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Speaker 1: This is Bloomberg Law with June Brussel from Bloomberg Radio.

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Speaker 1: In a unanimous decision, the Supreme Court let the Federal

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Speaker 1: Communications Commission relax the limits on the ownership of local

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Speaker 1: television and radio stations, siding with the broadcast industry and

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Speaker 1: Trump era regulators in a long running fight. Joining me

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Speaker 1: is Match Schettenhelm Litigation and government analysts for Bloomberg Intelligence.

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Speaker 1: Matt explained the change in rules here. So, this is

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Speaker 1: a long running efforts by the FCC to look at

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Speaker 1: easing its rules on media ownership for broadcast stations. And

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Speaker 1: for a number of years, uh the FECs looked at

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Speaker 1: relaxing the rule on how many stations, how many TV

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Speaker 1: stations a company can own in a particular market, and

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Speaker 1: also what's known as its cross ownership rules, whether the

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Speaker 1: same company can own newspapers and broadcast stations in the

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Speaker 1: same market, or whether it can own both a TV

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Speaker 1: and a radio station in the same market. And what's

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Speaker 1: happened here is, for the past seventeen years, every time

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Speaker 1: the FTEC has tried to ease these rules, which in

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Speaker 1: some cases date from the nineties seventies, the same court

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Speaker 1: to these same three judges at the Third Circuit Court

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Speaker 1: of Appeals in Philadelphia have blocked the effort and hit

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Speaker 1: pause on those pre existing rules. And what happens here

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Speaker 1: was the first time the STEC was sort of able

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Speaker 1: to break through that stranglehold that the Third Circuit had

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Speaker 1: on its effort to ease the rules. Why did the

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Speaker 1: FCC want to ease the rules on ownerships? So broadcasters say, look,

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Speaker 1: when these rules were enacted in the nineteen seventies, the

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Speaker 1: world looked very different. We didn't have the Internet as

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Speaker 1: a competitor, we didn't have cable television playing the role

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Speaker 1: that it does today, and so the whole the whole

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Speaker 1: media landscape is entirely different than when h the SEC

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Speaker 1: put these rules into place. And so they the broadcasters

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Speaker 1: have been consistently pushing the FEC to say, look, these

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Speaker 1: rules that don't make sense in this world anymore. With

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Speaker 1: all these different ways for advertisers to to to reach consumers,

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Speaker 1: broadcasters don't have a corner on that market anymore. So

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Speaker 1: putting special limitations on what broadcasters can do that don't

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Speaker 1: apply to Internet companies, that don't apply to the cable companies,

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Speaker 1: don't apply to all these other forms of new competition.

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Speaker 1: It just doesn't make sense anymore. And that argument with

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Speaker 1: with certain members of the FEC has taken hold. And

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Speaker 1: so what we saw with the Trump FEC was was

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Speaker 1: an effort to ease those broadcast ownership rules to make it,

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Speaker 1: what you know, a little more balanced between broadcasters and

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Speaker 1: other forms of media. Tell us about the third Sir

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Speaker 1: good decision that was appealed before the Supreme Court. Right, So,

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Speaker 1: so this, I think is the fourth time that the

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Speaker 1: Third Circuit has taken up an FCC effort to ease

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Speaker 1: these ownership rules, and it's the fourth time before these

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Speaker 1: same three judges the FCC has lost. And it's always

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Speaker 1: been two of the three judges that rule against the

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Speaker 1: SEC and one that would say, no, what the SEC

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Speaker 1: did here is fine. And so in this latest version,

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Speaker 1: it was the SEC trying to ease it totally did

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Speaker 1: away with the restrictions on the cross ownership on owning

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Speaker 1: newspapers and TV stations and radio stations in the same market,

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Speaker 1: and it slightly eased up the rule on how many

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Speaker 1: TV stations you can own in any individual market. What

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Speaker 1: the Court said, these two judges, they they said, no, FEC,

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Speaker 1: you didn't do enough to look at whether if you

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Speaker 1: do away with these rules, whether it will hurt ownership

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Speaker 1: of stations by minorities and ice females. And you've said,

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Speaker 1: the SEC that it's that's an important consideration as part

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Speaker 1: of your public interest analysis. And yet here you don't

