Petition — Federal Communications Commission v. National Citizens Committee for Broadcasting

_ Supreme Court, U.S,

Mm FILED &

APR 29 1977

MICHAEL RODAK, JR., CLERK

:

@6-1474%

: No.

Fr he Sepeme Gout of he Briel Stes

Octonzr Team, 1976

FeperaL ComMUNICATIONS CoMMISSION, PETITIONER

v.

Natros#au Crrizens Commrrrer For BroapcastTIna, ET AL.

fn ~ PETITION FOR A WRIT OF CERTIORARI TO THRE UNITED STATES

COURT OF APPEALS FOR THB DISTRICT OF COLUMBIA CIRCUIT

- Ne ‘

, Lape A

Stree teat SPS ae oes 4) ‘ wet Fresnel

Question presented....................-..---.- peuquebuncesneuen

Cases:

American Airlines vy. Civil Aeronautics Board, 192 F. 2a 417...

Bowmen Transportation, Inv. vy. Arkansas-Beat Freight Systems,

Buckeye Cablevision, Inc. v. Federal Communications Commie-

ston, 387 F. 2d 220

Citigens Communications Center v. Federal Communications Com-

mission, 447 F. 24 1201 Saat .

Citizens to Proserve Overton Park v. Volpe, 401 a, Gil encantis

Citieene TV Protest Committee v. Federal Communications Com-

mission, 948 F. 2d 56_.....-..-..-.---

Clarksbury Publishing Co. v. Federal Communications Comante-

GREED Oe Ge Cicctaecenccasccceguscenestinidincccsecacasee

Columbia Broadcasting System v. Democratic Nationai Commit-

Ey Sit TEE, Weinettpedacnduhiawninenitieidianteneineidinns

Federal Communications Commission v. Pottsville Broadcasting

ee 4! ee. Se

Federal Communications Commission v. WOKO, Inc., 829 U.S.

OD ecamayectiennenanntesnedbetadmiameninecniints ~

Federal Power Commission v. Idaho Power Co., 344 U.S. 17_....

Federal Trade Commission vy. Morton Salt Co., 334 U.S. 37...

Fidelity Television v. Federal Communications Commission, 515

F. 24 684, certiorari denied, 423 U.S. 926..............-..--..

Greater Boston Television Corporation v. Federal Communica-

tions Commission, 444 F. 2d 841, certiorari denied, 408 U.S, 923.

Mansfield Journal Co. v. Federal Communications Commission,

180 F. 24 28.... cieiee

Massachusetts Bay Telecasters y. Federal Communications Com-

mission, 261 F. 2d 55 -

National Broadcasting Co. v. United States, 319 U. 8. a

Permian Basin Arca Rate Cases, 390 U.S. 747 au

(I)

Soh

I.

Cases—Continued

Pinellas

Broadoasting Co. v. Federal Communications Commis- Page

sion, 230 F. 2d 204.......-.-. nie

Public Interest Research Group v. Federal Communications Com-

mission, 622 F. 24 1060. ate

ad Aten Dentinuating Ge, &, Ridaehdeanatedinte Gaate

sion, 396 U.S. 367

a

Securities ‘ené Bochange Commission -v. Chenery Cerp., 332

UB. 2064..caccee we

Storer Broadcasting Co. v. United States, 240 F. 24 66........+.

United Statee v. Detroit 4 Cleveland Navigation Co., 326 U.S. 236_

United States v. Maher, 307 U.S. 148. anew —

United States vy. Radio Corporation of America, 358 U.S. 334...-

United States v. Storer Broadcasting Co., 351 U.S. 192........

Statutes and Reguiations:

Communications Act of 1984, 48 Stat. 1064, as amended, 47 U.S.C.

Ee m ett

Miscellaneous :

CATV Rules (Docket Nos, 14896 et al.) : Second Report and Order,

CATV Rules (Docket Nos. 18397 et al.) : Cable Television Report

and Order, 36 FCC 2d 1438 saenQueNadEanananmenee

Daytime Skywave Transmission Rules:

Report and Order, 18 Rad. Reg. (P&F) 1845.........-.-...-.

Federal Communications Commission Eleventh Annual Report__

FM Broadcast Rules:

Second Report, Memorandum Opinion and Order, 40 FCC 720_-

Multiple Ownership of Standard Broadcaat Stetioxs:

Multiple Ownership Rules (Docket No. 8957).

Report and Order, 18 FCO 288...........................-..

Multiple Ownership Rulea (Docket No. 14711):

Report and Order, 46 FCC 1476...........................

Multiple Ownership Rules (Docket No. 18110) :

First Report and Order, 22 FCC 306, modified, 28 FCC 2d 622_.

Further Notice of Proposed Rule Making, 22 FCC 2d 889...

-—- eoaupdboednnedeegeusd .

