ORAL ARGUMENT NOT YET SCHEDULED Nos. 08–3078, 08–4454, 08–4455, 08–4456, 08–4457, 08–4458, 08–4459, 08– 4460, 08–4461, 08–4462, 08–4463, 08–4464, 08–4465, 08–4466, 08–4467, 08– 4468, 08–4469, 08–4470, 08–4471, 08–4472, 08–4472, 08–4473, 08–4474, 08– 4475, 08–4476, 08–4477 , 08–4478, 08–4652 UNITED STATES COURT OF APPEALS FOR THE THIRD CIRCUIT ________________ PROMETHEUS RADIO PROJECT, ET AL., Petitioners, v. FEDERAL COMMUNICATIONS COMMISSION AND UNITED STATES OF AMERICA, Respondents. ________________ On Petitions for Review of an Order of the Federal Communications Commission ________________ REPLY BRIEF OF PETITIONERS TRIBUNE COMPANY AND FOX TELEVISION STATIONS, INC. ________________ Ellen S. Agress NEWS CORPORATION 1211 Avenue of the Americas 28th Floor New York, NY 10036 Carter G. Phillips Counsel of Record Mark D. Schneider James P. Young Ryan C. Morris SIDLEY AUSTIN LLP 1501 K Street, N.W. Washington, D.C. 20005 Telephone: (202) 736-8000 Facsimile: (202) 736-8711 Counsel for Petitioners Tribune Company and Fox Television Stations, Inc. Maureen A. O’Connell NEWS CORPORATION 444 North Capitol Street, NW Suite 740 Washington, DC 20001 Counsel for Fox Television Stations, Inc. Additional Counsel Listed On Inside Cover Case: 08-3078 Document: 003110253685 Page: 1 Date Filed: 08/16/2010 Donald J. Liebentritt Charles J. Sennet Elisabeth M. Washburn TRIBUNE COMPANY 435 N. Michigan Ave Chicago, IL 60611 Counsel for Tribune Company . Case: 08-3078 Document: 003110253685 Page: 2 Date Filed: 08/16/2010 i TABLE OF CONTENTS TABLE OF AUTHORITIES .................................................................................... ii INTRODUCTION ..................................................................................................... 1 ARGUMENT ............................................................................................................. 3 I. THE FCC’S REFUSAL TO DEAL ADEQUATELY WITH THE RECORD EVIDENCE VIOLATES SECTION 202(h), AND IT STILL FAILS TO ADDRESS THE UNCONSTITUTIONALITY OF THE NEW RULE. ........................................................................................... 3 II. THE BASES FOR THE NEWSPAPER OWNERSHIP RULE REMAIN UNEXPLAINED AND INCONSISTENT WITH OTHER CROSS-OWNERSHIP RULES. ................................................................... 20 A. The Top-20 Presumption Lacks An Adequate Explanation. .............. 20 B. The Newspaper Ownership Rule Remains Internally Inconsistent And Conflicts With Other Cross-Ownership Rules. ...... 23 C. The “Top-Four” Restriction Is Arbitrary And Capricious. ................. 29 III. THE FCC’S RETENTION OF THE 1999 LOCAL TELEVISION OWNERSHIP RULE IS UNLAWFUL AND ARBITRARY. ..................... 31 A. Re-promulgating The 1999 Local Television Ownership Rule Conflicts With The Sinclair Remand Order. ....................................... 31 B. Re-Adoption Of The Local Television Ownership Rule Is Inconsistent With Prior FCC Findings. ............................................... 33 IV. Another Open-Ended Remand Is Unwarranted. ............................................ 35 CONCLUSION ........................................................................................................ 37 CERTIFICATION OF COMPLIANCE WITH FEDERAL RULE OF APPELLATE PROCEDURE 32(a) CERTIFICATE OF FILING AND SERVICE Case: 08-3078 Document: 003110253685 Page: 3 Date Filed: 08/16/2010 ii TABLE OF AUTHORITIES Page CASES Am. Iron & Steel Inst. v. EPA, 568 F.2d 284 (3d Cir. 1977) ............................................................................... 30 Am. Library Ass’n v. FCC, 406 F.3d 689 (D.C. Cir. 2005) ............................................................................ 18 Bethlehem Steel Corp. v. EPA, 651 F.2d 861 (3d Cir. 1981) ................................................................................. 7 Buckley v. Valeo, 424 U.S. 1 (1976) ................................................................................................ 20 Cassell v. FCC, 154 F.3d 478 (D.C. Cir. 1998) ............................................................................ 21 CBS, Inc. v. Democratic Nat’l Comm., 412 U.S. 94 (1973) ........................................................................................ 15, 18 FCC v. Fox Television Stations, Inc., 129 S. Ct. 1800 (2009) ........................................................................................ 34 FCC v. League of Women Voters, 468 U.S. 364 (1984) ............................................................................................ 15 FCC v. Nat’l Citizens Comm. for Broad., 436 U.S. 775 (1978) .............................................................................................. 5 Forester v. Consumer Prod. Safety Comm’n, 559 F.2d 774 (D.C. Cir. 1977) ............................................................................ 30 Gen. Chem. Corp. v. United States, 817 F.2d 844 (D.C. Cir. 1987) ............................................................................ 30 GTE Serv. Corp. v. FCC, 474 F.2d 724 (2d Cir. 1973) ............................................................................... 18 Ill. Citizens Comm. for Broad. v. FCC, 467 F.2d 1397 (7th Cir. 1972) ............................................................................ 18 Case: 08-3078 Document: 003110253685 Page: 4 Date Filed: 08/16/2010 iii Miami Herald Publ’g Co. v. Tornillo, 418 U.S. 241 (1974) ...................................................................................... 15, 18 Morall v. DEA, 412 F.3d 165 (D.C. Cir. 2005) .............................................................................. 7 Motor Vehicle Mfrs. Ass’n v. State Farm Mut. Auto. Ins., 463 U.S. 29 (1983) .......................................................................................passim N.J. Coal. for Fair Broad. v. FCC, 574 F.2d 1119 (3d Cir. 1978) ............................................................................. 19 Nat’l Cable & Telecomms. Ass’n v. Brand X Internet Servs., 545 U.S. 967 (2005) ...................................................................................... 24, 25 Nat’l Ass’n of Indep. Television Producers & Distribs. v. FCC, 516 F.2d 526 (2d Cir. 1975) ............................................................................... 16 Perry v. Sindermann, 408 U.S. 593 (1972) ............................................................................................ 19 Prometheus Radio Project v. FCC, 373 F.3d 372 (3d Cir. 2004) ........................................................................passim San Antonio v. United States, 631 F.2d 831 (D.C. Cir. 1980) ............................................................................ 21 Schurz Commc’ns, Inc. v. FCC, 982 F.2d 1043 (7th Cir. 1992) ............................................................................ 13 Sinclair Broad. Group, Inc. v. FCC, 284 F.3d 148 (D.C. Cir. 2002) ....................................................11, 21, 25, 27, 31 UPMC-Braddock Hosp. v. Sebelius, 592 F.3d 427 (3d Cir. 2010) ................................................................................. 6 Worldcom, Inc. v. FCC, 238 F.3d 449 (D.C. Cir. 2001) ............................................................................ 21 STATUTES AND REGULATIONS 47 U.S.C. § 326 ........................................................................................................ 15 47 C.F.R. § 73.3555(d)(5) .......................................................................................... 9 Case: 08-3078 Document: 003110253685 Page: 5 Date Filed: 08/16/2010 iv ADMINISTRATIVE DECISIONS 2002 Biennial Regulatory Review, Report and Order and Notice of Proposed Rulemaking, 18 FCC Rcd. 13,260 (2003), aff’d and remanded in part, Prometheus Radio Project v. FCC, 373 F.3d 372 (3d Cir. 2004) .................. 3, 34 2006 Quadrennial Regulatory Review, Further Notice of Proposed Rule Making, 21 FCC Rcd. 8834 .............................................................................................. 30 2006 Quadrennial Regulatory Review, 23 FCC Rcd. 2010 (2008) ............................................................................passim Capital Cities/ABC, Inc., 11 FCC Rcd. 5841 (1996) ................................................................................... 12 OTHER AUTHORITIES David Pritchard, Viewpoint Diversity in Cross-Owned Newspapers and Television Stations: A Study of News Coverage of the 2000 Presidential Campaign (Sept. 2002), available at http://www.fcc.gov/ownership/ materials/already-released/viewpoint090002.pdf ................................................. 8 Steve Wildman, Peer Review of The Internet and Local News and Information, available at http://www.fcc.gov/mb/peer_review/ reviews.html ........................................................................................................ 