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Media ownership ruling creates uncertainty for broadcast consolidation

Broadcast industry experts say a decision from a federal appeals court to vacate a 2017 U.S. Federal Communications Commission order that eased media ownership rules and remanded it back to the agency could have an impact on recently completed and ongoing broadcast consolidation efforts.

For instance, the ruling could be "problematic" for the Nexstar Media Group Inc.-Tribune Media Co. merger, which the FCC approved on Sept. 16, according to Christopher Terry, assistant professor of media law at the University of Minnesota's Hubbard School of Journalism and Mass Communication.

"I think there's some grounds to perhaps go to court and challenge some of the decisions made in the Nexstar merger decision now because of this, because the provisions under which the Nexstar merger was approved are no longer legally valid," said Terry in an interview.

The Sept. 23 decision from the U.S. Court of Appeals for the Third Circuit overturned an FCC order that revised the agency's local television ownership rule to eliminate a prohibition on any single entity owning more than one top-four-rated station in a single market. Under the terms of that order, the FCC made it agency policy to incorporate a case-by-case review of deals that involve more than one top station in a single market.

It is the Third Circuit's ruling on this provision that could create issues for the Nexstar deal, Terry said. The law professor said he could see a competitor at the local level challenge the Nexstar deal in court now.

"They can go back to the FCC and say, 'Look, you've created an anticompetitive situation here that's not allowed by the current rules ... I can't merge with another competitor and have a duopoly of my own. That gives [Nexstar] excessive market power,'" he said.

Nexstar declined to comment on the ruling.

The 2017 order also eliminated the local TV ownership rule's eight-voices test, which required that at least eight independently owned and operated full-power broadcast TV stations remain in a market following any merger of stations. Additionally, the order eliminated the newspaper/broadcast cross-ownership rule and the radio/television cross-ownership rule. These rules prohibited the cross-ownership of a full-service TV or radio broadcast station and a daily newspaper in the same market.

SNL Image

FCC Chairman Ajit Pai has suggested the agency will appeal the decision.
Source: AP Photo

In response to the Third Circuit's ruling, FCC Chairman Ajit Pai said the agency intends to "seek further review." The court also partially remanded an agency order that established an incubator program that aimed to bring new and diverse voices into broadcasting.

An appeal would most likely be heard either en banc by the Third Circuit or by the U.S. Supreme Court.

Terry said the "the fundamental issue that this decision turned on" is that the FCC is "not developing evidence to support its rulemaking decision."

According to media advocacy group Free Press, the court's ruling is the fourth time it has "rejected some or all of the FCC's efforts to deregulate over the past 15 years."

One broadcast industry source said pending an appeal, many consolidation efforts in the broadcast sector will have to be put on hold as a result of this ruling, but declined to discuss which deals they specifically think could be impacted.

The source also said it is difficult to see what motivation a broadcast group would have to spend a lot of capital in pursuit of a deal that might ultimately get thrown out as a result of this ruling.