Scripps-Howard Radio v. Federal Communications Commission,

189 F. 2d 677, certiorari denied, 342 U.S. 830.........~. Saint)~’

15

14

18

lit

Miscellaneous—Continued

Second Report and Order, 50 FCC 2d 1046, reconsidered, 53 Pogo

ee Gp tadneccnsanecedqecenecesecesun Mundbackult Sods

Newspaper Ownership of Radio Stations: '

Order No. 79, 6 Fed. Reg. 1580... wee baeasks

Order No. 79-A, 6 Fed. Reg. 8302............ ae SP ee

Notiee of Dismissal of Proceeding, 9 Fed Reg. 702_........._..

Policy Btatement on Comperetive Broadcast Heortnge, 1 FOC

2d 808...... -<< ---

Report on Chain Broadcasting (Order No. 37, Docket No. 6060).

Telephone Terminal Equipment Rules:

Memorandum Opinion and Order, 50 FCC 2d 88.

aa oa

Gn the Supreme Gourt of the Gnited States

Ocroser Term, 1976

No. —

FeperaL COMMUNICATIONS COMMISSION, PETITIONER

v.

Nationa Crrizens Commirres ror Broapcastina, ET AL.

PETITION FOR A WRIT OF CERTIORARI TO THE UNITED STATES

COURT OF APPEALS FOR THB DISTRICT OF COLUMBIA CIRCUIT

The Federal Communications Commission petitions for a

writ of certiorari to review the judgment of the United States

Court of Appeals for the District of Columbia Circuit in this

The opinion of the court of appeals (App. A," pp. 1-60) has

not yet been reported. The orders of the Federal Communica-

tions Commission (Apps. B and C, pp. 61-158) are reported at

50 FCC 2d 1046 and 53 FCC 2d 589.

The judgment of the court of appeals was entered on March

1, 1977 (App. D, pp. 159-160). A partial stay of mandate was

granted by the court of appeals on April 5, 1977 (App. E, pp.

161-167), and this petition for certiorari is being filed within

the time allowed by the court. This Court’s jurisdiction is in-

voked under 28 U.S.C. § 1254(1).

' The appendices to this petition are set forth under separate cover.

(1)

2

QUESTION PRESENTED

Whether the court of appeals exceeded the proper role of a

reviewing court (1) by substituting its judgment for the judg-

ment of the Federal Communications Commission that, in the

absence of a showing of public harm, public interest consider-

ations, which warranted the adoption cf rules forbidding new\_

broadcast-newspaper combinations in the same community,

did not, on balance, warrant across-the-board divestiture of

existing, previously approved, combinations, (2) by holding

that the Commission could not limit divestiture to combina-

tions which the Commission concluded constituted effective

local media monopolies and (3) by requiring the Commission to

order across-the-board divestiture of all existing combinations

except on individual showings of exceptional circumstances.

STATUTES INVOLVED

Sections 2(a), 4(i), 4(j), 301, 303(g), 309(a) and 309(d)

(1) of the Communications Act of 1934, 48 Stat. 1064, as

amended, 47 U.S.C. §§ 152(a), 154(i), 154(j), 301, 303(g),

309(a) and 309(d)(1), are set forth in App. F, pp. 168-170.

STATEMENT

1. This petition seeks review of an opinion (App. A, pp.

1-60) and judgment (App. D. pp. 159-160) invalidating

those portions of the so-called multiple ownership ruies of the

Federal Communications Commission which provide for di-

vestiture by co-located newspaper-broadcast combinations

which, in the Commission’s view, constitute effective local

media monopolies inconsistent with the public interest stand-

ord of the Communications Act. The court of appeals has held

that the Commission may not confine divestiture to such effec-

tive monopoly situations, but must instead adopt a rule requir-

ing the breakup of all co-located newspaper-broadcast combi-

nations, subject to waiver for exceptional cases. The decision

of the court, if upheld, would affect more than 50 newspaper-

television combinations and more than 120 newspaper-radio

combinations in over 130 communities throughout the United

States.

3

2. Until the rules now under review were adopted, the Com-

mission had long encouraged newspaper-broadcast cross-owner-

ship because of the important contribution it believed such

owners would make to the development of radio and, later, tele-

vision broadcasting. For many years, the Commission repeated-

ly found that licensing broadcast stations to newspaper owners

in the same community was in the public interest and otherwise

consistent with other agency policies. The instant rulemaking

proceeding was initiated in 1970 to determine whether the

Commission should continue to sanction such ownership. After

a review of all comments submitted and facts of record, the

Commission concluded that there were changed circumstances

warranting a different policy with respect to newspaper owners

applying for new broadcast facilities, but found no such cir-

cumstances and. no record evidence warranting a new policy

requiring across-the-board divestiture of existing newspaper-

broadcast combinations. Indeed, the agency found that there

were important public interest reasons for grandfathering most

existing ownerships.

