No. 19-1231 In the Supreme Court of the United States FEDERAL COMMUNICATIONS COMMISSION AND UNITED STATES OF AMERICA, PETITIONERS v. PROMETHEUS RADIO PROJECT, ET AL. ON PETITION FOR A WRIT OF CERTIORARI TO THE UNITED STATES COURT OF APPEALS FOR THE THIRD CIRCUIT REPLY BRIEF FOR THE PETITIONERS JEFFREY B. WALL Acting Solicitor General Counsel of Record Department of Justice Washington, D.C. 20530-0001 SupremeCtBriefs@usdoj.gov (202) 514-2217 TABLE OF CONTENTS Page A. Respondents defense of the decision below is unpersuasive ...................................................................... 2 B. This Court s review is warranted .................................... 8 TABLE OF AUTHORITIES Cases: Air Transp. Ass n of Am. v. Civil Aeronautics Bd., 732 F.2d 219 (D.C. Cir. 1984) ............................................... 7 FCC v. National Citizens Comm. for Broad., 436 U.S. 775 (1978)...................................................... 2, 5, 12 FCC v. WNCN Listeners Guild, 450 U.S. 582 (1981) .................................................................... 2, 3, 5, 8, 12 Motor Vehicle Mfrs. Ass n of the U.S., Inc. v. State Farm Mut. Auto. Ins. Co., 463 U.S. 29 (1983) ............... 2, 4 National Broad. Co. v. United States, 319 U.S. 190 (1943) .................................................................................. 2, 5 Prometheus Radio Project v. FCC, 373 F.3d 372 (3d Cir. 2004), as amended (June 3, 2016), cert. denied, 545 U.S. 1123 (2005) ....................................... 9 Statutes: Telecommunications Act of 1996, Pub. L. No. 104-104, 110 Stat. 56; 47 U.S.C. 303 note (§ 202(h)) ......................................... 8, 11 (I) In the Supreme Court of the United States No. 19-1231 FEDERAL COMMUNICATIONS COMMISSION AND UNITED STATES OF AMERICA, PETITIONERS v. PROMETHEUS RADIO PROJECT, ET AL. ON PETITION FOR A WRIT OF CERTIORARI TO THE UNITED STATES COURT OF APPEALS FOR THE THIRD CIRCUIT REPLY BRIEF FOR THE PETITIONERS The decision below vacated the Federal Communica- tions Commission s (FCC or Commission) comprehen- sive reforms of outdated media ownership rules, with far-reaching consequences for domestic broadcast mar- kets. The Commission first concluded in 2003 that the ownership rules should be substantially overhauled be- cause they inhibit beneficial combinations between struggling traditional outlets and no longer reflect cur- rent market realities. During the ensuing period, the Commission has repeatedly reaffirmed that position, while at the same time adhering to its longstanding view that potential effects on female and minority ownership are among the factors the agency should consider in de- termining whether particular regulatory changes will serve the public interest. In the Orders under review, after a searching examination of the available evidence, the agency concluded that reform of the ownership (1) 2 rules is unlikely to affect female and minority owner- ship and that the bare possibility of an adverse effect on such ownership is an insufficient reason to forgo regu- latory changes that are otherwise highly desirable. For the past 17 years, however, the same divided Third Circuit panel has repeatedly thwarted the Com- mission s efforts to reform its ownership rules. In the decision below, it rejected the Commission s reasoned policy judgments and imposed a rigid requirement that the Commission identify the likely effect on female and minority ownership with some unspecified degree of precision before any change can take effect. Respond- ents defense of that ruling largely repeats the flawed reasoning of the court below, while ignoring this Court s precedents repeatedly affirming the breadth of the FCC s discretion to regulate in the public interest. See, e.g., FCC v. National Citizens Comm. for Broad., 436 U.S. 775 (1978) (NCCB). Respondents efforts to char- acterize the petition for a writ of certiorari as seeking one-off error correction are similarly unpersuasive. The panel s decisions have distorted the quadrennial- review process, and they will seriously impair the Com- mission s ability to regulate in the public interest going forward. This Court s review is warranted. A. Respondents Defense Of The Decision Below Is Unpersuasive  The scope of review under the  arbitrary and capri- cious standard is narrow and a court is not to substitute