26 Case: 08-3078 Document: 003110253685 Page: 6 Date Filed: 08/16/2010 INTRODUCTION Petitioners Fox Television Stations, Inc. (“Fox”) and Tribune Company (“Tribune”) demonstrated in their opening brief that the FCC’s newspaper ownership rule is arbitrary and unconstitutional and that its duopoly rule is unlawful. The FCC’s brief is remarkably non-responsive. It ignores this Court’s holding in Prometheus that Section 202(h) of the Act requires the Commission to justify the retention of its media ownership restrictions as if it were adopting them for the first time. Instead, the FCC repeatedly pleads for “deference”; takes the existing cross-ownership restrictions for granted; asserts a seemingly boundless authority to keep them on the basis of unsupported “predictive judgments” even as it ignores evidence based on decades of actual experience contradicting those predictions; and asserts a need for “caution” and to act “incrementally” – all of which is inconsistent with its duties under Section 202(h). Moreover, the FCC simply cites the Supreme Court’s 1978 decision in NCCB and this Court’s 2004 Prometheus decision as foreclosing almost any review of the FCC’s new newspaper-broadcast cross-ownership rule, even though the FCC has reinstated restrictions well beyond what this Court’s remand contemplated and its new rules raise serious new constitutional issues that have never been considered by any court. Case: 08-3078 Document: 003110253685 Page: 7 Date Filed: 08/16/2010 2 As shown below, the FCC essentially concedes that it ignored relevant evidence concerning the sole rationale for the newspaper ownership rule – viewpoint diversity. The FCC has no explanation for why it reversed course from its prior conclusions, which were upheld by this Court in Prometheus, that restrictions on newspaper-broadcast combinations in the largest cities no longer adversely affect diversity given the significant programming benefits demonstrated from such combinations (except for a purported desire to take a “cautious” or “incremental” approach). Relying on NCCB, the FCC barely even responds to Petitioners’ showing that the FCC’s new presumptions and their intrusive oversight of newspapers’ and broadcasters’ editorial practices are profoundly unconstitutional. The FCC also does not respond to many of Petitioners’ points relating to the numerous internal inconsistencies in the newspaper ownership rule or its unlawful re-promulgation of the 1999 version of the local television rule in violation of the D.C. Circuit’s decision in Sinclair and this Court’s decision in Prometheus. The FCC’s failure to respond meaningfully to Petitioners’ showing confirms that these rules must be set aside. Case: 08-3078 Document: 003110253685 Page: 8 Date Filed: 08/16/2010 3 ARGUMENT I. THE FCC’S REFUSAL TO DEAL ADEQUATELY WITH THE RECORD EVIDENCE VIOLATES SECTION 202(h), AND IT STILL FAILS TO ADDRESS THE UNCONSTITUTIONALITY OF THE NEW RULE. The FCC’s rationale for retaining a ban on newspaper-broadcast cross- ownership is to guard against an “‘elevated risk of harm’” to viewpoint diversity. FCC Br. 38. As Petitioners demonstrated in their opening brief, the FCC’s retention – and indeed, expansion – of its attempts to police “viewpoint diversity” in this context are unlawful for three reasons: (1) the FCC ignored important prior findings and conclusions in its 2003 Order 1 and record evidence here demonstrating that these combinations do not threaten viewpoint diversity; (2) the FCC did not adequately explain why it reversed its 2003 determination (upheld by this Court) and reinstated intrusive review of such combinations even in large media markets like New York, Chicago, and Los Angeles; and (3) the FCC’s intrusive new content-based rules, which attempt to micromanage the coverage of local issues and the interactions between editors and reporters in cross-owned entities, are unconstitutional and beyond the FCC’s statutory authority. In many instances, the FCC’s brief does not even respond to these points, and what responses it has offered are meritless. 1 2002 Biennial Regulatory Review, Report and Order and Notice of Proposed Rulemaking, 18 FCC Rcd. 13,620 (2003) (“2003 Order”), aff’d and remanded in part, Prometheus Radio Project v. FCC, 373 F.3d 372 (3d Cir. 2004). Case: 08-3078 Document: 003110253685 Page: 9 Date Filed: 08/16/2010 4 1. The Order 2 violates the most fundamental tenet of administrative law, because on the key question in this case – whether newspaper-broadcast combinations present an “elevated risk of harm” to viewpoint diversity – the FCC does not even discuss, much less grapple with, the relevant evidence in the record. Pet. Br. 25-32. Section 202(h) governs this case, and as this Court held in Prometheus, it requires the FCC to justify fully the retention of any media ownership rule as if it were a new rule. Prometheus Radio Project v. FCC, 373 F.3d 372, 395 (3d Cir. 2004) (Section 202(h) “extends” the APA requirements that apply “to an agency’s decision to promulgate new regulations” to “the Commission’s decision to retain its existing regulations”). In other words, the FCC is required to approach each quadrennial review as if it had never promulgated any restrictions on newspaper-broadcast cross-ownership, and it must justify the retention of any such rules as if it were adopting them for the first time. Accordingly, Section 202(h) and the APA require the FCC to build a record establishing the relevant facts at the time of the quadrennial review, and it must “articulate a satisfactory explanation for its action including a ‘rational connection between the facts found and the choice made.’” Motor Vehicle Mfrs. Ass’n v. State Farm Mut. Auto. Ins., 463 U.S. 29, 43 (1983). 2 2006 Quadrennial Regulatory Review, 23 FCC Rcd. 2010 (2008) (“Order”) (JA__). Case: 08-3078 Document: 003110253685 Page: 10 Date Filed: 08/16/2010 5 In that regard, the FCC’s invocation of NCCB here is completely inapt. FCC Br. 39-40 (citing FCC v. Nat’l Citizens Comm. for Broad., 436 U.S. 775 (1978) (“NCCB”)). As the FCC notes, even in 1975 there was no compelling record evidence that newspaper-broadcast cross-ownership restrictions would result in any viewpoint diversity benefits. See FCC Br. 39 (quoting NCCB, 436 U.S. at 796). The Supreme Court upheld the rule based solely on the FCC’s prediction that the ban might provide “hoped-for” benefits in viewpoint diversity. NCCB, 436 U.S. at 786. The FCC seems to read NCCB as saying that, as long as the FCC claims it is making a predictive judgment, it gets a free pass and has no need to support its conclusions with evidence. FCC Br. 39-40. But the FCC cannot continue to rely on those same unsupported predictive judgments 35 years later. Section 202(h) now requires the FCC to justify any retention of these restrictions on free speech based on the facts as they exist today. The FCC did not even try to meet the standard set forth in Section 202(h). The FCC concedes that the only evidence the FCC cited for the proposition that newspaper-broadcast cross-ownership might harm viewpoint diversity were assertions that newspaper-Internet combinations sometimes shared local content. FCC Br. 38-39 (citing Order ¶ 49 (JA__)). In other words, the FCC’s central conclusion in this case concerning the effect of newspaper-broadcast combinations is not even based on evidence relating to such combinations. This is not the Case: 08-3078 Document: 003110253685 Page: 11 Date Filed: 08/16/2010 6 “reasoned analysis” that Section 202(h) and the APA require. See Prometheus, 373 F.3d at 395. If the Commission had never promulgated newspaper-broadcast cross-ownership rules and were seeking to impose such restrictions today as a new rule, courts would never permit the FCC to justify such a sweeping, nationwide ban based only on a snippet of anecdotes relating to shared content between newspapers and Internet sites. UPMC-Braddock Hosp. v. Sebelius, 592 F.3d 427, 430 (3d Cir. 2010) (substantial evidence necessary to support a rule “‘means such relevant evidence as a reasonable mind might accept as adequate to support a conclusion’”). Equally important, there was a wealth of evidence relating to the effect of newspaper-broadcast combinations on viewpoint diversity, and as the FCC implicitly concedes, the FCC’s Order ignored important evidence. In particular, the FCC did not discuss the Milyo Report, which fatally undermined the Order’s conclusions. See Order ¶ 49 (JA__); Pet. Br. 25-27, 30-31. The FCC’s response is limited to a footnote, in which the FCC claims that the Milyo Report examined only the difference in the political slant of cross-owned stations versus other stations, and “made no attempt to compare the viewpoints of newspapers and their cross-owned broadcast stations.” FCC Br. 39 n.11 (citing Milyo Study at 29 (JA__)). That is not correct. As Professor Milyo explains in the very next sentence after the one the FCC quotes, he also found that in almost all cases there Case: 08-3078 Document: 003110253685 Page: 12 Date Filed: 08/16/2010 7 was no statistically significant correlation between the cross-owned stations’ slant and the editorial slant of the newspaper or the campaign contributions of the corporate parent. 