Thus, by Report and Order, 50 FCC 2d 1046 (App. B, pp. 61-

147) the Commission prohibited the establishment of any new

co-located newspaper-broadcast combinations, see 47 C.F.R.

$$ 73.35(a) (1), 73.240(a) (1), 73.636(a)(1). (App. B. pp. 114—-

121), and also required divestiture in existing situations where

the same party owned, operated, or controlled the only news-

paper and the only television station (or, if there was no local

television outlet, the only radio station) in a community. All

other existing combinations were grandfathered. 47 C.F.R.

§§ 73.35(c) and n. 8, 73.240(c) and n. 8, 73.636(c) and n. 8

(/d.)?

In adopting the above rules, the Commission summarized the

record evidence (/d., pp. 67-89), and discussed the various con-

siderations underlying its action, including its legal authority

(/d., pp. 63-67), and the policy reasons for adopting its prospec-

* ® However, the prospective rules required that, in any future trans-

actions involving existing combinations, the newspapers and broadcast

licenses concerned must be transferred or sold to different pxrties.

4

tive rules (/d., pp. 89--93) and for limiting divestiture to situa-

tions where the Commission concluded there was an effective

local media monopoly (/d., pp. 93-101). The purpose of the

prospective rules was to attempt to promote diversity of view-

points among loca] mass media. The Commission explained that

it was changing its earlier policy of encouraging newspaper-

broadcast cross-ownership because the industry had matured

and it was no longer necessary to rely on newspaper owners for

their experience, resources and willingness to pioneer, which

broadcasting once needed. This did not suggest that existing

owners were not serving the public interest, but only that the

possibility of even a small gain in diversity was worthwhile

when it could be achieved without any disruption of existing

services (/d., pp. 90-91).

Whether to require divestiture was a very different and diffi-

cult problem. First, the record in this lengthy, five-year pro-

ceeding did not reveal any specific abuses or evidence of harm

to the public arising out of common ownership, let alone any

pattern of abuse or harm (/d., pp. 93 n. 26, 94 n. 27, 100, 104).

Second, there was, of course, no guarantee that Commission

action would increase diversity (/d., pp. 91, 93). Nevertheless,

after considering the views and comments of all the parties, the

Commission's judgment was that, in communities where it con-

cluded that there was an effective monopoly over local mass

media, there was also likely to be a significant absence of com-

petition and diversity, which prima facie outweighed other

policy considerations, so that divestiture, although a severe

remedy, was warranted (/d., pp. 95-99).

In those communities where there was no newspaper-broad-

cast monopoly, however, the Commission concluded that the

potential harm from divestiture outweighed “a mere hoped

for gain in diversity” (Jd., p. 93). In the Commission’s view,

“stability and continuity do serve important public purposes”

(Id.). Although divestiture might increase diversity, it might

also disrupt existing operations and unnecessarily deprive the

public of licensees who had served it long and well. On balance,

— _—

-—_--—- >)

5

therefore, the Commission determined that, in the absence of

any showing of injury to the public interest,’ across-the-board

separation of newspaper-broadcast combinations was an unwise

and unnecessary remedy (/d., pp. 93-96). Upon reconsidera-

tion, 538 FCC 2d 589 (App. C, pp. 148-158), the Commission re-

affirmed its previous order in all pertinent respects.

3. Several parties sought appellate review pursuant to 47

U.S.C. § 402(a). The court of appeals affirmed the Commis-

sion’s prospective rules, holding that a legislative type policy

judgment intended to increase diversity was not irrational even

though its benefits were speculative (App. A, pp. 18, 23).

The court vacated, however, the rules requiring divestiture

in effective monopoly situations, as well as the grandfathering

of other existing combinations. The court held that the Com-

mission had erred because, once having attempted to promote

diversity through its prospective rules, it had not adopted an

overall and vir‘ually irrebutable presumption, in connection

with its retroactive rules, thai “cross-owned stations do not

serve the public interest” (/d., p. 51). The court held that this

presumption was “compelled,” not discretionary, and was not

overcome by the other policies advanced by the Commission,

and that, therefore, a rule of across-the-board divestiture by

co-located newspaper-broadcast combinations was required

(App. E, pp. 166-167; App. A, pp. 52-60).

The court also found that the Commission was arbitrary and

capricious in distinguishing, for the purpose of its divestiture

rules, between communities where the Commission concluded

that broadcast combinations had an effective monopoly over

local mass media, and other communities where such tombina-

tions faced competition. In the court's view, it was irrational

for the Commission to conclude that the existence of an effec-

* The Commission explicitly recognized that “it [was] not necessary to

have proof of abuses” before it could require divestiture (App. B, p. 95

n. 29). The absence of such abuses, however, was a relevant factor in

balancing the various competing policy considerations. Had the record

revealed evidence of misuse or harm arising from cross-ownership, the

Commission might have ordered more divestiture (/d., p. 104).

