Amicus Brief for the United States — Capital Cities Cable, Inc. v. Crisp

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No. 82-1795

ee re ne ge hn

Iu the Supreme Court of the United States

OCTOBER TERM, 1983

CAPITAL CITIES CABLE, INC., ET AL., PETITIONERS

Vv.

RICHARD A. CRISP, DIRECTOR, OKLAHOMA

ALCOHOLIC BEVERAGE CONTROL BOARD

ON WRIT OF CERTIORARI TO THE UNITED STATES

COURT OF APPEALS FOR THE TENTH CIRCUIT

BRIEF OF THE

FEDERAL COMMUNICATIONS COMMISSION

AS AMICUS CURIAE SUPPORTING PETITIONERS

REX E. LEE

Solicitor General

PAUL M. BATOR

Deputy Solicitor General

MICHAEL W. MCCONNELL

RICHARD G. WILKINS

Assistants to the Solicitor General

Department of Justice

Washington, D.C. 20580

202) 633-2217

BRUCE E. FEIN

General Counsel

DANIEL M. ARMSTRONG

Associate General Counsel

C. GREY PASH, JR.

Attorney

Federal Communications Commission

Washington, D.C. 20554

a may eT

QUESTION PRESENTED

Whether the State’s regulation of liquor advertising,

as applied to out-of-state broadcast signals, is valid in

}

light of existing federal regulation of cable broadcasting.

TABLE OF CONTENTS

Interest of the Federal Communications Commission

Statement

Introduction and summary of argument

Argument:

I. Regulation of out-of-state advertising trans-

mitted over cable television is preempted by

federal law

A. The Commission has expressly preempted

this form of state regulation

Bb. The Oklahoma ban on liquor advertising di-

rectly conflicts with federal regulations

C. The Oklahoma ban on liquor advertising

stands as an obstacle to the achievement of

the Commission's full purposes and objec-

tives :

II. The FCC regulations that preempt the Okla-

homa provision are valid and authorized by

statute

III. The authority granted the states by the Twenty-

first Amendment to regulate the importation of

alcoholic beverages does not validate Oklahoma’s

advertising ban

Conclusion

TABLE OF AUTHORITIES

Cases:

Arlington Tclecommunications Corp., 70 F.C.C.9d

229]

Associated Press y.

Blum vy. Bac »?, 457

Brookhaven Cable T

cert. denied, 44]

U spay States, 326 U.S. 1

U.S. 132

Vv, Ine. V. Kelly, Sia Ff. od 765.

US. 904

(III)

14,

Cases—Continued: Page

Cable Television Report and Order in Docket No.

18397, 36 F.C.C.2d 143, on reconsideration, 36

F.C.C.2d 326, aff'd sub nom. American Civil

Liberties Union v. FCC, 523 F.2d 1344.8, 13, 14, 15, 17

Cable Teli vision Syndicated Program Exclusivity

Rules, 79 F.C.C.2d 663, aff'd sub nom. Malrit.

T.V. v. FCC, 652 F.2d 1140, cert. denied, 454

Us. 1148 15

California A LaRue, 409 U.S. 109 a, 25

California Retail Liquor Dealers Ass'n Vv. Midcal

Aluminum, Ine., 445 U.S. 97 2a, 24, 25, 27

Carter V. Virginia, 321 US. 131 eo

Central Hudson Gas & Eleetric Corp. V. Publie

Service Comm'n, 447 U.S. 557 3

( ‘larification of Cable Teli VISTON Rul Ss, 46 F.( ae Dslr."

175 5, 9

Clarification of CATV First Report as to Scope

of Federal Preemption, 20 F.C.C.2d 74] 2,9, 10

Collins V./Yosemite Park & Curry Co., 304 U.S.

Gi6 J 24

Columbia Broadcasting Systems, Inc. Vv. Demo-

cratic National Committee, 412 U.S. 94 18

Community Cable TV, Inc., No. 83-525 (FCC Nov.

15, 1983) 9, 10

Craig V. Boren, 429 U.S. 190 22-23

Departmen? of Revenue v. James Beam Distilling

Co., 377 U.S. 341 23

Dunagin Vv. City of Oxford, No. 80-3762 (Sth Cir.