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Speaker 1: have any data, any hard conclusions about if you do

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Speaker 1: away with these rules, whether that's going to decrease ownership

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Speaker 1: by females and by minorities. And so these two judges said, nope,

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Speaker 1: you can't relax these rules until you know more about

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Speaker 1: the effects on that sort of ownership of stations. So

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Speaker 1: now what did the Supreme Court decide? So so then

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Speaker 1: the broadcasters and the SEC took it to to the

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Speaker 1: Supreme Court and said the standard that those two judges

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Speaker 1: that the Third Circuit put on us is too onerous,

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Speaker 1: it's too tough. And agencies get to make these sorts

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Speaker 1: of policy calls and they get to balance the evidence

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Speaker 1: that they have before it. And that's effectively what the

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Speaker 1: Supreme Court, with a decision written by Brett Kavanaf said

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Speaker 1: that this is a decision within the zone of reasonableness

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Speaker 1: for the FEC. And the FEC took the data it

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Speaker 1: had it's asked for comments from the whole world and said,

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Speaker 1: tell us what the effects of doing away with this

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Speaker 1: rule will be. It took the evidence it received, it

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Speaker 1: analyzed it, and it concluded that in the FEC's view,

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Speaker 1: it won't clearly have an impact on ownership by females

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Speaker 1: and minorities. And even though those two judges at the

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Speaker 1: Third Circuits would have disagreed or would have pushed the

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Speaker 1: SEC to do more analysis, the Supreme Court in this

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Speaker 1: decision said, no, what the SEC did is enough. It

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Speaker 1: doesn't have a duty to go find the data itself.

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Speaker 1: It took the data it was provided, it analyzed it,

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Speaker 1: and it made a policy decision, and that's all that's needed.

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Speaker 1: It acted within the zone of reasonableness. So the SEC's

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Speaker 1: efforts to ease these rules can take effect. Despite what

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Speaker 1: those two judges of the Third Circuit set, was it

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Speaker 1: surprising that it was an unanimous decision. That was the

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Speaker 1: one thing that did surprise me about this decision. When

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Speaker 1: the Supreme Court took this case, it was a pretty

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Speaker 1: strong signal that at least four justices had issues with

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Speaker 1: what the Third Circuit could you know, had done before,

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Speaker 1: and so there was there's always some some question, Okay,

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Speaker 1: are we gonna get to the fifth, the sixth, the

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Speaker 1: seventh judge. But this is a pretty business friendly Supreme

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Speaker 1: Court given its makeup right now, and so it was

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Speaker 1: it was a very good sign for the broadcasters that

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Speaker 1: that the Court took the case. I did think that

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Speaker 1: you you might see a descent from from Justice so

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Speaker 1: to Mayor backing the public Interest group uh case, that

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Speaker 1: that the SCC needs to do more with looking to

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Speaker 1: ownership by by females and minorities. I suspect that was

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Speaker 1: a disappointment to to that cause that there wasn't a

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Speaker 1: a stronger voice um on on the side of the

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Speaker 1: Third Circuit here. And so that was the other surprise

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Speaker 1: that how quickly this decision came out. This this decision

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Speaker 1: was argued in in mid January, and to have a

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Speaker 1: decision and here already in early April is fast for

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Speaker 1: the SEC. But that's also a product of this being unanimous.

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Speaker 1: When the Court acts unanimously, we don't have to wait

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Speaker 1: for dissenting opinions to come in as well. So yeah,

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Speaker 1: I was surprised that that the Court spoke with one

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Speaker 1: voice on it. Justice Clarence Thomas wrote a concurrence that

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Speaker 1: took things a step further. Tell us what he said

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Speaker 1: in his concurrence. That's right. So so Clarence Thomas UH

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Speaker 1: sort of took the view that the the industry groups,

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Speaker 1: the broadcasters were pushing here, that that the FEC really,

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Speaker 1: when it's considering whether to ease the rules, it doesn't

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Speaker 1: have to consider ownership by by females and minorities at all.

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Speaker 1: The standard in the statute doesn't say anything about that.

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Speaker 1: It says the SEC is supposed to do a public

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Speaker 1: interest analysis. Now, historically the STEC has always said a

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Speaker 1: public interest analysis looks two questions like ownerships by minority groups.