233-646-772 at

6

tive monopoly should control (App. A, pp. 58-59). Thus, in

order “that everyone would be equally treated,” the court or-

dered the Commission to adopt a rule, subject to waiver only

in exceptional circumstances, requiring across-the-board dives-

titure (App. E, p. 167; see also App. A, p. 60).*

REASONS FOR GRANTING THE WRIT

The Communications Act of 1934, as amended, charges the

‘Commission with the function of regulating broadcasting to

serve the “public interest, convenience and necessity,” 47

U.S.C. §§ 301, 303, 309(a) (App. F. pp. 169-170). This is a

broad mandate which Congress directed the Commission to

carry out in light of changing conditions. FCC v. Pottsville

Broadcasting Co., 309 U.S. 134, 138 (1940). In exercising that

function, the Commission has long attached importance to the

policy of diversification of broadcast ownership in the belief

that this is likely to contribute to a diversity of viewpoints.

The policy favoring diversification, however, has not stood

in the way of first encouraging newspaper-broadcast cross-

ownership, and then repeatedly finding our many years that

existing newspaper-broadcast cross-ownerships were in the

public interest. The prospective rule adopted by the Commis-

sion, prohibiting such combinations in the future, reflected a

change in the industry’s maturity which led the Commission

to conclude that, in the interests of seeking diversity, it was

no longer appropriate to rely upon newspaper owners as an

important source of qualified new licensees. On the other hand,

there was no evidence of changed circumstances or any pattern

of conduct injurious to the public interest which affected the

*On April 5, 1977, the court of appeals granted a partial stay of its

mandate, but only if the Commission filed a petition for a write of certiorari

within seventeen days thereafter (App. E, pp. 161-167). The court stayed

that part of its order which vacated the Commission's grandfather rule

(and neecessarily related matters) and which required the Commission to

adopt, instead, a rule ordering divestiture of all co-located newspaper-

broadcast combinations. The court did not stay, however, its affirmance of

the Commission's prospective rules, or the court's vacation of the Com-

mission’s limited divestiture rule.

7

value of the continu:ty of meritorious service provided by

existing newspaper-broaceast ownerships. Disruption of that

service, where it existed. taerefore, was unnecessary and un-

desirable except where there was a real likelihood that the

paucity of owners in a community could adversely affect diver-

sity in that community. But the decision of the court below

would require the Commission drastically to change its long-

standing policies concerning newspaper-broadcast cross-owner-

ships in the absence of any changed circumstances, in the

absence of any record evidence of harm arising out of such

ownerships, and without any regard for the Commission’s con-

sistent and contrary interpretation of public policy and the

Communications Act.

The decision of the court below raises important issues as to

the proper role of a court in reviewing agency action which war-

rant Supreme Court review. The court below has substituted its

judgment for that of the Commission on matters of public pol-

icy; it has improperly held that an agency may not weigh and

apply standards in a different manner when it is acting retroac-

tively than when it is acting prospectively ; it has attempted to

create a virtually irrebuttable presumption in favor of one im-

portant policy which would deprive the agency of the discretion

to balance various components under its public interest man-

date; and it has improperly usurped an agency function by

directing the remedy the agency must adopt.

1. The effect of che decision is to deny the Commission the

discretion to balance competing policy considerations so as to

reach a result different from that preferred by the court. More-

over, the court’s result is inconsistent with the approach the

Commission has followed for more than thirty years in fashion-

ing its ownership rules, and in repeatedly finding that existing

newspaper-broadcast cross-ownerships have operited in the

public interest.°

*’ Newspaper owners have never been considered disqualified to hold

broadcast licenses. In the 1940’s the Commission decided to prevent undue

concentration of control by newspaper-broadcast cross-owners on a case-

by-case basis rather than by rule. Newspaper Ownership of Radio Stations,

6 Fed. Reg. 1508, 3302 (1940), 9 Fed. Reg. 702 (1944).

4

8

These rules have codified a Commission policy in favor of

diversified ownership of broadcast media. However, the Com-

mission has always taken into account other considerations too,

particulary the need to avoid unnecessary disruption of exist-

ing services upon which the public has become accustomed to

rely. Generally, therefore, these ownership rules have only

applied prospectively, with little or no divestiture required.’

When the 1953 ownership rules were judicially challenged,

this Court upheld the Commission's rulemaking authority to

place numerical limitations on the number of commonly

owned stations in the same service. United States v. Storer

Broadcasting Co., 351 U.S. 192 (1956), On remand to the Dis-

trict of Columbia Circuit, the specific limits established by

® The Commission’s chain broadcasting regulations, promulgated in 1941,

generally grandfathered ownership by radio networks of individual sta-

tions. The Commission stated that it might have acted differently if this

question had arisen before such ownerships had actually come into being.