Oct. 31, 1983) at

FCC v. National Citizens Committee for Broad-

casting, 436 U.S. 775 18

Farmers Union v. WDAY, Inc., 360 U.S. 525 1S, 16

Fidelity Federal Savings & Loan Ass'n Vv. de la

Cuesta, 458 U.S: 14) S, 9, 10, 11, 17, 19, 20. 22, 28

First Re port and Order in Docket No. 14895, 38

B.C.C. 683, 2 F.C.C.2d 725, aff'd sub nom. Black

Hills Video Corp. v. FCC, 399 F.2d 65.5, 9, 12-13, 14. 18

First Re port and Order in Docket No. 18.397, 20

F.C.C.2d 201, order set aside, 441 F.2d 1322,

rev'd svb nom. United States v. Midwest Video

Corp., 406 U.S. 649 2, 5, 8, 9, 18, 20, 21

Cases—Continued : Page

Florida Lime & Avocado Grows rs. Ine. V. Paul,

oid U.S. 132 ‘ 13, 16, 37

Free v. Bland, 369 U.S. 663 11, 22. 23

Garland B. Pugh, 68 F.C.C.2d 997 12, 13

Goldstein V. California, 412 U.S. 546 11

Head V. New Merico Board of Examiners in Op-

fometry, 374 U.S. 424 7

Hines V. Davidowitz, 312 U.S. 52 17

Hostetter Vv. Idlewild Liquor Corp., 377 U.S. 324 23

Jones V. Rath Packing Co., 430 U.S. 519 8

Joseph E. Seagram & Sons, Inc. v. Hostetter, 384

Us. oo Os

Jose pr S. Finch & Co. v. McKittrick, 305 U.S. 93

395 23

Larkin v. Grendel's Den, Inc., No. 81-878 (Dec. 13,

1982) 22

Malrite T.V. v. FCC, 652 F.2d 1140 19

National Broadcasting Co. Vv. United States, 319

U.S. 390 . 20

New York State Liquor A ‘thority Vv. Bellanca,

452 U.S. 714 25

Nippert Vv. City of Riehmond, 327 U.S. 416 29

Notice of Inquiry in Doeket No. 20767, 58 F.C.C.2d

915 9

Notice of Proposed Rulemaking and Notice of In-

quiry in Docket No. 18397, 15 F.C.C.2d 417 12

Oklahoma Aleoholie Beve rage Control Board V.

Heublein Wines, Int'l, 566 P.2d 1158 3

Pacific Gas & Electirie Co. v. State Energy Re-

sources Conservation and Development Comm'n,

No. 81-1954 (Apr. 20, 1983) 8, 16, 17

Perez V. Campbell, 402 U.S. 637 12

Queensgate Investment Co. Vv. Liquor Control Com-

mission, 69 Ohio St. 2d 361, 433 N.E.2d 138,

apneal dismissed, No. 81-2174 (Oct. 2, 1982) 4, 25

Report and Order in Docket No. 20272. 54 YC 2a

855 8,9, 10, 21

State Board of Education v. Young's Market Ca.

299 U.S. 59 22 99

Time-Life Broadcast, Inc... 31 F.C.C.2d 747 5, 9, 10

Tulsa Cable T levis ‘On, 74 F.C.C 2a 3 2 18

Cases—Continued: Page

United States v. Frankfort Distilleries, Inc., 324

US. 203 24

United States v. O’Brien, 391 U.S. 367 18

Unite d States V. Shim r. 367 US. 374 ik. 20

United States v. Southwestern Cable Co., 392 U.S.

157 a, 21

United States v. State Tax Commission, 412 U.S.

363 24, 25

WAPA-TV Broadcasting Corp., 59 F.C.C.2d 263 12

William Jameson & Co. V. Morgenthau, 307 U-S.

171 23

Wisconsin V. Constantineau, 400 U.S. 433 23

Constitution, statutes and regulations:

U.S. Const. :

Art. I:

Commerce Clause Bp ao, at

Supremacy Clause 3, 2

Amend. I . ; 18

Amend. XIV sf

Equal Protection Clause 3

Amend. XXI 5, G, Ze, 25, 24, 26, 2

§ 2 22

Okla. Const. Art. XXVII, $5 2

Communications Act of 1934, 47 U.S.C. (& Supp.

VV) 181 ef Seq. 1

*1, 47 USS, 161 1, 19, 22, 27

3 2(a), 47 U.S.C. 152(a) 1, 20, 27

$ 307(b), 47 U.S.C. 307(b) 14

7 USC. tlife) 11

At USL. lili te) ($) Li, 12

iY U.S.C. 111d) 12

Oklahoma Alcoholic Beverage Control Act, Okla.

Stat. Ann. tit. 37, $516 (West Cum. Supp.

