U.S. Supreme Court permits FCC to loosen media ownership rules

FILE PHOTO: The Supreme Court in Washington
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By Andrew Chung and David Shepardson

WASHINGTON (Reuters) -The U.S. Supreme Court on Thursday allowed the Federal Communication Commission to loosen local media ownership restrictions, handing a victory to broadcasters in a ruling that could facilitate industry consolidation as consumers increasingly move online.

In a 9-0 ruling authored by Justice Brett Kavanaugh, the justices overturned a lower court decision that had blocked the FCC's repeal of some media ownership regulations in 2017 for failing to consider the effects on ownership by racial minorities and women. Critics of the industry have said further consolidation could limit media choices for consumers.

The justices acted in appeals by the FCC, companies including News Corp, Fox Corp and Sinclair Broadcast Group Inc and the National Association of Broadcasters.

The associations for other broadcast networks' local affiliates, including ABC, NBC and CBS, backed the appeals, arguing that consolidation would help ensure the economic survival of local television amid heavy competition from internet companies that provide video content. Broadcast television stations have said they are increasingly losing advertising dollars to digital platforms.

In 2017, the FCC - then led by Republicans during former President Donald Trump's administration - voted to eliminate a ban in place since 1975 on cross-ownership of a newspaper and TV station in a major market. It also voted to make it easier for media companies to buy additional TV stations in the same market, and for companies to buy additional radio stations in some markets.

The FCC, now equally divided between Democrats and Republicans, is led by acting chairwoman Jessica Rosenworcel, a Democrat, who voted against the 2017 decision. The agency is set to have a Democratic majority once President Joe Biden nominates and the Senate confirms a new commissioner. The FCC could then seek to reverse the 2017 order.

Rosenworcel did not immediately respond to a request for comment after the ruling.

Writing for the unanimous court, Kavanaugh said that the FCC reasonably reviewed the ownership rules to find that repealing or modifying them "was not likely to harm minority and female ownership."

Kavanaugh added: "The FCC reasoned that the historical justifications for those ownership rules no longer apply in today's media market, and that permitting efficient combinations among radio stations, television stations and newspapers would benefit consumers."

The case highlighted diverging views on the best way to ensure a competitive environment that promotes a broad range of local news and information. Critics of the FCC's action have said relaxing ownership rules could jeopardize a wider array of sources at the local level.

The Philadelphia-based 3rd U.S. Circuit Court of Appeals had thwarted the FCC's efforts to revise the rules since 2003 in a series of decisions. The new rules were challenged by a number of community advocacy groups led by the Prometheus Radio Project. The 3rd Circuit in 2019 blocked the new rules.

Former FCC Commissioner Mike O'Rielly, a Republican who voted for the 2017 order, said he expects there will be some "strategic deals" to consolidate in which a local newspaper could be acquired, but that "no massive deals" are going to happen given the struggling local media sector.

Cheryl Leanza, a lawyer for the plaintiffs who challenged the 2017 FCC decision, said that "the good news is the Biden FCC, once it gains a working majority, can quickly get to work building a solid record to promote the public interest standard and media ownership diversity."

Advocacy group Free Press said the Biden FCC and Congress "must recognize that hedge-fund and Wall Street-driven consolidation harms local communities, and only decimates what's left of competition and diversity. ... The silver lining here is (the court) deferred to the agency's judgment and left room for a new commission to get this right."

David Chavern, CEO of the News Media Alliance group that represents more than 2,000 news organizations, hailed the ruling and said the previous restrictions "had shackled the newspaper industry for far too long. The repeal of the ban will generate much needed investments and cross-platform synergies that will help sustain local news media."

(Reporting by Andrew Chung in New York and David Shepardson in Washington; Editing by Will Dunham)