Under the circumstances, however, it ordered divestiture only where two

AM stations were licensed to the same network in the same area, or where

the available facilities were so few or so unequal that the network had

essentially no competition. Report on Chain Broadcasting (Order No. 37,

Docket No. 5060) (1941). When, in 1953, the Commission limited to seven,

seven, and five, respectively, the number of AM, FM and TV stations

which could be under common control, it deliberately set these limits at a

level that would not require extensive divestiture because it believed this

would be “unduly disruptive.” Multiple Ownership Rules (Docket No. 8957),

18 FCC 288, 292. In the few instances when the limits were exceeded, di-

vestiture was dealt with case by case. Jd. at 295.

When the Commission first adopted rules which prohibited a single party

from owning two or more AM radio roadeast stations in the same area,

Multiple Ownership of Standard Broadcast Stations, 8 Fed. Reg. 16065

(1943), approximately 20 existing combinations were required to divest

on a case-by-case basis, FCC Eleventh Annual Report (1946), p. 12. How-

ever, in 1964, when the Commission amended its rules to reflect stricter and

more precise stanadrds for determining prohibited overlap (AM, FM or TV),

no divestiture was required of the numerous existing combinations. Multiple

Ownership Rules (Docket No. 14711), 45 FCC 1476. Nor did the Com-

mission require divestiture when, in 1970, it adopted rules prohibiting

common ownership of television and radio stations in the same market.

Multiple Ownership Rules (Docket No. 18110), 22 FCC 2d 306, as modi-

fied 28 FCC 2d 662.

Sl

9

the Commission were sustained on the ground that they were

based on the Commission's experience, “coupled with a design

to avoid undue disruption of existing service.’ Storer Broad-

casting Co. v. United States, 240 F.2d 55, 56 and n. 3. See also

National Broadcasting Co. v. United States, 319 U.S. 190, 206-

207 (1943) where this Court in affirming the chain broadcast-

ing regulations, expressly noted the Commission’s reluctance

to order more extensive divestiture.

After many years of encouraging common ownership of news-

paper-broadcast stations in the same community, the Commis-

sion, in 1970, initiated the rulemaking proceeding reviewed

below to consider, among other things, whether changed cir-

cumstances warranted either a prospective ban or the divesti-

ture of existing co-located newspaper-broadcast combinations.

Further Notice of Proposed Rulemaking, 22 FCC 2d 339, 346.

The Commission was interested in determining whether either

of these courses of action was necessary to promote diversity or

was otherwise required by the public interest, but at the same

time it expressed concern about the disruptive effects of divesti-

ture. Jd. at 348. This concern took on added significance when

the record below revealed no evidence of specific abuses or pub-

lic interest harm arising from newspaper-broadcast cross-

ownerships, let alone a pattern of abuse or harm warranting

across-the-board divestiture (App. B, pp. 93 n. 26, 94n. 27, 100,

104). The Commission thus had to decide whether a policy in

favor of diversification should now be treated as controlling, or

whether other competing policies, most notably that of avoiding

disruption, should outweigh the diversification policy under

certain circumstances (Id. p. 93).

In evaluating what steps should be taken in regard to exist-

ing cross-owned combinations, the Commission fashioned a

divestiture rule reflecting this Court’s observation that the

statutory public interest standard might not be met when “the

publisher of the sole newspaper in an area applie[d] for a

license for the only available radio and television facilities,

which, if granted, would give him a monopoly of that area’s

major media of mass communications.” United States v. Radio

Corp. of America, 358 U.S. 334, 351-352 (1959). Thus, the

10

Commission's rule required divestiture of all newspaper-broad-

cast combinations which, in the agency's view, had an effective

monopoly over local mass media."

The court below coneeded that, in fashioning this divestiture

rule in the absence of any evidence of abuses, the “Commission

necessarily had to rely primarily on policy, not factual consid-

erations” (App. A, pp. 37-38). However, rather than give defer-

ence to a decision based upon various competing public policy

judgments, “an area where administrative judgments are en-

titled to the greatest amount of weight by appellate courts,”

SEC v. Chenery Corp. 332 U.S. 194, 209 (1946), the court below

approached the same policy considerations differently to reach

a result which it preferred.

This was improper, for it is well established that a reviewing

court is not “empowered to substitute its judgment for that

of the agency.”” Bowman Transportation, Inc. v. Arkansas-Best

Freight System, 419 U.S. 281, 285 (1974), quoting from Citizens

to Preserve Overton Park y. Volpe, 401 U.S. 402, 416 (1971). It

is the agency which is charged with assessing the relevant pub-

lie interest, “both existing and foreseeable,” and the court does

not substitute the Commission’s balance with “one more nearly

to its liking.” Permian Basin Area Rate Cases, 390 U.S. 747,

792 (1968). The court of appeals thus exceeded the proper role

of a reviewing court vis-a-vis administrative agencies.*

The Commission was clearly acting properly when it decided

that a retroactive application of policy raised different con-

siderations than when it applied a policy only prospectively.