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Speaker 1: But but Clarence Thomas would have gone a little bit

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Speaker 1: further than the rest of the court and and and said, look,

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Speaker 1: the FCC, you don't have to look at this at

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Speaker 1: all if you don't want to. And there's no no

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Speaker 1: duty under the statute. So in some cases for the

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Speaker 1: public interest groups, it's a win in the sense that

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Speaker 1: the Supreme Court didn't go further and and tie the

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Speaker 1: FEC's hands the way Clarence Thomas UH suggests that that

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Speaker 1: the Court could have. But Thomas was writing only for himself.

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Speaker 1: The Supreme Court's decision for the unanimous Court um was

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Speaker 1: was a more modest decision that just said, you know,

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Speaker 1: the FEC did enough here in balancing the factors, and

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Speaker 1: it's free. It didn't opine on whether the SEC should

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Speaker 1: or should not or can or cannot consider UM ownerships

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Speaker 1: UM by minority groups as part of its analysis. Did

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Speaker 1: the majority decision basically say the FEC does need data

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Speaker 1: to make these kinds of decisions, and does that imply

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Speaker 1: that other agencies don't need data either to make rules.

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Speaker 1: I think what he was clarifying is that the test

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Speaker 1: itself is not that onerous, that an agency like the

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Speaker 1: FTC doesn't have a duty to go out and find

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Speaker 1: the data. And so that's going to help every agency

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Speaker 1: as lower courts apply this standard for what constitutes arbitrary

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Speaker 1: and capricious action, that an agency doesn't have a duty

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Speaker 1: to go out there and find the data itself. It

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Speaker 1: takes the data that it's provided, and sometimes it doesn't

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Speaker 1: get very good data. But the agency simply has a

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Speaker 1: duty to analyze the data it receives and make a

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Speaker 1: judgment within a reasonable zone of interest. So it's it's

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Speaker 1: helpful to agencies as they make policy calls, and it's

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Speaker 1: going to be more difficult for judges who disagree with

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Speaker 1: agencies to second guess those decisions and to block the decisions.

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Speaker 1: So in that sense, absolutely, this decision would help not

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Speaker 1: just the f SEC, but any agency challenged under the

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Speaker 1: Administrative Procedures Act. Does that rule go into effect immediately then? Yeah.

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Speaker 1: So the effect of the Supreme Court decision is to

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Speaker 1: vacate the Third Circuit's decision, which was blocking the FEC's

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Speaker 1: rule relaxation from taking effects. So by that chain of

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Speaker 1: um of operations, yes, the f SEC's relaxation of its

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Speaker 1: ownership rules now takes effect as as a result of

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Speaker 1: the Court's decision. The question that sort of hung over

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Speaker 1: this litigation was whether this kind of a rule relaxation

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Speaker 1: would lead to a wave of consolidation in the broadcast industry. Right, so,

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Speaker 1: I think the impacts here are not going to be

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Speaker 1: dramatic in the short term. And one reason why I

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Speaker 1: is because we now have the FCC controlled not by

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Speaker 1: Republicans but likely by Democrats. Now right now, the SEC

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Speaker 1: split two to two. Until Joe biden A points a

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Speaker 1: fifth commissioner, the SEC can't even do any of its

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Speaker 1: controversial work like media ownership, and that's going to take

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Speaker 1: a matter of months. But even when SEC Commissioner is approved,

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Speaker 1: a Democrat controlled FEC is going to act much more

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Speaker 1: slowly and much more cautiously in easing these rules. And

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Speaker 1: it's been the Democrats at the FEC that have been

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Speaker 1: much more sympathetic to these public interest groups arguments that

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Speaker 1: we have to be worried about ownership by females and minorities,

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Speaker 1: and so this FCC is going to I think there's

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Speaker 1: some sympathy even from the Democrats to to say, look,

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Speaker 1: these these rules from the nineteen seventies are a little

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Speaker 1: too restrictive for broadcasters, both on the radio and the

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Speaker 1: TV side, and I think so there's they're They're likely

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Speaker 1: will be some loosening of the rules over the next

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Speaker 1: four years, but it's going to be modest and it's

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Speaker 1: going to be slow moving. What it will help with,

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Speaker 1: I think is is when you see these big transactions

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Speaker 1: by the broadcasters of swapping stations and things like that.