3 The FCC’s failure even to address this contrary evidence by itself requires reversal. Morall v. DEA, 412 F.3d 165, 178 (D.C. Cir. 2005) (agency “decision does not withstand review because the agency decisionmaker entirely ignored relevant evidence”); Bethlehem Steel Corp. v. EPA, 651 F.2d 861, 867 (3d Cir. 1981) (agency must “consider[ ] the relevant information brought to its attention”). Moreover, it would have been patently arbitrary to give greater weight to anecdotes about newspaper-Internet sharing of content than to a carefully constructed and peer-reviewed study that systematically examined the impact of newspaper-broadcast cross-ownership on political slant. These findings in the Milyo Report were just the tip of the iceberg. As Petitioners stressed in their opening brief (at 27-31), both the Milyo Report and other peer-reviewed studies demonstrated that newspaper-broadcast combinations offer numerous benefits for localism (see Order ¶¶ 39-46 (JA__); Milyo Report at 22-23 (JA__)), and other parties submitted extensive evidence that cross-owned 3 See Milyo Report at 29 (JA__) (“the particular political orientation of cross- owned stations, as measured by the editorial endorsements of the affiliated newspaper or the campaign contributions flowing from persons associated with the parent company, are also not significantly related to political slant in most specifications”); see also id. at 27-28 (JA__) (explaining the results) & Tables 17 & 18 (JA__) (tabulating results). Case: 08-3078 Document: 003110253685 Page: 13 Date Filed: 08/16/2010 8 newspapers and broadcast stations do not speak with a single voice. 4 The FCC acknowledged some of this evidence, but it concluded – citing only the newspaper- Internet content-sharing anecdotes – that the record as to viewpoint diversity was inconclusive. Order ¶ 49 & nn.168-69 (JA__). Assessing the evidence in this fashion is not reasoned decisionmaking, and the FCC does not even try to defend the fact that it ignored evidence that undermined its conclusions. See FCC Br. 38- 39. 5 In short, the FCC did not comply with Section 202(h). The FCC’s approach here – taking a “risk of harm” for granted and ignoring or discounting the relevant 4 See, e.g., Belo Comments 16 (JA__); NAA Comments 79-83 (JA__); Media General Comments 34-35 (JA__); see also David Pritchard, Viewpoint Diversity in Cross-Owned Newspapers and Television Stations: A Study of News Coverage of the 2000 Presidential Campaign (Sept. 2002), available at http://www.fcc. gov/ownership/materials/already-released/viewpoint090002.pdf (studying for purposes of the 2003 Order whether commonly owned newspapers and television stations speak with a single voice and concluding that the data suggest they do not). 5 Instead, the FCC construes Petitioners’ brief (at 30) as arguing merely that the FCC did not give proper weight to the Internet as a source of viewpoint diversity. It is inconsistent, to say the least, for the FCC today to deny the substantial role played by the Internet in fostering diversity at a time when it is engaging in unprecedented efforts to establish a national broadband plan to promote access to the Internet. Even so, the FCC’s Order does acknowledge that Internet news sites add diversity and, indeed, that the Internet is dramatically affecting the newspaper industry and “diminishing mainstream media power over information flow.” FCC Br. 40, 41 n.12 (internal quotation marks omitted); see also Prometheus, 373 F.3d at 400 (“We agree record evidence suggests that cable and the Internet supplement the viewpoint diversity provided by broadcast and newspaper outlets in local markets.”). But there is no sound evidence that newspaper-broadcast cross- ownership harms viewpoint diversity with or without the Internet. Case: 08-3078 Document: 003110253685 Page: 14 Date Filed: 08/16/2010 9 contrary evidence in favor of manifestly irrelevant anecdotes – does not satisfy its burden to justify the retention of any media ownership rules as if they were new rules. Equally clearly, Section 202(h) does not permit the FCC to proceed “cautiously” or “incrementally” with revisions to its rules where restrictions are not supported by conclusive record evidence. For the same reasons, the newspaper-broadcast cross-ownership restrictions are no longer constitutional, even under NCCB: because the FCC has not shown any risk of harm to viewpoint diversity, it has not shown any “substantial government interest” that would save the rule under the First Amendment, especially given the new rules’ intrusive review regarding the production of news by newspapers and broadcasters. See Prometheus, 373 F.3d at 402 (citing NCCB, 436 U.S. at 799-800). 2. Under the FCC’s new approach, every proposed newspaper-broadcast transaction in every city must be litigated before the FCC, with intrusive review to determine both whether the relevant presumption (positive or negative) can be rebutted and to assess such matters as the structure and personnel of the combination’s newsrooms and whether the combination will “significantly increase” coverage of local issues. 47 C.F.R. § 73.3555(d)(5). These rules apply even in the largest media markets like New York, Chicago, and Los Angeles, and even if the newspaper or broadcast station has a small circulation or audience. Case: 08-3078 Document: 003110253685 Page: 15 Date Filed: 08/16/2010 10 Indeed, many combinations are presumed adverse to the public interest even in the top-20 markets (such as those involving most network-affiliated television stations or involving more than one broadcast station), and markets below the top 20 are presumed incapable of permitting such combinations at all, even where the number of independent voices in the market is not significantly different than those in more populated markets. This represents a sharp break from both the 2003 Order and Prometheus, and the FCC’s attempts to justify this case-by-case approach do not withstand scrutiny. The FCC’s principal argument is that, because of the “‘inconclusiveness of some of the data’” and “‘disagreement as to the outcome of the studies,’” the best course was to reinstate the blanket ban on every transaction in every city, so that the Commission could ensure in case-by-case review that each proposed transaction “‘actually will increase the total amount of local news generated by the combined outlets.’” FCC Br. 42-43 (quoting Order ¶ 46 (JA__)). This is nonsense: as Petitioners have explained, the Commission’s conclusions in 2003 and the record in this proceeding overwhelmingly indicated that newspaper- broadcast combinations typically provide significant public interest benefits and do not harm viewpoint diversity, and the record confirmed that the “risks of harm” were especially attenuated in large media markets that have scores of local outlets. See, e.g., Order ¶¶ 21-38 (JA__). The standard the FCC applied here – that unless Case: 08-3078 Document: 003110253685 Page: 16 Date Filed: 08/16/2010 11 it has complete confidence that newspaper-broadcast combinations will never result in any harms anywhere, the blanket ban with case-by-case review remains necessary everywhere – is inconsistent with Section 202(h) and the APA. Sinclair Broad. Group, Inc. v. FCC, 284 F.3d 148, 164 (D.C. Cir. 2002) (FCC’s “wait-and- see approach, however, cannot be squared with its statutory mandate … to repeal or modify any rule that is not necessary in the public interest” (internal quotation marks omitted)); see also Prometheus, 373 F.3d at 406 n.33. Moreover, the new rule is an unexplained departure from precedent. In the 2003 Order, the FCC eliminated all newspaper-broadcast cross-ownership restrictions in cities with nine or more television stations. This Court specifically upheld this repeal of the blanket ban. Prometheus, 373 F.3d at 398-400 (upholding the FCC’s conclusions that the ban undermined localism and did not harm viewpoint diversity, at least in larger markets). To be sure, this Court found that the FCC had not adequately explained where it had drawn the lines in its Cross- Media Limits, and it remanded the 2003 Order to give the FCC a chance to provide a better explanation. Id. at 402-10, 435. But the question whether the ban should be reinstated in the larger cities that contain a plethora of media voices was flatly not within the scope of the remand. The FCC never responds to this argument. Although it says that it “came to a different conclusion” in 2008 on the abstract question of bright-line rules versus a case-by-case approach, FCC Br. 43- Case: 08-3078 Document: 003110253685 Page: 17 Date Filed: 08/16/2010 12 44, it never addresses the question of why it was necessary to reinstate any rule in the largest markets, where it repealed all restrictions in 2003 and when that specific repeal was upheld by this Court. The FCC also pleads (at 43) that, because of the “‘long history’” of the newspaper rule, it needed to “‘proceed cautiously,’” rather than “effecting a sudden and dramatic change.” This argument is truly perverse. The proceeding at issue is probably the least “sudden” and most “cautious” proceeding in FCC history. Commissioners of varying political persuasions have been calling for the repeal of the newspaper-broadcast cross-ownership rule since 1996. 