* The divestiture rule for effective monopolies merely particularized the

Commission’s conception of the public interest from a purely structural per-

spective. Newspaper-broadcast combinations unaffected by this rule were

permitted to continue. However, the Commission retained its long-standing

ad hoc policy that a showing of specific abuses arising out of the cross-

ownership combination could result in a forfeiture of the broadcast license

(App. B, pp. 103-104 n. 49).

* The court below made it clear that it did not rest its holding in this case

on antitrust principles (App. A, p. 57, n. 170). This is not, therefore, an

antitrust case in which a court has its own expertise, but rather, it involves

issues of communications policy where the court may not substitute its

judgment for that of the agency.

ll

See American Airlines v. Civil Aeronautics Board, 192 F. 2d 417,

420 (D.C. Cir. 1951). It is this distinction which allows the

agency the discretion to grandfather established service in the

interests of preserving that service to the public. See Buckeye

Cablevision v. FCC, 387 F. 2d 220, 227-228 (D.C. Cir. 1967),

citing United States v. Maher, 307 U.S. 148 (1939).° In limit-

ing divestiture to effective monopoly situations, the Commis-

sion decided that an attempt to promote diversity in non-

monopoly situations did not outweigh the likelihood of harm

occasioned by the disruption of existing services (App. B, p.

93).*° The court of appeals did not disagree that this was a

relevant consideration. Rather, the court, in its attempt to pro-

mote diversity, tried to leave room for the continuing import-

ance of the factor of minimizing disruption by asserting that

“the new owners will become the beneficiaries of any unoffi-

cial policy of continuity” (App. A, p. 54). The Commission

might have adopted what could be described as a one-time

upheaval approach, but that did not afford the court the au-

® In addition to its action in fashioning its ownership rules, the Commis-

sion has generally disfavored the retroactive application of new require-

ments. See, e.g., ¥M Broadcast Rules, 40 FCC 720, 725-26 (1962) (exist-

ing “supermaximum” FM stations grandfathered); Daytime Skywave

Transmission Rules, 18 Rad. Reg. (P&F) 1845, 1854 (1959) (existing sta-

tion interference grandfathered); and CATV Rules, 2 FCC 2d 725, 785

(1966) and 36 FCC 2d 143 (1972) (existing CATV signals grandfathered).

In all of these cases, the Commission’s purpose was to avoid disruption of

established service. The 1966 cable grancfathering was upheld in the Buck-

eye Cablevision case, supra. See also Telephone Terminal Equipment Rules,

59 FCC 2d 83 (1976) (certain types of terminal equipment grandfathered

under registration program).

1° Although the Communications Act does not afford the same degree of

security found in other laws, the court of appeals has warned that the

Commission may not simply disregard “legitimate renewal expectancies im-

plicit in the structure of the Act.” Greater Boston Television Corporation v.

FCC, 444 F. 2d 841, 854 (1970), cert. denied, 403 US. 923 (1971). See

Alionza Federal de Mercedes v. FCC, 539 F. 2d 732, 736 (1976). The Com-

mission's concern for disrupting existing service in this rulemaking pro-

ceeding went beyond, of course, any private interests of established licensees;

it also focused upon the interruption of service to the viewing and listening

publie (App. B, pp. 93, 95).

12

thority to impose a balance more nearly to its liking. Permian

Basin Area Rate Cases, supra."

Interference with the Commission's rulemaking authority is

sharply illustrated by the court’s vacation of those rules which

required divestiture of commonly owned newspaper-broadcast

interests in a market not served by any other independently

owned local newspaper or broadcast facility. The court took

the view that in such monopoly markets there may be no less

diversity than in larger markets with more competing voices

(App. A, p. 59). In other words, the court states that the Com-

mission might have considered adding additional frequencies

to these markets, rather than requiring divestiture; it is the

larger markets, the court concluded, in which divestiture “may

be more useful” (App. A, p. 59). This is not only fundamentally

inconsistent with the court’s own presumption that additional

voices promote diversity, but totally at odds with the court's

expression on other occasions that it is the smaller, rather than

larger, markets which probably suffer from a lack of diversity.

'! The court similarly decided to balance differently other policies ad-

vanced by the Commission disfavoring divestiture. The Commission ex-

pressed concern that the great demand for equity capital to finance divesti-

ture transactions would set in motion a chair of events with a resulting

reduction in working capital and profit accumulation otherwise available for

quality programming (App. B, pp. 83, 93). The court, while apparently

not disagreeing that this was a relevant concern, relegated it to “lesser”

importance because this same undesirable effect might also occur when

the Commission permitted voluntary transfers to new owners (App. A,

pp. 56-57).