its judgment for that of the agency. Motor Vehicle Mfrs. Ass n of the U.S., Inc. v. State Farm Mut. Auto. Ins. Co., 463 U.S. 29, 43 (1983). This Court has repeat- edly affirmed the FCC s broad discretion to regulate in the public interest. See FCC v. WNCN Listeners Guild, 450 U.S. 582 (1981); NCCB, supra; National Broad. Co. 3 v. United States, 319 U.S. 190 (1943) (NBC). In the Or- ders under review, the agency carefully considered the record evidence, acknowledged gaps in the available data, and reached reasonable policy conclusions in light of both the record and the agency s own extensive expe- rience. Respondents attacks on those Orders lack merit. 1. The court of appeals erred in treating the possi- bility of adverse effects on female and minority owner- ship as a dispositive consideration in all FCC quadrennial- review proceedings. See Pet. App. 34a. Respondents observe that  [t]he FCC has  historically embraced ownership diversity as part of its public interest man- date, and continues to do so. Br. in Opp. 23 (citation omitted). But the Commission s longstanding practice of considering female and minority ownership as one factor in its public-interest analysis is vastly different from treating that consideration as an absolute prereq- uisite in all rulemakings. Respondents do not defend or even address the court of appeals determination that  the Commission must ascertain on record evidence the likely effect of any rule changes it proposes * * * on ownership by women and minorities. Pet. App. 33a- 34a. The court s ruling substantially constrains the FCC s  broad discretion in determining how much weight should be given to goals like gender and racial diversity,  and what policies should be pursued in pro- moting those goals. WNCN, 450 U.S. at 600. 2. The court of appeals also disregarded the defer- ential arbitrary-and-capricious standard by substitut- ing its own judgment for the agency s reasoned policy analysis. See Pet. App. 28a-32a. Respondents fault the Commission for  set[ting] forth no data about female ownership and relying on  a woefully inadequate  anal- ysis of faulty data pertaining to minorities. Br. in Opp. 4 30-31. But the Commission repeatedly solicited data pertaining to the effects of potential rule changes on fe- male and minority ownership. See Pet. App. 45a. When commenters failed to submit meaningful evidence on the subject, see id. at 33a, 45a, the Commission drew reasonable inferences from the available data, while ac- knowledging the evidentiary gaps that respondents now highlight. See, e.g., id. at 73a nn.325-326. Noting that the FCC here made an affirmative find- ing of  no harm, respondents argue that,  when agen- cies do rely on data, they  do not have free rein to use inaccurate data.  Br. in Opp. 31, 33 (citation omitted). That argument gives insufficient weight to the agency s factual findings, see State Farm, 463 U.S. at 43, and re- flects a misunderstanding of the FCC s core rationale here. Although the Commission stated several times that modifications to the ownership rules would not likely reduce female and minority ownership, see, e.g., Pet. App. 195a, its bottom-line conclusion was that it could not  justify retaining the rule[s] * * * based on the unsubstantiated hope that the rule[s] will promote minority and female ownership. Id. at 215a; see id. at 200a, 236a (similar). The agency thus reasonably con- cluded that, given the compelling competitive justifica- tions for loosening the ownership rules and the absence of meaningful data suggesting that this step would re- duce female and minority ownership, the bare possibil- ity that loosening the rules would have that adverse ef- fect was not a sufficient reason to forgo an otherwise beneficial regulatory change. This Court s precedents confirm the FCC s discre- tion to make the policy choices it made here. In advanc- ing the public interest, the Commission may  rely on its judgment, based on experience,  notwithstanding the 5 inconclusiveness of the rulemaking record  particularly when the relevant evidence  is difficult to compile and the potential effects of the rule changes do   not lend themselves to detailed forecast.  