6 The FCC amassed enormous records on this rule in the 1998 and 2000 biennial reviews, in a special 2001 rulemaking, and again in the 2002 and 2006 reviews. Pet. Br. 4-7. Relaxation of this rule, as the Court agreed in 2004, was long overdue, but the FCC took years to respond to this Court’s remand – which meant that this Court’s stay (and thus the 1975 ban) remained in effect for six years after this Court upheld at least a partial repeal. Indeed, this plea for “deference” to the Commission’s “caution” simply continues the Commission’s well-established pattern of dragging its feet, continually punting the issues from one quadrennial review to another, and 6 Capital Cities/ABC, Inc., 11 FCC Rcd. 5841, 5906 (1996) (Separate Statement of Chairman Reed Hundt) (“there is reason to believe that … the newspaper- broadcast cross-ownership rule, is right now impairing the future prospects of an important national source of education and information: the newspaper industry.”). Case: 08-3078 Document: 003110253685 Page: 18 Date Filed: 08/16/2010 13 seeking to avoid any judicial scrutiny for its “procrastination.” Cf. Schurz Commc’ns, Inc. v. FCC, 982 F.2d 1043, 1056 (7th Cir. 1992). The FCC spends much of the Order and its brief justifying its actions on the ground that the newspaper-broadcast cross-ownership rule is the only media ownership rule that has not changed since 1975, but Section 202(h) does not permit the Commission to ignore the relevant evidence in favor of a meaningless concern for “caution.” What the FCC calls “caution” could just as easily be labeled “rigidity,” which is precisely what Section 202(h) was enacted to prevent. 3. As Petitioners demonstrated, the newspaper-broadcast cross- ownership rule is also unconstitutional on several grounds. The FCC gives all of these arguments the back of the hand in a short section at the end of the brief, essentially treating all possible constitutional arguments as foreclosed either by the Supreme Court’s decision in NCCB or by this Court’s decision in Prometheus. See FCC Br. 57, 95-99. Although Petitioners acknowledged that this Court has already resolved certain constitutional claims in Prometheus and that Petitioners wish to preserve those issues for possible review in the Supreme Court, see Pet. Br. 47-48, the Order raises new constitutional issues that are properly before this Court and must be decided unless the Court sets aside the rule on Section 202(h) or APA grounds. Case: 08-3078 Document: 003110253685 Page: 19 Date Filed: 08/16/2010 14 In particular, the local news and four-factor inquiry that will apply to all future newspaper-broadcast transactions are completely new rules, and thus no court has had an opportunity to decide whether they are constitutional. They are not. As Petitioners explained in detail (Pet. Br. 33-40), the presumptions’ four- factor test would effectively establish permanent Commission oversight of the combination’s newsroom operations, including the newsroom operations of the newspaper. The Commission would assert ongoing authority over such subjects as the amount of time devoted to local coverage, the resources invested in reporting, the structure and personnel of the two editorial boards, and the “power” and “influence” of the combination’s speech. Order ¶¶ 70-75 (JA__). As the FCC emphasizes (at 56) in answering the Citizen Petitioners’ claims, if the newspaper- broadcast combination fails to abide by these regulations of their speech, “the federal government already has a wide array of tools at its disposal” to punish the newspaper-broadcast combination, including monetary forfeitures, license revocation or denial of license renewal, and even jail. The FCC does not deny that these regulations constitute content-based regulation. FCC Br. 57, 96-97. “On the contrary,” the FCC asserts that it has a “general power” to “‘interest itself in the kinds of programs broadcast by licensees’” to ensure that broadcasters serve the “public interest.” Id. at 97 (quoting Nat’l Ass’n of Indep. Television Producers & Distribs. v. FCC, 516 F.2d Case: 08-3078 Document: 003110253685 Page: 20 Date Filed: 08/16/2010 15 526, 536 (2d Cir. 1975) (“NAITPD”)). It is well-settled, however, that even under the “scarcity doctrine,” content-based regulations such as these are subject to heightened scrutiny. FCC v. League of Women Voters, 468 U.S. 364, 380-84 (1984); CBS, Inc. v. Democratic Nat’l Comm., 412 U.S. 94, 126 (1973). In particular, the Supreme Court has made clear that the FCC has no authority to impinge on the editorial freedom of broadcasters, because the First Amendment gives heightened protection to the “right of broadcasters to exercise ‘the widest journalistic freedom consistent with their public obligations.’” League of Women Voters, 468 U.S. at 379 (quoting CBS, 412 U.S. at 110) (alterations omitted); see also 47 U.S.C. § 326. The FCC’s new web of restrictions and requirements, as the FCC freely admits, represents an attempt to curb, cabin, and shape the editorial identities of the two entities. Such attempts to shape those identities violate the First Amendment both with respect to broadcasters, see League of Women Voters, 468 U.S. at 378-80 (First Amendment must be applied to “guard[] against ‘the risk of an enlargement of Government control over the content of broadcast discussion of public issues,’” because “we must necessarily rely in large part upon the editorial initiative and judgment of the broadcasters who bear the public trust”), and certainly with respect to newspapers, Miami Herald Publ’g Co. v. Tornillo, 418 U.S. 241, 258 (1974). 7 7 Contrary to the FCC’s contention, the Second Circuit did not hold in NAITPD Case: 08-3078 Document: 003110253685 Page: 21 Date Filed: 08/16/2010 16 In its opening brief, Petitioners described the pernicious ways in which these factors would give the Commission undue influence over the combination’s speech, and the FCC has no response. The Order expressly states that the FCC will: (1) examine “the resources that the broadcast entity will be devoting to the coverage of local news, such as the hiring of additional reporters and newsroom staff”; (2) make sure the combined entities “each maintain their own separate news and editorial staff,” including “separation among any personnel who control editorials and commentaries, such as editorial boards”; (3) look at the “relative power and influence of those voices and the outlets that the applicant proposes to own”; and (4) will “evaluate whether adequate investment in newsroom operations will be allocated and expended,” and thus will “expect applicants to explain in detail their plans and commitments to enhance the news operations of the broadcast and newspaper outlets following transfer of control and state when those measures will be implemented.” Order ¶¶ 70-75 (JA__) (emphasis added). As Petitioners explained (at 35-37), these factors would give the FCC substantial (and continuing) influence over the quantity and quality of news programming, the time that the FCC has a general, free-roving right to “interest” itself in the type of programming licensees air. NAITPD involved the Prime Time Access Rule, which was an attempt to curb the perceived economic power of the three networks circa 1975 and to create economic opportunities for independent producers. That rule did not restrict the editorial discretion of any individual licensee and certainly not of any newspaper. See NAITPD, 516 F.2d at 537 (under the rule “the station is still free to choose the game show over the panel on inflation”). Case: 08-3078 Document: 003110253685 Page: 22 Date Filed: 08/16/2010 17 the programming will air, the length of the programs, the topics to be covered, hiring decisions and news coverage assignments, and even the investments and editorial arrangements to be made at the newspaper to ensure “editorial independence.” The FCC does not discuss or attempt to defend any of these measures in its brief, 8 and it cannot simply fall back on the Supreme Court’s decision in NCCB, which never considered such FCC review of news operations. These factors also constitute direct regulation of newspapers that goes well beyond the FCC’s statutory authority. Pet. Br. 38-39. As Petitioners explained, under the factors that will govern any approved transaction under these rules, the newspaper’s editors will constantly second-guess their everyday decisions about what stories to cover, the resources to devote to local reporting, whether and how to share information, reporting, or personnel with the broadcast station, and many other issues to ensure that the combined practices of the two entities will not run afoul of the FCC’s expectations related to “viewpoint diversity.” The FCC has no authority to regulate newspapers under the Communications Act, and these factors would give the FCC a degree of influence and control over the newsroom operations of a newspaper that cannot fairly be deemed a regulation of “radio or 8 In a brief footnote, the FCC argues that, under the “independent news judgment” factor, the FCC will presume independence based on the structure of the two editorial boards. FCC Br. 97 n.31. The FCC does not even address, however, by what authority the FCC can dictate to a newspaper who shall sit on its editorial board. Case: 08-3078 Document: 003110253685 Page: 23 Date Filed: 08/16/2010 18 wire communications.” Ill. Citizens Comm. for Broad. v. FCC, 467 F.2d 1397, 1400 (7th Cir. 1972); GTE Serv. Corp. v. FCC, 474 F.2d 724, 735-36 (2d Cir. 