The court also dismissed the undesirable effect the Commission attached

to the possibility that divestiture would risk the loss of owners who par-

ticipated in the daily operations of their stations, a factor of substantial

importance in comparative proccedings between applicants for new facilities.

Policy Statement on Comparative Broadcast Hearings, 1 FCC 2d 393, 395-

396. As the court recognized, however, three quarters of existing combina-

tions are locally owned (App. A, pp. 52-53). Although local ownership

without any participation in the operation of a station is given no credit in

a comparative proceeding, it was not unreasonable for the Commission in

a policy making context to take into account the intangible benefits of

local ownership, a factor of even some importance in a comparative pro-

ceeding. 1 FCC 2d, supra. The court, however, preferred to speculate that

local entrepreneurs would find broadcasting an attractive investment, and

that therefore, there would be no loss of local ownership (App. A, p. 53).

13

See Greater Boston Television Corporation v. FCC, supra, 444

F, 2d at 859-860; Massachusetts Bay Telecasters v. FCC, 261

F. 2d 55, 64-65, n. 24 (D.C. Cir. 1958) ; Fidelity Television, Inc.

v. FCC, 515 F. 2d 684, 701, (D.C. Cir. 1975) cert. denied, 423

U.S. 926 (1975).

The decision of the court strikes at the very heart of the dis-

cretion Congress confided to the Commission, not the courts,

to be satisfied that the public interest will be served, see FCC v.

WOKO, Inc., 329 U.S. 223, 229 (1946). An agency’s function is

not merely to appraise facts and draw inferences, but also to

bring its expert judgment to bear on a problem and to determine

“from its analysis of the total] situation on which side of the

controversy the public interest lies.” U.S. v. Detroit & Cleve-

land Navigation Co., 326 U.S. 236, 241 (1945). This Court

should review the far-reaching interference with the adminis-

trative process by the court below.

2. In addition to substituting its judgment for that of the

Commission, the court below has now elevated what has here-

tofore been considered one important component of the public

interest standard into binding law. The court holds that because

of First Amendment considerations cross-ownership must be

presumed to be contrary to the public interest standard of the

Communications Act and that in this proceeding, the presump-

tion must be given “controlling weight” over all other public

interest policy factors (App. A, pp. 56-57; App. E, pp. 166-

167). In reaching this conclusion, the court has failed to observe

the “venerable principle that the construction of a statute by

those charged with its execution should be followed unless there

are compelling indications that it is wrong.” Red Lion Broad-

casting Co. v. FCC, 395 U.S. 367, 381 (1967). Whether there are

such compelling reasons, however, must be determined by a

careful evaluation of the Commission’s reasoning in light of pol-

icies embodied by Congress in the public interest standard of

the Communications Act. Columbia Broadcasting System, Inc.

v. Democratic National Committee, 412 U.S. 94, 121-122

(1972).

The diversification policy adopted by the Commission more

than thirty years ago was drawn from both the First Amend-

14

ment and the antitrust laws. There is no dispute between the

court and the Commission that the public interest standard

invites reference to First Amendment principles, CBS v. DNC,

supra, 412 U.S. at 122, and antitrust policies, United States v.

Radio Corporation of America, supra, 358 U.S. at 351. However,

although the Commission, with judicial approval, has always

emphasized the importance of diversification, neither the

Commission nor the courts, including this Court, have ever

suggested that the First Amendment compels what has now

been declared a virtually irrebuttable presumption against

cross-ownership,

The court of appeals now has required the Commission to

adopt this controlling presumption because the court is of the

view that the Communications Act, the First Amendment, and

the long-standing importance of the Commission’s diversifica-

tion policy compelled the presumption that cross-owned sta-

tions do not serve the public interest (App. A, p. 51). There

is nothing in the Communications Act or its legislative history,

however, which mandates this sweeping conclusion or any

other one concerning cross-ownership different from that

reached by the Commission. Congress chose to leave such

questions with the Commission. CBS v. DNC, supra, 412 U.S.

at 122. When there have been doubts as to the wisdom of man-

dating rather than allowing promotion of First Amendment

principles, the courts have not imposed such an “inflexible

response as a matter of constitutional law.” Public Interest

Research Group v. FCC, 522 F.2d 1060, 1067 (1st Cir. 1975)

(footnote omitted), cert. denied, 424 U.S. 965 (1976). See also

CBS v. DNC, supra. The court of appeals not only failed to

give proper deference to the Commission’s judgment on this

matter, but its declaration that diversification must be given

“controlling” weight in this rulemaking proceeding is entirely

inconsistent with the court’s own past recognition of the Com-

mission's discretion in this area.”