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Speaker 1: Every time those are announced, the broadcasters have to have

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Speaker 1: to divest a number of stations because they have too

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Speaker 1: many in any individual market. This should help them in

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Speaker 1: some cases not need to divest quite as many stations,

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Speaker 1: and so they gain economies of scale and efficiencies from

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Speaker 1: owning multiple stations in local markets. It's going to be

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Speaker 1: slow moving, but it should help broadcasters. And then in

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Speaker 1: the long term, if you see the FCC controlled by

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Speaker 1: Republicans again, you could see much more aggressive action in

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Speaker 1: really scrapping these rules and really taking a lighter touch

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Speaker 1: to broadcast regulation over the long term. This decision gets

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Speaker 1: the third circuits not entirely out of the way, but

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Speaker 1: it really helps avoid what has been a old block

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Speaker 1: for those efforts to relax the rules. So then will

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Speaker 1: we see some consolidation ahead, some acquisitions. I think it's

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Speaker 1: very possible. I mean, I think there are certain broadcasts

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Speaker 1: UH TV owners that are are always looking for those opportunities,

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Speaker 1: and I think this should this should make it a

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Speaker 1: little easier for companies like Gray Television, who who filed

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Speaker 1: the brief with the Supreme Court, and next Star and

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Speaker 1: Sinclair and tegana UH names like that are constantly looking

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Speaker 1: for opportunities like this, and this should make it a

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Speaker 1: little bit easier UH to to own more stations in

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Speaker 1: local markets. But as I said, it's going to be gradual.

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Speaker 1: It's going to be slow moving because this FCC with

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Speaker 1: with Jessica Rosen Warstel now is the acting chairwoman, This

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Speaker 1: FEC is not going to be aggressive in easing the rules,

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Speaker 1: but this makes it a little bit easier going forward.

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Speaker 1: Will this benefit conservative broadcasters in particular? I don't think

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Speaker 1: it has an impact like that based on the ideology

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Speaker 1: of of the message that's going out there. This has

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Speaker 1: mostly been distinct from from those sorts of issues. This

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Speaker 1: just helps as a business matter, Uh, potentially ownership, you know,

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Speaker 1: owning more stations in local markets. Um. And so I

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Speaker 1: don't I don't see a direct impact on ideology like that.

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Speaker 1: I take it that there is a problem with having

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Speaker 1: enough female and minority ownership of television stations. Is there

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Speaker 1: any way to consider that in the future with this decision? Yeah,

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Speaker 1: so that in one sense that the win for the

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Speaker 1: public interest groups who lost this case, no question, But

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Speaker 1: they didn't shut the door on the SEC's ability to

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Speaker 1: continue considering that as a factor. And all the Supreme

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Speaker 1: Court said here is was all the evidence that was

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Speaker 1: before that FEC. It didn't force the SEC to do more.

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Speaker 1: They could make a decision to ease the rules based

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Speaker 1: on that record that said, there's nothing that stops the

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Speaker 1: FDC now, especially under the control of Democrats, to say, hey,

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Speaker 1: this really matters to UH. Ownership by females and minorities

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Speaker 1: is important and we need to do more. But what

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Speaker 1: really needs to happen likely is that they need more

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Speaker 1: evidence than they had here on the record of the

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Speaker 1: impacts of the of the effects of easing the rules

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Speaker 1: on ownership by by these groups. And UM so so absolutely,

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Speaker 1: I think you're going to see Democrats um continue to

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Speaker 1: push broadcasters to do more in that respect, and this

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Speaker 1: Supreme Court decision does block that absolutely. It just makes

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Speaker 1: it easier if the FDCs has decided, look that we

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Speaker 1: don't see a problem with easing the rules, and and

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Speaker 1: so it makes it a little easier to ease the

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Speaker 1: rules going forward. Thanks for being on the Bloomberg Law Show. Matt.

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Speaker 1: That's Matthew Chettenhelm, Bloomberg Intelligence Litigation and Government Analyst. And

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Speaker 1: that's it for the edition of the Bloomberg Law Show.

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Speaker 1: Remember you can always do the latest legal news by

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