1973); Am. Library Ass’n v. FCC, 406 F.3d 689, 700 (D.C. Cir. 2005). Equally important, the FCC’s attempt to dictate editorial personnel and practices to a newspaper, and to stage-manage “viewpoint diversity” as it occurs in the broader speech marketplace, is profoundly unconstitutional. Miami Herald Publ’g, 418 U.S. at 258; CBS, 412 U.S. at 124-25. The FCC again has no answer to any of these points. It argues simply that the rule is not a regulation of newspapers because it does not apply to all newspapers, but only to those in cross-ownership with a broadcast station (FCC Br. 57). Not only is that assertion completely non- responsive, it is essentially saying to broadcasters, “if you don’t like it, don’t publish.” Petitioners also demonstrated that, by establishing these factors as the price of approval for a transaction, the FCC has placed itself in a position in which it will evaluate the sufficiency of news content and commitments, and can negotiate and extract specific promises from the combination relating to programming, personnel, newsroom investments, and much else. The FCC’s response is, essentially, that it can dictate whatever programming or editorial practices it wants, as long as such measures are “voluntarily” agreed to by an applicant needing approval for a transaction. Id. The FCC is again missing the point: it is well- Case: 08-3078 Document: 003110253685 Page: 24 Date Filed: 08/16/2010 19 settled that unconstitutional restrictions do not become constitutional merely because they are conditioned on the provision of a government benefit. See, e.g., Perry v. Sindermann, 408 U.S. 593, 597 (1972) (government cannot condition benefit on curtailment of constitutional right because “[t]his would allow the government to ‘produce a result which [it] could not command directly’” (quoting Speiser v. Randall, 357 U.S. 513, 526 (1958)). 9 Finally, Tribune demonstrated below that the newspaper-broadcast rule does not implicate the scarcity doctrine, and the Order contains no response; Petitioners repeated the argument here, and the FCC again offers no response. 10 Of course, there is no response: the newspaper rule has nothing to do with the scarcity of the airwaves, because it has no impact on how many different entities own the available stations. Rather, the newspaper rule is the FCC’s attempt to arrogate to 9 The FCC cites New Jersey Coalition for Fair Broadcasting v. FCC, 574 F.2d 1119, 1126 (3d Cir. 1978), as acknowledging that the FCC previously accepted voluntary commitments relating to news coverage. FCC Br. 57-58. That case involved a proceeding in which the Commission was investigating a unique problem: the fact that the state of New Jersey at that time had no in-state VHF stations. Rather than formally reallocate stations from New York City and Philadelphia, the Commission accepted commitments from stations in those cities to devote additional resources to the coverage of news in New Jersey. Nothing in this Court’s review of that decision implies that the FCC may assess the sufficiency of newspaper or broadcast news content and its relationship to diversity of viewpoints; to the contrary, this Court expressly noted that the Commission had “maintain[ed] its traditional posture of not interfering with the programming judgment of broadcasters.” New Jersey Coal., 574 F.2d at 1126. 10 See FCC Br. 95-96 (lumping Petitioners’ argument with arguments that the scarcity doctrine should be overturned). Case: 08-3078 Document: 003110253685 Page: 25 Date Filed: 08/16/2010 20 itself the power to regulate the debate across the entire speech marketplace – a power that neither the statute nor the Constitution grants to the FCC. Buckley v. Valeo, 424 U.S. 1, 48-49 (1976) (per curiam) (“government may [not] restrict the speech of some elements of our society in order to enhance the relative voice of others”). II. THE BASES FOR THE NEWSPAPER OWNERSHIP RULE REMAIN UNEXPLAINED AND INCONSISTENT WITH OTHER CROSS- OWNERSHIP RULES. Petitioners also demonstrated that the newspaper ownership rule must be set aside because the FCC failed to explain adequately the bases for its presumptions and because the rule is inconsistent with the FCC’s other cross-ownership rules. Pet. Br. 40-47. The FCC fails to respond to many of Petitioners’ points, and its few responses only confirm the arbitrariness and unexplained irrationality of the rule. A. The Top-20 Presumption Lacks An Adequate Explanation. Petitioners showed (at 41-42) that the FCC failed to “articulate a satisfactory explanation” for applying its positive presumption to only the largest 20 markets. State Farm, 463 U.S. at 43. The FCC cited several statistics about the number of television stations and newspapers in the top-20 markets compared to other markets but failed to explain how these statistics justified its specific waiver policy. Case: 08-3078 Document: 003110253685 Page: 26 Date Filed: 08/16/2010 21 The FCC responds principally that its decision to draw a line at the top-20 markets is entitled to substantial deference. FCC Br. 45-47; see also Consumers Union Br. 10-13. The mere fact that this is a line-drawing exercise does not excuse the FCC from explaining why the line makes sense in light of the record before it. Sinclair, 284 F.3d at 162 (“notwithstanding the substantial deference to be accorded to the Commission’s line drawing, the Commission cannot escape the requirement that … it provide a reasoned explanation for its action”); see also San Antonio v. United States, 631 F.2d 831, 852 (D.C. Cir. 1980) (line drawing “does not excuse the Commission from articulating ‘fully and carefully the methods by which, and the purposes for which, it has chosen to act’”). The FCC had to provide “a reasonable explanation for the line it has drawn” and demonstrate “that line’s relationship” to the problem addressed by the FCC’s rule. Cassell v. FCC, 154 F.3d 478, 485 (D.C. Cir. 1998); see also Worldcom, Inc. v. FCC, 238 F.3d 449, 461-62 (D.C. Cir. 2001) (FCC is “required to identify the standard and explain its relationship to the underlying regulatory concerns”). Indeed, the FCC’s failure to explain the lines it drew in 2003 led to the remand in Prometheus. 373 F.3d at 411, 420. The FCC’s explanation fails here too. The FCC simply repeats the statistics from the Order about the number of television stations and newspapers in the top- 20 markets versus other markets (at 45, 46-47), but cannot point to any explanation Case: 08-3078 Document: 003110253685 Page: 27 Date Filed: 08/16/2010 22 in the Order demonstrating why these statistics support the FCC’s top-20 presumption. The fact that “the 20 largest markets average 87.8” total voices “compared to 65 on average for the next 10 markets” hardly justifies the new rule. FCC Br. 47. The FCC seems oblivious to the absurdity of claiming that cross- ownership should be permitted in markets with 87 voices but presents a danger where it threatens to reduce the number of voices from 65 to 64. If it is the number of voices that makes the rule or its application rational, and not arbitrary, the FCC must explain where it draws the line, and not simply consider averages across a broad segment of markets by population. There is a fundamental disconnect between the top-20 rule and the “major media voices” test. The FCC’s newspaper ownership rule treats combinations within the top-20 markets as presumptively in the public interest if they leave at least eight independently owned “major media voices,” Order ¶ 53 (JA__), because the eight-voice test ensures that a sufficient number of local sources exist in a market to satisfy the FCC’s diversity rationale, id. ¶ 60 (JA__). As Petitioners demonstrated (at 41-42), however, many combinations in markets 21-50 would also leave at least eight independently owned “major media voices,” but the FCC never confronts this fundamental inconsistency either in the Order or in its brief. In the end, the FCC simply repeats the line from the Order stating that “‘the top 20 markets share a robustness in media and outlet diversity that is not matched Case: 08-3078 Document: 003110253685 Page: 28 Date Filed: 08/16/2010 23 in smaller markets.’” FCC Br. 47 (quoting Order ¶ 63 (JA__)). This is a pure ipse dixit that has no grounding in the statistics the FCC has presented. The FCC’s failure to “articulate a satisfactory explanation” for its top-20 presumption or state a “‘rational connection between the facts found and the choice made” renders the rule arbitrary and capricious. State Farm, 463 U.S. at 43. B. The Newspaper Ownership Rule Remains Internally Inconsistent And Conflicts With Other Cross-Ownership Rules. Petitioners also demonstrated three other inconsistencies inherent in the newspaper ownership rule: the rule “weights” media outlets differently than the one-to-a-market rule without adequate explanation (Pet. Br. 42-43); it counts “voices” differently than other rules that serve viewpoint diversity (id. at 43-44); and it arbitrarily restricts combinations between broadcast stations and all newspapers, even though only “major” newspapers count toward diversity under the rule (id. at 44-45). The FCC’s attempts to defend the Order on these points fail. First, Petitioners explained that the newspaper ownership rule conflicts with the radio-television rule because the FCC has weighted media outlets differently under these two rules, even though they both supposedly serve the same interest – viewpoint diversity. Pet. Br. 42-43; see also Order ¶ 82 (JA__). 