions, the Commission expressly contemplated that waivers could be granted. The FCC established three specific instances in which a waiver would be appropriate, as well as a fourth, catch-all provision:

It is not our intention that the [cross-ownership] rules should work a forfeiture.... For this reason inability to sell the station would be a basis for waiver.... We would take a similar view if the only sale possible would have to be at an artificially depressed price. Likewise, if it could be shown that separate ownership and operation of the newspaper and station cannot be supported in the locality, waiver might well be appropriate.... Finally, if it could be shown for whatever reason that the purposes of the rule ... would be better served by continuation of the current ownership pattern, then waiver would be warranted.

Id. at 1085 (footnotes omitted).

Most significant for this appeal--since appellants' challenge addresses not the basis for the waiver but the sufficiency of Fox's showing--the Commission went on twice to opine on the type of showing it would require for waivers. First, in connection with waivers in the first category--that is, based on inability to sell--the Commission noted:

[T]here is a need to protect against a station being offered for sale at a price out of keeping with its true value so that the owners could seek waiver on the basis of the inability to dispose of the station. We expect the parties involved to proceed in good faith. In connection with any attempt to show the inability to dispose of an interest to conform to the rules, we shall not give any weight to a showing that does not include a full description of the effort made to sell that interest, the price at which it was listed and a certification of a station (or if it applies, newspaper) broker that in his view this price is consistent with the fair market value of...

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