1982) 2

47 C.F.R. 73.1860 16

VII

Constitution, statutes and regulations—Continued: Page

4i C.F. Pt. TG:

Section 76.5(v)

Sections 76.51-76.61 (1980)

Section 29 (b)

Section 09 (a) (1)

Section 29(a) (5)

Section 29 (a) (6)

Sections 76.92-76.99

~] ~~] +] ~~]

Miscellaneous:

Before the Subcomm. on Courts, Civil Libertis $.

and the Administration of Justice of th: How

Comm. on the Judiciary, 94th Cong., Ist Sess..

rt. 1 €1975)

HAR. 5680, H.R. 6821. H.R. 6835. fore Sub-

comm. No. 3 of the House Comm. on the Judi-

cary, 89th Cong., Ist Sess., Pts. 1 & 3 (1965)

and Copyriahts of the Senate Comm. oa? ths

Judiciary, 93d Cong., 1st Sess. (1973)

48 Fed. Reg. 49855 (1983)

H.R. Rep. 94-1476, 94th Cone., 2d Sess. (1976)

Television Digest, Inc., Television & Cable Fact-

hook (1982-1983 ed.)

Op. Okla. Att’y Gen. No. 79-334 (Mar. 19. 1980)

Iu the Supreme Court of the United States

OCTOBER TERM, 1983

No. 82-1795

CAPITAL CITIES CABLE, INC., ET AL., PETITIONERS

RICHARD A. CRISP, DIRECTOR, OKLAHOMA

ALCOHOLIC BEVERAGE CONTROL BOARD

ON WRIT OF CERTIORARI TO THE UNITED STATES

COURT OF APPEALS FOR THE TENTH CIRCUIT

BRIEF OF THE :

FEDERAL COMMUNICATIONS COMMISSION

AS AMICUS CURIAE SUPPORTING PETITIONERS

INTEREST OF THE

FEDERAL COMMUNICATIONS COMMISSION

Under the Communications Act of 1934, 47 U.S.C. (&

Supp. V) 151 et seqg., the Federal Communications Com-

mission has authority over all interstate and foreign

communications by wire and radio—including cable tele-

vision systems—for the purpose of making available “to

all the people of the United States a rapid, efficient,

Nationwide, and world-wide wire and radio communica-

tion service.” 47 U.S.C. 151, 152(a). The Oklahoma

law requiring state cable television systems to delete

liquor advertisements from television signals that they

carry has a significant impact on the regulatory scheme

administered by the Commission. The advertising ban,

if enforced, will prevent some cable system operators

from complying with valid Commission regulations that,

(1)

among other things, specifically prohibit deletion of any

part of a retransmitted broadcast signal, including com-

mercials. The Oklahoma law, moreover, will hinder the

provision of television service to rural and other areas

of Oklahoma that receive all or most of their television

service from cable retransmission of out-of-state televi-

sion signals. The Oklahoma provision upheld by the

court below thus undermines the longstanding federal

policy of encouraging the widest availability and diversity

in television.

This Court has directed the parties to brief and argue,

in addition to other questions presented by the petition-

ers, the question: ‘Whether the state's regulation of

liquor advertising, as applied to out-of-state broadcast

signals, is valid in light of existing federal regulation of

cable broadcasting.” The Commission will limit its dis-

cussion as amicus curiae to this question.

STATEMENT

The State of Oklahoma prohibits the advertising of

alcoholic beverages, except by means of strictly regu-

lated on-premises signs. Oklahoma Alcoholic Beverage

Control Act, Okla. Stat. Ann. tit. 37, $516 (West Cum.

Supp. 1982!; Okla. Const. Art. XXVII, £5. This provi-

sion was originally adopted by public referendum, as

part of a state constitutional amendment that replaced

Oklahoma’s prior ban on the sale and consumption

of alcoholic beverages with a system of local option.

For a number of years, the advertising ban has been

enforced against television broadeast stations in Okla-

'To the extent necessary to address the effect of the Oklahoma

provision on the regulatory framework of the cable industry as a

whole, our discussion will encompass “cablecasting,” i.e., video pro-

gramming not carried over television broadcast stations (see 47

C.F.R. 76.5(v)), as well as broadcasting. Cablecasting includes,

for example. such satellite-delivered, national] cable programming

services as Home Box Office (HBO), Cable News Network (CNN

and USA Network. See United States v. Midwest Video C rp., 406

U.S. 649, 651, 653 n.6 (1972

homa that transmit national network programs contain-

ing wine advertisements.” Notwithstanding the apparent

breadth of the advertising ban, the Oklahoma Attorney

General has ruled that the law does not apply to out-of-

state print media sold in Oklahoma, and until 1980 the

law was not enforced against cable television systems

retransmitting out-of-state broadcast signals (Pet. App.