11 The FCC again 11 Petitioners also showed that the newspaper ownership rule conflicts with this Court’s decision in Prometheus because, as with the Cross-Media Limits, the FCC Case: 08-3078 Document: 003110253685 Page: 29 Date Filed: 08/16/2010 24 invokes “caution” and “deference.” The FCC claims that it needed to be more cautious about newspaper-radio cross-ownership, because of the “‘unique attributes of newspapers,’” FCC Br. 58 (quoting Order ¶ 63 n.206 (JA__)), and that newspapers are “‘the most organized, systematic gatherers of news and information in their communities,’” id. (quoting Order ¶ 35 (JA__)). Unfortunately for the FCC, the Order does not back up this assertion: the FCC selectively omits that the quotation actually applies to “broadcast stations” as well. See Order ¶ 35 (JA__) (“Newspapers and, to a somewhat lesser extent, broadcast stations still continue to serve as the most organized, systematic gatherers of news and information in their communities.”). If the FCC believes that television stations are equally important sources of local news and information, see, e.g., id. ¶ 57 (JA__), then the FCC had no basis to treat radio differently in the two contexts. The FCC also claims again that it “may proceed ‘incrementally’ when it decides to revisit a longstanding rule.” FCC Br. 59. Even if Section 202(h) permitted such an approach, the case cited, Nat’l Cable & Telecomms. Ass’n v. Brand X Internet Servs., 545 U.S. 967 (2005), is inapposite. In Brand X, the Supreme Court held that it “need not address” the argument that two of the FCC’s has treated media outlets equally without “weighting” them according to their nature, potential reach, or delivery. Pet. Br. 43. The FCC offers no response in its brief. Case: 08-3078 Document: 003110253685 Page: 30 Date Filed: 08/16/2010 25 rules were inconsistent because the FCC could consider the consistency of its reasoning in a separate rulemaking that was underway. Id. at 979, 1002. Here, on the other hand, the FCC has adopted two final rules in the same proceeding that treat the same media inconsistently. In all events, even if the FCC wishes to “‘proceed cautiously’” or “‘incrementally,’” it is not free to ignore relevant evidence or to adopt two related rules that treat the same type of entity in different and inconsistent ways. Sinclair, 284 F.3d at 162; see also State Farm, 463 U.S. at 43 (agency must “articulate a satisfactory explanation for its action”). Second, Petitioners demonstrated that the newspaper ownership rule is irrational because its “voices” test counts only major newspapers and full-power television stations, whereas the one-to-a-market rule counts many more types of voices in its voices test. Pet. Br. 43-44. In a footnote, the FCC argues that “because newspaper/television combinations ‘involve the two most important types of sources for news and information,’ the ‘voices test applied to such combinations’ should include only ‘major voices in order to ensure that diversity in the market is safeguarded.” FCC Br. 51 (quoting Order ¶ 80 n.259 (JA__)); see also Order ¶ 84 n.279 (JA__). The only support the FCC gives for this determination, and the determination that “‘radio is a significantly less important source of news and information,’” FCC Br. 51 (quoting Order ¶ 80 n.259 (JA__)), are two studies (Studies 7 and 8) submitted by Consumers Union. See Order ¶ 80 Case: 08-3078 Document: 003110253685 Page: 31 Date Filed: 08/16/2010 26 n.259 (JA__) (citing CU Comments at 124 (JA__)); id. ¶ 84 n.279 (JA__) (citing CU Comments at 11 (JA__), which discusses Studies 7 and 8). Elsewhere in the Order, however, the FCC specifically declined to rely on the quantitative conclusions from these studies. See id. ¶ 57 n.187 (JA__). It found that the peer review had criticized their methodology and raised critical questions about their conclusions. Id. Indeed, the peer review concluded that the flaws in the studies’ methodology drew into question their results, and “in particular” their conclusions as to which media people “used most frequently or found most important as sources of national news and local news.” 12 Because of the methodological flaws in these studies, the FCC refused to rely on their quantitative conclusions, using them only “as evidence of the fundamental points that consumers continue to rely primarily on traditional media sources” – which include newspapers, broadcast television, and radio – “for their local news” or as “evidence that newer sources of information, including news web sites and blogs, are lesser sources of information for consumers compared to traditional sources of information.” Order ¶ 57 n.187 (JA__). Having rejected the quantitative conclusions in these studies, the FCC cannot then claim that the same studies quantitatively prove the “voice” test in the newspaper-broadcast rule should 12 Steve Wildman, Peer Review of The Internet and Local News and Information, at 3, available at http://www.fcc.gov/mb/peer_review/reviews.html (last visited Aug. 10, 2010). Case: 08-3078 Document: 003110253685 Page: 32 Date Filed: 08/16/2010 27 be different from the one in the one-to-a-market rule. Pet. Br. 43-44. These studies cannot support the newspaper rule’s voices test when, by the FCC’s own admission, the studies demonstrate only that traditional media are more important for local information than newer media (i.e., the Internet). See Sinclair, 284 F.3d at 162. Third, the newspaper ownership rule is also arbitrary because it presumptively prohibits combinations between broadcast stations and any newspaper, even when the newspaper is not a “major media voice” that the FCC considers necessary to diversity. Pet. Br. 44-45. The FCC again tries to have it both ways: it says that even though non-major newspapers (i.e., those with less than 5 percent circulation rates) are not a “major media voice,” it “recognized that even less-read daily newspapers rank among ‘the most influential providers of local news in their markets.’” FCC Br. 52 (quoting Order ¶ 61 (JA__)). The quoted language from the Order, however, addresses the FCC’s “top four prohibition” and simply states that the FCC “consider[s] a daily newspaper and the top four stations to be the most influential providers of local news in their markets” – it says nothing about “less-read” newspapers. Order ¶ 61 (JA__). Indeed, just four paragraphs earlier, the FCC emphasized that “major newspapers … are generally the most important and relevant outlets for news and information in local markets today.” Id. ¶ 57 (JA__) (emphasis added). The FCC has provided no Case: 08-3078 Document: 003110253685 Page: 33 Date Filed: 08/16/2010 28 rationale for extending the presumptions and case-by-case review to combinations involving non-major newspapers. 13 Petitioners also demonstrated that the FCC’s continued prohibition against newspaper-radio combinations is arbitrary, because all radio stations, by definition, are not “major media voices.” Pet. Br. 45. In response, the FCC quotes the Order’s naked assertion that “the Commission could not ignore the possibility that in a specific local market, the ‘combination of a daily newspaper with one or more radio stations may have significant negative implications for the range of viewpoints available.’” FCC Br. 53 (quoting Order ¶ 63 n.206 (JA__)). Given the way the FCC has defined a “major media voice,” however, it would be impossible for a newspaper-radio combination to reduce the number of major voices. The FCC claims (at 53) that it was “especially concerned about small and medium- sized markets,” but even in smaller markets there is no threat to the number of 13 The FCC claims that “‘combinations involving non-major newspapers … will not face as high a hurdle’ in obtaining FCC approval ‘as those involving major newspapers’ because smaller newspapers are less influential than major newspapers.” FCC Br. 52 (quoting Order ¶ 68 n.220 (JA__)). That is cold comfort: the notion that the Commission may assess how “influential” a newspaper is, on a case-by-case (or any) basis, is starkly unconstitutional. The prospect that the Commission could deny a smaller newspaper permission to merge with a station because that paper had an influential writer or had broken important stories is deeply offensive to the First Amendment. In all events, this type of promise cannot satisfy the FCC’s obligation to “articulate a satisfactory explanation for its action including a ‘rational connection between the facts found and the choice made,’” State Farm, 463 U.S. at 43, nor does it satisfy the FCC’s obligation under Section 202(h) to justify retention of the restriction. Case: 08-3078 Document: 003110253685 Page: 34 Date Filed: 08/16/2010 29 major media voices. Even if such a threat existed, the prohibition could be rationally extended only to such small markets. The FCC simply has not explained why it continues to prohibit all such transactions or force them to submit to case- by-case adjudication. State Farm, 463 U.S. at 43. 