NCCB, 436 U.S. at 796-797 (citation omitted); see NBC, 319 U.S. at 224 ( It is not for us to say that the  public interest will be fur- thered or retarded by the [regulations]. ); WNCN, 450 U.S. at 600; Pet. 17-19. Respondents address NCCB only in a parenthetical, see Br. in Opp. 33, and do not address WNCN or NBC at all. The Third Circuit s methodology was flatly inconsistent with those deci- sions. Finally, respondents contend that the Reconsidera- tion Order  was a wholly unexplained about-face from [the FCC s] judgment in the 2016 Order that precisely the same data did not justify relaxing the ownership rules. Br. in Opp. 33; see 32 FCC Rcd 9802 (Reconsid- eration Order) (excerpted at Pet. App. 153a-242a); 31 FCC Rcd 9864 (2016 Order) (excerpted at Pet. App. 57a- 152a). Respondents argument (see Br. in Opp. 33-34) conflates two distinct conceptions of  ownership diver- sity. The 2016 Order retained in significant part the three major ownership rules at issue here the newspa- per/broadcast cross-ownership rule, the radio/television cross-ownership rule, and the local television ownership rule for the stated purposes of  promot[ing] competi- tion and  viewpoint diversity, and  not with the pur- pose of preserving or creating specific amounts of mi- nority and female ownership. Pet. App. 63a-64a; see 31 FCC Rcd at 9944, 9951-9952. In adopting a  modest loosening of the newspaper/broadcast cross-ownership rule in the 2016 Order, the Commission concluded citing the same data at issue here that the record  fails to 6 demonstrate that this change was  likely to result in harm to minority and female ownership. 31 FCC Rcd at 9944. Although the 2016 Order also stated that the ownership rules  promote[ ] opportunities for diver- sity, Pet. App. 64a; see 31 FCC Rcd at 9944, 9952 (same), the Reconsideration Order explained that this observation  did not indicate a belief that the rule[s] would promote minority and female ownership specifi- cally, but rather that the rule[s] would promote owner- ship diversity generally by requiring the separation of [media] station ownership. Pet. App. 199a; see id. at 215a, 236a (similar). With respect to the general weighing of the costs and benefits associated with the agency s ownership rules, the Reconsideration Order unquestionably reflected a substantial departure from the analysis in the 2016 Or- der. But the agency explained in detail its reasons for concluding that, in light of extensive changes to the me- dia landscape, the ownership rules no longer served the public interest. See Pet. 10. The court below did not find that aspect of the FCC s analysis to be deficient. With respect to the specific issue on which the court be- lieved that additional evidence and analysis were required the presence or absence of any meaningful link between the ownership rules and minority and fe- male ownership the Reconsideration Order was nei- ther an  about-face nor  unexplained. Br. in Opp. 33. 3. The Third Circuit compounded its errors on the merits by invalidating the Reconsideration and Incuba- tor Orders in full, as well as the  eligible entity defini- tion from the 2016 Order, even though the court s rea- soning pertained only to discrete aspects of the Recon- sideration Order. See Pet. 27; see also 33 FCC Rcd 7911 (Incubator Order) (excerpted at Pet. App. 243a-272a). 7 Respondents argue (Br. in Opp. 35-37) that the Com- mission s adoption of a revenue-based eligible-entity definition and eligibility criteria depended on the agency s finding that repeal of the ownership rules would not reduce female and minority ownership levels. The Third Circuit did not endorse this proposition, and respondents cite nothing in the Orders indicating that the eligible-entity definition and eligibility criteria are contingent in this way. In the same vein, respondents suggest (id. at 36) that, in light of the FCC s repeal of the ownership rules, the Commission might be required to adopt an eligible-entity definition that is  targeted more directly to race and gender ownership diversity. Respondents do not engage, however, with the Commis- sion s extensive analysis of the constitutional limitations on the use of race- and gender-conscious standards. See Pet. App. 120a-133a, 136a-152a, 264a. 4. In the alternative, respondents contend that the FCC s analysis of ownership diversity  fail[s] for lack of adequate notice. Br. in Opp. 34. The Third Circuit did not address this issue, see id. at 35, and the argument lacks merit. The notice of proposed