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Consumer Groups Win As FCC Finds Itself Bound In Sequel To Prometheus

Posted  July 25, 2011

In a major victory for consumer groups and a substantial blow to deregulation proponents, the U.S. Court of Appeals for the Third Circuit has reined in the Federal Communications Commission (“FCC”) and struck down its revised rules designed to deregulate media ownership.

The Third Circuit’s second major decision in Prometheus Radio Project v. Federal Communications Commission (“Prometheus II”) rejects rules adopted by the FCC in 2007 that would have paved the way to further corporate consolidation of media ownership.  Among other things, Prometheus II blocks the FCC’s attempt to end the 35-year-old ban on ownership by the same entity of a newspaper and a radio station in the same media market.

Rather than a substantive assessment of the FCC’s proposed deregulation of media ownership rules, however, the Third Circuit’s decision was a stinging rebuke of the FCC’s disregard for public notice and comment requirements under the FCC’s then-chairman Kevin J. Martin.

The Third Circuit’s ruling in Prometheus II was not first time the court foiled the FCC’s efforts to lift the cross-ownership ban.  In adopting new rules in 2003, the FCC made its first stab at lifting the cross-ownership ban.

Consumer groups quickly challenged the changes adopted by the FCC in 2003.  In the first round of Prometheus Radio Project v. Federal Communications Commission (“Prometheus I”), the Third Circuit considered consumers’ objections to those revised rules.  The court agreed with the FCC that a complete ban on newspaper/broadcast cross-ownership was no longer necessary to protect media diversity, but held that the regulation of cross-ownership was still in the public’s interest.  Finding that the regulatory mechanism proposed by the FCC in place of the cross-ownership ban suffered a dearth of reasoned analysis, the Third Circuit rejected and remanded the FCC’s 2003 rule changes.

In rejecting and remanding the FCC’s 2003 rule changes, the Third Circuit advised the FCC that “any new ‘metric for measuring diversity and competition in a market be made subject to public notice and comment before it is incorporated into a final rule.”

Despite the Third Circuit’s admonition, the FCC’s July 2006 public notice inviting comment on issues remanded by the court in Prometheus I regarding cross-ownership was vague.  The notice asked only whether limits should vary depending on the characteristics of local markets, and if so, how should they be factored into any limits.  Two Commissioners dissented from the order calling for public notice and comment, complaining that the notice was unclear and open-ended.  Commissioner Michael J. Copps wrote, “I do not see how we can be transparent and comply with the dictates of the Third Circuit [in Promethseus I] without letting the American people know about and comment on any new standards of measurement that we are adopting in developing our ultimate decision.”

On November 13, 2007, The New York Times published an Op-Ed by then-FCC Chairman Martin disclosing the details of his proposal for a new newspaper/broadcast cross-ownership rule.  The same day, Chairman Martin issued a press release setting a 28-day deadline, not the usual 90-day period, for the public to comment on his proposal.

On November 28, 2007, with more than two weeks before the truncated public comment period was to close, Chairman Martin circulated an internal draft of the rulemaking Order to the other Commissioners.  In an effort to slow down the FCC’s rule-making process to provide for a meaningful notice and comment period, on December 17, 2007, a bi-partisan group of 25 U.S. Senators sent the FCC a letter urging it to delay its vote.  The FCC was unmoved by the Senators’ letter and adopted the new rules by a three to two vote on December 18, 2007.

In Prometheus II, the Third Circuit vacated and remanded the FCC’s new rule governing newspaper/broadcasting cross-ownership with almost no substantive consideration of the rule.  Rather, the court’s ruling was grounded in what it deemed as the FCC’s failure to comply with the Administrative Procedures Act (“APA”).

The FCC conceded that Chairman’s Martin’s Op-Ed/Press-Release did not satisfy the APA’s notice requirements.  It argued, however, that the two sentences contained in its July 2006 notice requesting general comment regarding whether limits should vary depending local market characteristics, and if so, how, satisfied the APA’s notice requirements.

The Third Circuit disagreed, noting that until Chairman’s Martin’s November 2007 Op-Ed/Press Release, “the public did not know even what options he was considering, let alone the Commission.”  The court found the 28 days Chairman Martin provided for responses to his proposed rule in direct contravention with the APA which requires that the public have a meaningful opportunity to submit data and written analysis regarding a proposed rulemaking.

The Third Circuit issued a clear warning that the FCC comply with the APA’s notice and comment requirements in any future attempt to modify its rules.

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