14 C. The “Top-Four” Restriction Is Arbitrary And Capricious. Petitioners showed that the top-four prohibition within the newspaper ownership rule is arbitrary and capricious because there is no evidentiary support for it and because the FCC has failed to offer a consistent or reasonable explanation for this specific prohibition. Pet. Br. 45-47. The FCC’s response is unavailing. Petitioners demonstrated that the FCC lacks the antitrust rationale for the top-four prohibition that was the asserted justification for a different but similar cross-ownership rule, and that the FCC’s diversity rationale is insufficient. Id. at 45-46. The FCC agrees that an antitrust rationale does not support the top-four prohibition in this context. FCC Br. 50 (“the Commission expressly justified its ‘top four’ restriction on newspaper/television combinations on diversity grounds”). As for the viewpoint diversity rationale, the FCC has not produced any sound basis 14 As with the FCC’s promise to impose a less burdensome hurdle on non-major newspaper combinations, the FCC’s promise of a lesser hurdle for radio combinations is no substitute for a reasoned explanation for the rule. See supra n.13. Case: 08-3078 Document: 003110253685 Page: 35 Date Filed: 08/16/2010 30 for a viewpoint diversity rationale for the newspaper rule at all, for the reasons stated above. See supra pp. 4-9. Petitioners also showed that the FCC’s rationale for the top-four prohibition conflicts with its focus on “major media voices,” rendering the FCC’s rule unexplained and arbitrary. Pet. Br. 46-47. The FCC has no response. Because the FCC cannot identify any justification for this conflict, the Court should set aside the FCC’s “internally inconsistent and inadequately explained” newspaper ownership rule. Gen. Chem. Corp. v. United States, 817 F.2d 844, 857 (D.C. Cir. 1987) (per curiam). 15 15 Citizen Petitioners’ argument (at 27-29) that the FCC failed to provide sufficient notice before adopting its newspaper-broadcast cross-ownership rule is meritless. The FCC’s notice stated that in addition to the specific issues raised, the FCC asked “whether [its] goals would be better addressed by employing an alternative regulatory scheme or set of rules.” 2006 Quadrennial Regulatory Review, Further Notice of Proposed Rule Making, 21 FCC Rcd. 8834 ¶ 4 (2006). The FCC invited comments on whether its cross-ownership limits should “vary depending upon the characteristics of local markets” and “what characteristics should be considered, and how [they] should … be factored into any limits.” Id. ¶ 32. “This leaves little doubt that the Notice provided a sufficient ‘description of the subjects and issues involved’ in the Commission’s decision.” Prometheus, 373 F.3d at 416. The FCC was not required to publish a proposed version of the rule it has adopted; it need only “‘fairly apprise’ the public” of the issues involved “to enable the public to effectively participate in the rulemaking process.” Am. Iron & Steel Inst. v. EPA, 568 F.2d 284, 291, 295 (3d Cir. 1977); see also Forester v. Consumer Prod. Safety Comm’n, 559 F.2d 774, 787 (D.C. Cir. 1977). Citizen Petitioners had ample opportunity to comment on the actual rules that were adopted and in fact did so. Case: 08-3078 Document: 003110253685 Page: 36 Date Filed: 08/16/2010 31 III. THE FCC’S RETENTION OF THE 1999 LOCAL TELEVISION OWNERSHIP RULE IS UNLAWFUL AND ARBITRARY. Petitioners demonstrated that the FCC’s duopoly rule must be set aside because the FCC ignored the remands from this Court and the D.C. Circuit in re- promulgating the 1999 version of this rule without an adequate explanation. Pet. Br. 51-55. The FCC fails to address several of Petitioners’ points, and its limited responses are meritless. A. Re-promulgating The 1999 Local Television Ownership Rule Conflicts With The Sinclair Remand Order. Petitioners showed that in re-adopting the 1999 duopoly rule, the FCC ignored the D.C. Circuit’s remand in Sinclair without an adequate explanation for re-imposing a rule the D.C. Circuit found arbitrary and capricious. Id. at 51-52. Specifically, as Petitioners demonstrated, the FCC attempts to justify the local television rule in the Order on the basis of competition, but the D.C. Circuit held that competition could not justify the FCC’s differing treatment of “voices” in its ownership rules. Id. at 52; Sinclair, 284 F.3d at 164 (the FCC “never explains why such diversity and competition” in other ownership rules “should not also be reflected in its definition of ‘voices’ for the local ownership rule”) (emphasis added)). The FCC ignores this point entirely, confirming that the local television ownership rule must be set aside. Case: 08-3078 Document: 003110253685 Page: 37 Date Filed: 08/16/2010 32 Rather than respond to Petitioners’ showing, the FCC simply re-asserts that “the rule remains necessary to preserve competition among broadcast television stations.” FCC Br. 81 (quoting Order ¶ 100 (JA__)). But the FCC has not shown that competitive concerns justify the rule. The FCC has not started from scratch in re-promulgating the rule – there is no careful discussion of any evidence justifying these rules, nor is there a discussion of how the evidence specifically supports the numerical limits adopted or the choices made. Rather, the FCC simply states that in 2002 it rejected the rule it now adopts, but that it has decided to retain the rule because this Court tossed the numerical limits the FCC adopted in 2002. Order ¶¶ 82, 101 (JA__, __). This does not satisfy Section 202(h), see Prometheus, 373 F.3d at 395 (requiring analysis that “ordinarily applies to an agency’s decision to promulgate new regulations”), much less the D.C. Circuit’s remand in Sinclair. The FCC also fails to respond to Petitioners’ showing that the FCC has not developed a record to support its differing treatment of “voices” under the local television ownership rule and one-to-a-market rule or a record demonstrating that other “voices” do not affect the competitive markets for advertisers or viewers so as to justify their exclusion. See Pet. Br. 53. In the Order, the FCC bases its “voices” test on competition among local television stations. Order ¶ 100 (JA__). Yet the FCC fails to provide any evidence concerning how (or even whether) other “voices” offer “an incentive to television stations to invest in better programming Case: 08-3078 Document: 003110253685 Page: 38 Date Filed: 08/16/2010 33 and to provide programming that is preferred by viewers” – the primary goal competition supposedly serves. Order ¶ 97 (JA__); see Comments of NAB at 102- 10 (Oct. 23, 2006) (JA__) (demonstrating that other voices affect competition); Further Comments of NAB at 19-23 (Dec. 11, 2007) (JA__). As this is the FCC’s principal rationale for the local television ownership rule, it was incumbent on the FCC to provide evidence supporting its decision to ignore other “voices” and the D.C. Circuit’s remand. See Prometheus, 373 F.3d at 395. It failed to assume that burden. The FCC also fails to respond to Petitioners’ showing that the only evidence cited by the FCC to support its exclusion of certain “voices” actually contradicts its conclusion. See Pet. Br. 53. 16 B. Re-Adoption Of The Local Television Ownership Rule Is Inconsistent With Prior FCC Findings. Petitioners demonstrated that the duopoly rule must also be set aside because the FCC failed to explain adequately its reversal of course from the path outlined in the 2003 Order in which the FCC concluded that competition no longer justified 16 The FCC correctly demonstrates that the Citizen Petitioners’ arguments concerning any evaluation of the effect of the digital television transition would have been premature. FCC Br. 83; see Citizen Pet’rs’ Br. 43-45. Commenters explained that the benefits of multicasting may never be realized because many broadcasters may not invest in this technology until cable providers do. Opp’n of NAB to Pet. For Reconsideration at 11 (May 6, 2008) (JA__). In all events, the Citizen Petitioners can hardly argue that the FCC should have counted nascent technologies like multicasting, while it excluded established competitors such as radio, newspapers, cable, and the Internet from consideration under the local television ownership rule. See, e.g., Comments of NAB at 102-10 (JA__); Further Comments of NAB at 19-23 (JA__). Case: 08-3078 Document: 003110253685 Page: 39 Date Filed: 08/16/2010 34 the 1999 rule. Pet. Br. 53-55. The FCC does not respond to Petitioners’ showing or otherwise try to justify its determination that “competition for … advertisers” justified re-adoption of the rule. Order ¶ 97 (JA__). The FCC instead emphasizes its determination that competition in local markets “‘provides an incentive to television stations to invest in better programming and to provide programming that is preferred by viewers.’” FCC Br. 76 (quoting Order ¶ 97 (JA__)); see also id. at 76-77. This evades the issue. As in the current Order, the FCC in its 2003 Order declared that its “competition goal seeks to ensure that for each television market, numerous strong rivals are actively engaged in competition for viewing audiences.” 