'? Contrary to its holding concerning diversity, the court below recognized

that antitrust policy is only one component of the public interest standard,

and that the Commission had discretion not to give it prima facie effect

(App. A, p. 57, n. 107).

15

For example, the court below consistently has stated only

that “(d)iversification is a factor properly to be weighed and

balanced with other important factors.” Citizens Communica-

tions Center v. FCC, 447 F. 2d 1201, 1214, n. 36 (D.C. Cir.

1971). See also, Fidelity Television, supra, 515 F. 2d at 709.

Diversification was never presumed, either by the Commission

or the court, to have “controlling” weight over other policies.

Instead the court previously has made clear that it does not

intend to “impinge at all upon the Coramission’s substantive

discretion in weighing factors and granting licenses. . . .”’ Citi-

zens, supra at n. 33.

The application of this general rule of statutory construction

is as appropriate in the context of the multiple ownership rule-

making proceeding as it is in the context of an adjudicatory

proceeding.** And yet, the decision of the court profoundly de-

prives the Commission of this same substantive discretion to

give meaning to the public interest, convenience and necessity

in a rulemaking proceeding. We submit that this fundamental

departure from prior statutory construction raises a funda-

mental issue which should be reviewed by this Court.

2. The decision below also raises a significant issue concerning

the court of appeals’ power to direct a particular remedy rather

than to order a remand of the proceeding to the agency for re-

consideration in light of legal errors the court believed to exist.

The court of appeals found that the Commission had committed

error in insisting that before it could require divestiture of news-

paper-broadcast combinations, it had to find evidence of abuses

™ See, e.g., Citizens TV Protest Comm. v. FCC, 348 F.2d 56 (DC. Cir.

1965) ; Clarksburg Publishing Co. v. FCC, 225 F.2d 511, 518-519 (D.C. Cir.

1955); Mansfield Journal Co. v. FCC 180 F.2d 28, 35 (D.C. Cir. 1950);

Pinellas Broadcasting Co. v. FCC, 230 F 2d 204, 208-209 and n.6 (D.C. Cir.

1956), cert. denied, 350 US. 1007 (1956); Scripps-Howard Radio v. FCC,

189 F.2d 677, 683 (D.C. Cir. 1951), cert. denied, 342 U.S. 830 (1951).

16

(App. A, p. 50; App. E, p. 165)."* The court also believed that

the Commission had failed to explain adequately why it did

not adopt the presumption that cross-ownership was contrary

to the public interest (App. A, p. 52). However, rather than

order a remand to the Commission for reconsideration, the court

ordered the Commission to adopt a rule requiring, in effect,

across-the-board divestiture (App. A, p. 60; App. E, p. 167).

The court below has violated the guiding principle that “the

function of the reviewing court ends when an error of law is

laid bare. At that point the matter once more goes to the Com-

mission for reconsideration.” FPC v. Idaho Power Co., 344 U.S.

17, 20 (1952), citing Federal Communications Commission v.

Pottsville Broadcasting Co., 309 U.S. 134 and Federal Trade

Commission v. Morton Salt Co., 334 U.S. 37 (1948). On re-

mand, the Commission might have formulated a different rule

or decided that a rule was inappropriate in light of the appel-

late court’s iegal interpretations. However, when the court

decreed that the Commission must adopt a rule requiring dives-

titure of all co-located, cross-owned newspaper-broadcast com-

binations, “it usurped an administrative function.” FPC v.

Idaho, supra. We submit that this question is one of funda-

mental importance which also warrants review by this Court.

'* As previously indicated, n. 3, supra, the Commission explicitly recog -

nized that “it was not necessary to have proof of abuses” before it could re-

quire divestiture. (App. B, p. 95 n. 29). The court of appeals was thus

mistaken when it described the Commission as having believed that it was

required to find actual evidence of abuse before it could order divestiture

(App. E, p. 165; App. A, p. 50). But even if the court had been correct in

its deseription, and even if this had constituted error by the Commission, the

proper course would have been to remand the proceeding to afford the Com-

mission ap opportunity to determine whether, in light of this assumed error,

it would have formulated a different rule. The court, however, did not do

this. Instead, it proceeded to substitute its own policy judgment in favor of

divestiture for that of the Commission.

17

The decision below is contrary to established precedent on

questions of basic importance to the administration of the

Communications Act of 1934 and to administrative law gen-

erally. It goes to the essential relationship between agencies

and reviewing courts. It is respectfully submitted that the peti-

tion for certiorari should be granted.

Werner K. HarTeNBERGER,

General Counsel,

Danie. M. ARMSTRONG,

Associate General Counsel,

SHELDON M. GuTTMANN,

Kerr H. Facan,

Counsel.

Federal Communications Commission.

Apri 22, 1977.

U.S. GOVERNMENT PRINTING OFFICE. 1877