4a, 0a n.1, 23a-24a). In March 1980, however, the State

Attorney General issued an opinion in which he con-

cluded that retransmission of wine commercials by cable

television systems violates Oklahoma law.’ Cable opera-

tors were therefore notified that thev would be criminally

prosecuted if such advertising were carried over their

systems ‘Pet. App. 4a, 4la).

In March

systems, filed suit in the United States Distriet Court

for the Western District of Oklahoma seeking declara-

tory and injunctive relief against Richard Crisp, Direc-

tor of Oklahoma’s Alcoholic Beverage Control Board.

They argued that application of the advertising ban to

cable carriage of out-of-state broadcast signals violated

the Commerce and Supremacy Clauses, their free speech

rights under the First and Fourteenth Amendments, and

the Equal Protection Clause of the Fourteenth Amenda-

ment. On cross motions for summary judgment, the dis-

trict court issued a permanent injunction barring en-

forcement of the Oklahoma law against petitioners. Ap-

plying the test set forth in Centra! Hudson Gas & Elec-

tric Corp. V. Public Service Comm'n, 447 U.S. 557 (1980).

- The Oklahoma Supreme Court has found enforcement of the law

against television stations to be consistent with the Commerce

Clause of the United States Constitution. Oklahoma Aleoholic Rever-

age Control Board Vv. Heublein Wines. Int'l. 566 2d 1158 (Okla.

1977

‘Op. Okla. Att'y Gen. No. 79-334 (Mar. 19, 1980). Because bever-

ages containing less than 3.2 alcohol may be advertised. and be-

cause beer may sometimes contain less than 3.2°) aleohol. beer com-

mercials need not be deleted (Pet. App. 3a At the time this case

was brought, hard liquor generaliy was not advertised on television.

the court held that the ban on liquor advertising was an

unconstitutional restriction on the cable operators’ First

and Fourteenth Amendment right to engage in protected

commercial speech. Pet. App. 33a-50a.' The court of

appeals reversed, holding that, although the advertising

at issue was protected by the First Amendment, the

Oklahoma ban was a valid restriction on commercial

speech ‘Pet. App. 20a, 24a).° The court recognized that

its ruling placed cable broadcasters “in a difficult posi-

tion’: however, the court did not address the preemptive

effects of federal law on the Oklahoma advertising ban,

noting only that “nothing in the First Amendment pro-

hibits’’ the state proscription (id. at 23a).°

INTRODUCTION AND SUMMARY OF ARGUMENT

Oklahoma’s prohibition of liquor advertisements, as

applied to cable television transmissions, would have a

serious adverse effect on the national system of cable

television communications. Because federal copyright

* The district court found that (1) cable systems import broad-

cast signals that originate outside Oklahoma and contain wine com-

mercials; (2) federal law prohibits cable operators from modifying

those signals; (3) cable operators “have no contractual relationship

with the stations whose signals they carry, pay no fee to the stations

for said signals, and have no voice in the programming carried by

such stations”; (4) there is no feasible way for cable operators to

delete advertising from imported signals; and (5) inability to carry

out-of-state signals containing wine commercials “would probably

cause a large but inherently immeasurable reduction in Plaintiffs

subscriber revenue" ( Pet. App. 40a-42a).

* The court of appeals viewed this Court’s summary dismissal of

the appeal in Queensgate Investment Co. V. Liquor Control Commis-

ston, No. 81-2174 (Oct. 4, 1982),°as controlling the result in the

instant proceeding (Pet. App. 24a). Im Queensgate, the Ohio Su-

preme Court upheld as consistent with the First and Fourteenth

Amendments a partial ban on off-premises advertising of liquor

prices by certain liquor permit holders. Queensgate Investment Co.

V. Liquor Control Commission, 69 Ohio St. 2d 361, 433 N.E.2d.138

(1982).

®*On April 4, 1983, the court of appeals stayed its mandate pend-

ing this Court’s final disposition of the case (Pet. App. 27a).

law, FCC rules, and technical factors prohibit the dele-

tion of advertisements from broadcast signals and other

video programs transmitted by cable systems, Oklahoma's

ban on liquor advertising will effectively prevent Okla-

homa cable systems from retransmitting out-of-state pro-

grams to their subscribers. If allowed to stand, the

court of appeals’ decision will interfere with the FCC’s

regulatory authority, disrupt the nationwide cable tele-

vision communications system, and diminish the diversity

of broadeast voices available in Oklahoma, in direct con-

travention of federal statutory and regulatory policy.

I. Twenty-first Amendment considerations momentarily

aside, Oklahoma’s ban on liquor advertising is unques-

tionably preempted by federal law insofar as it is applied

to transmission of out-of-state programming carried by

Oklahoma cable television systems.