rulemaking was  sufficiently descriptive of the subjects and issues in- volved so that interested parties [could] offer informed criticism and comments. Air Transp. Ass n of Am. v. Civil Aeronautics Bd., 732 F.2d 219, 224 (D.C. Cir. 1984) (citation and internal quotation marks omitted; brackets in original). And even if the notice could be deemed inadequate, the 2016 Order relied on the same statistical analysis whose use in the Reconsideration Order respondents attack as defective. See Pet. App. 66a-67a (comparing different data sets in rejecting  the claim that tightening the Local Television Ownership Rule will promote increased opportunities for minority 8 and female ownership ). Respondents therefore had an opportunity to criticize that analysis in conjunction with the reconsideration proceedings. Cf. WNCN, 450 U.S. at 591 n.22 (Court did  not consider the action of the Commission, even if a procedural lapse, to be a suffi- cient ground for reopening the proceedings where the undisclosed study in question was released before the agency s  denial of reconsideration ). B. This Court s Review Is Warranted This Court s review is necessary to undo the damage that the decision below inflicts on the Nation s broad- cast markets and the Commission s ability to respond to market developments. Respondents characterize the petition for a writ of certiorari as seeking backward- looking error correction. That characterization ignores both the context of this litigation and the court of ap- peals actual holding. 1. Section 202(h) of the Telecommunications Act of 1996, as amended, 47 U.S.C. 303 note, establishes an  it- erative process through which the FCC can keep pace with market developments by taking  a fresh look at its rules every four years and reassessing  how its rules function in the marketplace. Pet. App. 48a (Scirica, J., concurring in part and dissenting in part). The Third Circuit s series of decisions has substantially impeded the proper functioning of that process. Respondents contend that, in light of the Commis- sion s short-lived 2016 decision to retain the ownership rules in significant part, this case  hardly [presents] a decades-long freezing of rules that the agency has long wanted to jettison. Br. in Opp. 27. But the blanket ban on newspaper/broadcast cross-ownership has remained in place since 1975, despite three separate FCC at- 9 tempts to repeal it. See Pet. 30. The broadcast owner- ship rule adopted 45 years ago cannot plausibly be thought to reflect current market realities. See Prome- theus Radio Project v. FCC, 373 F.3d 372, 398 (3d Cir. 2004), as amended (June 3, 2016) (Prometheus I), cert. denied, 545 U.S. 1123 (2005). In arguing that the ownership rules continue to serve a useful purpose, respondents cite extra-record sources for the proposition that  [b]roadcasting continues to drive local news and content creation. Br. in Opp. 27. But as the Reconsideration Order found, the rules may actually  prevent[ ] local news outlets from achieving ef- ficiencies by combining resources. Pet. App. 173a, 180a. And by precluding the Commission s revised rules from ever taking effect, the court of appeals re- peated vacaturs have  depriv[ed] both the Commission and Congress [of ] the valuable opportunity to evaluate the new rules and the effects of deregulation on the me- dia marketplace, thus  [s]hort-circuiting the iterative process the statute contemplates. Prometheus I, 373 F.3d at 438 (Scirica, J., dissenting in part, concurring in part). Respondents have no answer to this point. 2. If left in place, the Third Circuit s decision will also distort pending and future quadrennial reviews by imposing a blanket requirement that the FCC deter- mine, with some unstated degree of precision, the effect of any change to the ownership rules on female and mi- nority ownership. Pet. App. 34a. Respondents assert that  no court-imposed  effective requirement demands a precise finding on ownership diversity before altering ownership rules. Br. in Opp. 25-26 (brackets and cita- tion omitted). That statement cannot be reconciled with the Third Circuit s unambiguous directive:  On remand the Commission must ascertain on record evidence the 10 likely effect of any rule changes it proposes and what- ever  eligible entity definition it adopts on ownership by women and minorities, whether through