3rd Circuit Halts Media Rule Changes

The 3rd U.S. Circuit Court of Appeals late Wednesday blocked controversial federal rules easing media company mergers. In a three-page order issued after 5 p.m. EDT, the court granted a motion that bars the Federal Communications Commission from implementing recently revised media ownership rules until after the court considers the legality of the regulations. Without the stay, the rules would have taken effect today.

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A federal appeals court late Wednesday blocked controversial federal rules easing media company mergers. In a three-page order issued after 5 p.m. EDT, the 3rd U.S. Circuit Court of Appeals granted a motion that bars the Federal Communications Commission from implementing recently revised media ownership rules until after the court considers if the regulations are legal. “Given the magnitude of this matter and the public’s interest in reaching the proper resolution, a stay is warranted pending a thorough and efficient judicial review,” the court wrote. The ruling came just hours after the Media Access Project, a Washington public interest law firm, squared off against the FCC and media companies before the court over its Aug. 13 motion for the stay. Without the stay, the rules would have taken effect today. The FCC on June 2 adopted rules that generally loosen limits on TV, newspaper and radio mergers. MAP and other consumer groups argue that enabling industry consolidation will narrow consumer choice and harm media diversity. In Wednesday’s hearing, MAP president Andrew J. Schwartzman said the media rules should be delayed until the 3rd Circuit considers all of the new media rules. “Once the floodgates are opened, they cannot be closed,” he said. “The FCC has opted for more consolidation and less diversity.” Schwartzman said MediaNews Group Inc., which publishes The Fairbanks (Alaska) Daily News-Miner, is likely to be the first to take advantage of the looser restrictions on newspaper-broadcast company deals in the same market by purchasing an affiliate of General Electric Co.’s NBC. Should the court ultimately decide to send the rules back to the FCC for further review, Schwartzman said, it will be difficult to force companies to divest assets acquired since the rule rewrite. MAP and other opponents of the media rules also contend that the FCC did not give consumers enough time to consider the rules, or the arguments made on their behalf, before their adoption. They have been especially harsh in attacking the agency’s so-called diversity index, a new FCC benchmark assessing the concentration of media in the U.S. Schwartzman told the court that before its rulemaking, the agency did not give interested parties any indication that it would include noncommercial radio stations in its definition of radio markets. That change could promote consolidation, he said. Attorneys representing the FCC and media companies NBC, News Corp. and Viacom Inc. challenged the motion to delay the media rules, arguing that consumers will not experience any severe and immediate harm, a key test for granting the stay. Hank Brands, a partner at law firm Paul, Weiss, Rifkind, Wharton & Garrison, representing TV networks, noted that most media companies have no short-term plans to make acquisitions, which mitigates risk to the public. “If the court was considering whether to take the life support off someone tomorrow, then maybe this stay should be considered, but with this case there is no irreparable harm,” he said. “Harm here is not imminent.” Brands also said companies can be required to divest media assets if the rules are reversed. Responding to earlier testimony regarding the mounting congressional opposition to the rules, Brands said the FCC has already determined that the ownership regs are in the public interest. “After an exhaustive review of the media marketplace, a majority at the FCC decided that these rules were in the best interest of the public,” he said. MAP “must make a legal argument on whether you could win on the merits, and [Schwartzman] hasn’t done that.” According to some legal observers, the Philadelphia court could request a short delay in implementing the rules and send the case to the U.S. Court of Appeals for the D.C. Circuit. TV network operators recently filed a motion to transfer the media ownership proceeding to Washington, arguing that the D.C. court’s experience handling media regulation cases makes it a better venue. �Copyright 2003, The Deal, LLC. All rights reserved.

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