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Although the Federal Communications Commission is opening the door to more media mergers, a recent court order will effectively keep controversial television, radio and newspaper deals on the stoop for the foreseeable future. On Sept. 3 the agency stopped accepting new merger applications and froze all pending deal reviews after the 3rd U.S. Circuit Court of Appeals barred the FCC from implementing recently revised media ownership rules until after the three-judge panel considers if the regulations are legal. The FCC, which adopted new media ownership regulations in June, said Wednesday that it was processing deals based under the old media ownership rules. Observers expect most companies to put off acquisitions until after the appellate court in Philadelphia decides on the legality of the new rules. “You are not going to see instances where media companies will try to push the envelope with major transactions in small and big markets,” said Andrew Lipman, a partner at law firm Swidler Berlin Shereff Friedman in Washington. About the only deals the FCC will review are small, noncontroversial applications that likely would sail through regardless of whether the old or new regulations applied, Lipman said. One problem for media companies scouting acquisitions is that the old rules generally would require more asset divestitures to secure FCC approval. The new rules are more permissive, so the safer strategy is to delay deals until the dispute is over. One way the FCC could expedite dealmaking is to grant companies waivers from the old ownership restrictions, said Harold Feld, an associate director at the Media Access Project, a Washington-based public interest law firm. Only if the new rules are deemed unlawful would companies have to divest properties, Feld said. Yet he predicts the agency and companies would be leery of using waivers too often. “I cannot imagine that the court or Congress will look kindly on the FCC granting a merger that would not be permissible under the old rules by granting a waiver,” Feld said. “It would give the appearance that they were flouting the court’s stay.” The 3rd Circuit on Sept. 3 blocked the FCC from implementing the media rules. Feld said the agency is likely to grant a media ownership waiver for Paxson Communications Corp.’s sale of a broadcast outlet in Shreveport, La., to another media company in the same market. The $10 million deal was struck June 18 after the agency unveiled the new rules. The deal would violate the prior ownership rules. Viacom Inc. and News Corp. also will retain waivers on television stations they own that exceed the 35 percent cap on the percent of U.S. households any single owner of television stations may reach. The new cap would be 45 percent. “The only way Viacom and News Corp. could be forced to divest stations in the immediate future is if Congress passes a law bringing back the cap to 35 percent,” Feld said. FCC officials did not return calls seeking comment. Some observers note that rival media companies might try to challenge deals reviewed under the old rules. Meanwhile, attorneys for Spanish Broadcasting System Inc. from Willkie Farr & Gallagher in Washington submitted a comment letter to the FCC arguing that the agency cannot continue its current review of Univision Communications Inc.’s $3.5 billion deal for Hispanic Broadcasting Corp. Willkie Farr partner Philip Verveer wrote that the court’s stay of the new media rules precludes the agency from applying them to assess the takeover. He also argued that the agency can’t proceed under the old rules because the telecom regulator has “thoroughly discredited them, finding them inadequate in several ways.” �Copyright 2003, The Deal, LLC. All rights reserved.

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