new empirical research or an in-depth theoretical analysis. Pet. App. 34a. Respondents also assert that the court of appeals did not  require the Commission to give any predeter- mined weight to ownership diversity in balancing com- peting policies. Br. in Opp. 26. But by rejecting the Commission s conclusion that it could no longer retain the ownership rules  based on the unsubstantiated hope that [they] will promote minority and female owner- ship, Pet. App. 215a, the court plainly elevated poten- tial effects on female and minority ownership over other considerations. By requiring additional empirical analysis of owner- ship diversity, while preventing the regulatory changes that would allow the agency to study the new rules ef- fects, the Third Circuit s ruling leaves the agency with no apparent path forward. Respondents vaguely sug- gest that the FCC can  correct any unreliable owner- ship data filed, cross reference its existing comprehen- sive transaction data with ownership filings to fill in gaps and improve comparisons over time, and ensure complete reporting by broadcast licensees. Br. in Opp. 32-33. But respondents do not explain how the tabula- tion of actual female and minority ownership levels which the FCC was already doing well before the Third Circuit s decision, see, e.g., Pet. App. 78a will help the FCC to predict the effects of innovative rule changes that it has not been allowed to implement. Given the Third Circuit s distortion of ongoing and future quadrennial-review proceedings, respondents plea for the Court to  allow[ ] the agency to move on and get it right is hard to take seriously. Br. in Opp. 29; 11 see id. at 24-29. Over the past 17 years, the Commission has repeatedly attempted to comply with the panel s ju- dicially imposed standards, and each time the court of appeals has rebuffed the agency s effort. Remitting the Commission to yet another round of administrative review to be performed in the shadow of the Third Circuit s critical misstatement of the governing legal standard would merely prolong the FCC s inability to fulfill its obligations under Section 202(h). 3. Finally, the Third Circuit s continued retention of jurisdiction, including in the decision below, see Pet. App. 37a-38a, has effectively prevented (and will con- tinue to prevent) other courts from addressing the questions presented here. Respondents describe the court of appeals retention of jurisdiction as  routine, Br. in Opp. 21 n.4, but they do not dispute that other circuits have acceded to it and that future legal chal- lenges falling within  the scope of the remand will be heard by the Third Circuit. Id. at 26. Respondents con- tention (id. at 1) that the absence of a circuit conflict militates against certiorari therefore rings hollow. Respondents also attempt to leverage the govern- ment s opposition to certiorari at earlier stages of this litigation, arguing that a  plea for pure error correction is even less certworthy now. Br. in Opp. 18. But the government s previous restraint simply confirmed its willingness to attempt in good faith to address the panel s concerns. When the government opposed certi- orari in 2005 and 2012, it had not yet experienced 17 years of futility in attempting to comply with the Third Circuit s misapprehension of the governing standards. Nor had the court of appeals yet saddled the Commis- sion with a rigid requirement that it ascertain, via  em- pirical research or an in-depth theoretical analysis, 12 Pet. App. 34a, the future effects of any rule changes on female and minority ownership. The legal and practical significance of the decision below can adequately be appreciated only by consider- ing the cumulative effects of the court of appeals re- peated vacatur orders issued over an extended period of time. This Court s review is necessary to free the Commission from the  revolving-door review perpetu- ated by the Third Circuit s legal errors. Br. in Opp. 29. This Court has previously granted review to preserve the Commission s authority to regulate in the public in- terest, see, e.g., NCCB, supra; WNCN, supra, and the same course is warranted here. * * * * * For the foregoing reasons and those stated in the pe- tition for a writ of certiorari, the petition should be granted. Respectfully submitted. JEFFREY B. WALL Acting Solicitor General AUGUST 2020