2003 Order ¶ 150. After examining audience share data, however, the FCC determined that “the evidence we have from common ownership of two television stations suggests that more viewers prefer the post-merger programming” and that, accordingly, the 1999 rule “is overly restrictive.” Id. Based on this evidence, the FCC concluded that “some relaxation of the current rule … would facilitate efficiencies and likely result in the delivery of programming preferred by viewers” and so the 1999 “rule cannot be justified on grounds of competition.” Id. 17 The FCC never addresses this evidence or explains how (or even whether) the situation has changed. Fox Television Stations, Inc. v. FCC, 129 S. Ct. 1800, 17 The FCC’s suggestion (at 77) that its “relaxation of the rule in 2003” was based entirely on viewpoint diversity is revisionist history. Case: 08-3078 Document: 003110253685 Page: 40 Date Filed: 08/16/2010 35 1811 (2009) (“a reasoned explanation is needed for disregarding facts and circumstances that underlay or were engendered by the prior policy”). The most that the FCC can muster in response to the 2003 Order is its agreement with commenter AFL-CIO “that failing to retain the 1999 rule would ‘trigger multiple station mergers in local markets,’ and ‘result[ ] in a loss of newscasts and shared news product.’” FCC Br. 76-77. This naked assertion, however, fails to grapple with the FCC’s prior determination; in the 2003 Order, the FCC concluded that station mergers resulted in audience-preferred programming – precisely the goal the FCC is trying to reach. 18 The FCC has failed to explain its disregard of facts and circumstances underlying the 2003 determination. IV. Another Open-Ended Remand Is Unwarranted. Finally, because the newspaper ownership and local television ownership rules are unlawful and unconstitutional, the appropriate relief is either vacatur of the rules or a remand requiring the FCC to issue any revised rules within, at most, 120 days. Pet. Br. 55-57. The FCC does not contest Petitioners’ request for a limited, supervised remand of 120 days if this Court holds any part of these rules unlawful or unconstitutional. See FCC Br. 103 n.33. 18 Consumers Union highlights the FCC’s statement “‘that the record now before us is unpersuasive regarding the effects of multiple ownership on local programming.’” Consumers Union Br. 17 n.17 (quoting Order ¶ 103 (JA__)). There, however, the FCC only addressed its prior determinations regarding localism, not competition. See Order ¶ 103 (JA__) (citing 2003 Order ¶¶ 155-64). The statement provides no support for the FCC’s current Order. Case: 08-3078 Document: 003110253685 Page: 41 Date Filed: 08/16/2010 36 The FCC argues that the Court should not vacate these rules, id., but fails to address Petitioners’ point that there is no risk of disruption from vacatur. The FCC must consent to the issuance or modification of licenses and, with appropriate motivation, could adopt well-reasoned rules within an adequate amount of time to avoid any disruptive consequences that would flow from vacating these rules. Pet. Br. 56. Case: 08-3078 Document: 003110253685 Page: 42 Date Filed: 08/16/2010 37 CONCLUSION For the reasons stated, the Court should vacate the newspaper ownership rule and the local television ownership rule as unconstitutional or arbitrary, capricious, and otherwise unlawful, or, in the alternative, remand these rules for the FCC to issue revised rules within 120 days. Respectfully submitted, /s/ Carter G. Phillips Ellen S. Agress NEWS CORPORATION 1211 Avenue of the Americas 28th Floor New York, NY 10036 Carter G. Phillips Counsel of Record Mark D. Schneider James P. Young Ryan C. Morris SIDLEY AUSTIN LLP 1501 K Street, N.W. Washington, DC 20005 (202) 736-8000 Counsel for Petitioners Tribune Company and Fox Television Stations, Inc. Maureen A. O’Connell News Corporation 444 North Capitol Street, NW Suite 740 Washington, DC 20001 Counsel for Fox Television Stations, Inc. Donald J. Liebentritt Charles J. Sennet Elisabeth M. Washburn TRIBUNE COMPANY 435 N. Michigan Ave Chicago, IL 60611 Counsel for Tribune Company Case: 08-3078 Document: 003110253685 Page: 43 Date Filed: 08/16/2010 CERTIFICATION OF COMPLIANCE WITH FEDERAL RULE OF APPELLATE PROCEDURE 32(a) This brief complies with the type-volume limitations of Federal Rule of Appellate Procedure 32(a)(7)(B), and Rules of this Court, because it contains 8,861 words (as determined by the Microsoft Word 2007 word-processing system used to prepare the brief), excluding the parts of the brief exempted by Federal Rule of Appellate Procedure 32(a)(7)(B)(iii). This brief complies with the typeface requirements of Federal Rule of Appellate Procedure 32(a)(5) and the type-style requirements of Federal Rule of Appellate Procedure 32(a)(6) because it has been prepared in a proportionally spaced typeface using the Microsoft Word 2007 word-processing system in 14- point Times New Roman font. The undersigned further certifies that the text of the electronic version of the brief filed is identical to the text in the paper copies filed, and that the PDF version of this brief submitted via the Court’s electronic filing system has been scanned for viruses using McAfee Virus Scan Enterprise Edition, and that no virus was detected. /s/ Ryan C. Morris RYAN C. MORRIS Case: 08-3078 Document: 003110253685 Page: 44 Date Filed: 08/16/2010 CERTIFICATE OF FILING AND SERVICE I hereby certify that on this 16th day of August 2010, the foregoing document was filed electronically with United States Court of Appeals for the Third Circuit via the Court’s Electronic Filing System. I further certify that I caused a true and correct copy of the foregoing document to be served electronically upon the following counsel in this matter through this Court’s Case Management/Electronic Filing System or by electronic mail upon consent, as appropriate: Matthew Berry Daniel M. Armstrong Jacob M. Lewis Joseph R. Palmore James M. Carr P. Michele Ellison C. Grey Pash, Jr. Federal Communications Commission Office of the General Counsel Room 8-A741 445 12th Street, S.W. Washington, DC 20554 Counsel for Federal Communications Commission Catherine G. O’Sullivan Nancy C. Garrison Robert B. Nicholson Robert J. Wiggers U.S. Department of Justice Antitrust Division/Appellate Division 950 Pennsylvania Avenue, N.W. Room 3224 Washington, DC 20530-0001 Counsel for United States of America Case: 08-3078 Document: 003110253685 Page: 45 Date Filed: 08/16/2010 John R. Feore Michael D. Hays M. Anne Swanson Dow Lohnes PLLC 1200 New Hampshire Ave., N.W. Suite 800 Washington, D.C. 20036 Counsel for Cox Enterprises, Inc.; Cox Radio, Inc.; Cox Broadcasting, Inc.; Miami Valley Broadcasting Corporation; and Media General, Inc. James R. Bayes Kathleen A. Kirby Richard E. Wiley Martha E. Heller Wiley Rein LLP 1776 K Street, NW Washington, DC 20006 Counsel for Newspaper Association of America, Belo Corp., Gannett Co., Inc. and Morris Communications Co., LLC Robert A. Long Jr. Enrique Armijo Covington & Burling LLP 1201 Pennsylvania Avenue NW Washington, DC 20004-2401 Counsel for Coalition of Smaller Market Television Stations and Raycom Media, Inc. L. Andrew Tollin Kenneth E. Satten Wilkinson Barker Knauer, LLP 2300 N Street NW, Suite 700 Washington, DC 20037-1128 Counsel for Bonneville International Corporation and The Scranton Times, L.P. Elaine J. Goldenberg Joshua M. Segal Jenner & Block LLP 1099 New York Avenue NW, Suite 900 Washington, DC 20001-4412 Counsel for National Association of Broadcasters Clifford M. Harrington Jack McKay Pillsbury Winthrop Shaw Pittman LLP 2300 N Street NW Washington, DC 20037 Counsel for Sinclair Broadcast Group, Inc. Angela J. Campbell Adrienne T. Biddings Georgetown University Law Center Institute for Public Representation 600 New Jersey Avenue NW Suite 312 Washington, DC 20001-2075 Counsel for Media Alliance and Office of Communication of the United Church of Christ, Inc. Andrew Jay Schwartzman Media Access Project Suite 1000 1625 K Street NW Washington, DC 20006 Counsel for Prometheus Radio Project Case: 08-3078 Document: 003110253685 Page: 46 Date Filed: 08/16/2010 Glenn B. Manishin Duane Morris LLP 505 9th Street, NW, Suite 1000 Washington, DC 20004 Counsel for Consumers Union and Consumer Federation of America Coriell S. Wright 501 Third Street NW Suite 875 Washington, DC 20001 Counsel for Free Press John F. Sturm Newspaper Association of America 4401 Wilson Blvd. Suite 900 Arlington, VA 22203 Counsel for Newspaper Association of America Jane E. Mago Jerianne Timmerman National Association of Broadcasters 1771 N Street, N.W. Washington, DC 20036 Counsel for NAB Richard E. Wiley Helgi C. Walker James R. Bayes John E. Fiorini III Jamie Alan Aycock Wiley Rein LLP 1776 K Street, N.W. Washington, DC 20006 Counsel for CBS Corporation and CBS Broadcasting Inc. Richard J. Bodorff Helgi C. Walker Eve Klindera Reed Christiane M. McKnight Wiley Rein LLP 1776 K Street, NW Washington, DC 20006 Counsel for Clear Channel Communications, Inc /s/ Ryan C. Morris Ryan C. Morris Sidley Austin LLP 1501 K Street, NW Washington, DC 20005 Counsel for Petitioners Tribune Company and Fox Television Stations, Inc. Case: 08-3078 Document: 003110253685 Page: 47 Date Filed: 08/16/2010