A. The federal! intention to preempt state regulation of

the content of cable advertising is explicit. The Commis-

sion has established a comprehensive and exclusive regu-

latory scheme, expressly preempting nonfederal restric-

tions on the “operational aspects” of cable television, in-

cluding all “signal carriage regulation.” Clarification of

Cable Television Rules, 46 F.C.C.2d 175, 178 (1975): see

First Report and Order in Docket No. 18297. 20 F.C.C.

2d 201, 223 (1969). The Commission’s exclusive regula-

tory jurisdiction over program offerings comprises ad-

vertising as well as other programming ‘see Second Re-

port and Order. in Docket No. 14895, 2 F.C.C.2d (gin

756 (19661), and nonbroadeast ‘or cableeast) program-

ming as well as broadcast-originated signals. See Clarifi-

cation of CA TV First Report as to Scope of Feds ral Pre-

emption, 20 F.C.C.2d 741 (1969): Time-Life Broadcast.

inc., 31 FC.C, 2d 747 (1971).

B. The Oklahoma provision directly conflicts with the

specific regulatory scheme erected by Congress and the

Commission. Compliance with Oklahoma's ban on wine

commercials would make it impossible for cable opera -

tors to comply with the nonceletion requirements of the

the Commission's rules requiring the carriage of signals

from nearby local broadeast stations. Moreover. compli-

ance would be technically impracticable given the struc-

ture of the industry as it has developed under federal

regulation.

C. The Oklahoma provision, if enforced, would signifi-

cantly interfere with achievement of the purposes and

objectives of national cable communications policy, as

established by Congress and the Commission. It would

significantly diminish the access of Oklahoma residents

to the broad range of programming intended to be avail-

able on a nationwide basis.

II. The regulations that produce this preemptive effect

on Oklahoma’s prohibition of liquor advertising as it ap-

plies to cable television are a valid exercise of the broad

authority delegated to the Commission under the Com-

munications Act of 1934. As such, they must prevail over

conflicting state laws.

Ill. The Twenty-first Amendment’s grant of enhanced

authority to the states over the sale and importation of

alcoholic beverages does not alter this conclusion. The

Twenty-first Amendment does not displace all federal

law that has an effect on the sale of liquor. Here, the

State's liquor regulation has a direct, significant, and

adverse effect on the cable television industry—an unre-

lated industry which it is the policy of Congress to foster

and encourage.

ARGUMENT

I. REGULATION OF OUT-OF-STATE ADVERTISING

TRANSMITTED OVER CABLE TELEVISION IS

PREEMPTED BY FEDERAL LAW

The preemption of state laws, especially those touching

on the area of heightened state authority under the

Twenty-first Amendment, is not lightly inferred. In this

case, however, the State of Oklahoma has purported to

require operators of cable television systems to do what

‘

they cannot and may not do under the federal regulatory

scheme. In light of the Commission’s unambiguous in-

tent to preempt such state laws, the inconsistency be-

tween the Oklahoma law and the federal scheme. and

the severe adverse consequences to the nation’s system of

cable communications, the Oklahoma provision at issue

cannot stand. Cf. Head v. New Mexico Board of Evx-

aminers in Optometry, 374 U.S. 424 (1963).

A. The Commission has expressly preempted this form

of state regulation

“It is well established that within constitutional limits

Congress may preempt state authority by so Stating in

*In Head, this Court concluded that FCC radio broadcasting reg-

ulations did not preempt the state’s authority to ban price-related

eyeglass advertising. As we demonstrate below, the state and fed-

eral laws at issue here are in every material respect distinguishable

from those in Head: the Commission's preemptive intent is explicit

and unambiguous; the conflict between state and federal law is ir-

reconcilable; and the state law, if enforced, would seriously inter-

fere with achievement of federal policy. The differences between

broadcast and cable regulation, reflected in Head and the instant

case, arise from differences in the technical structure and economic

role of the broadcast and cable industries. Generally speaking, cable

operators, unlike broadcasters, retransmit programming verbatim

from a wide variety of sources simultaneously. Cable operators typi-

cally have no means for deleting specified types of commercial ad-

Vertising, and were they to do so, it would injure the economic in-

terests of program originators protected under copyright law. FCC

rule, and contract. These distinctions between broadcast and cable

remain at the heart of FCC regulatory policy. See 48 Fed. Reg.

19855 «19838 suggesting that local laws prohibiting aleoholic

beverage advertising over radio may be enforced by loca! authori-

ties’. The Oklahoma Attorney General, however. failed to recognize

any legally relevant differences between these media

There is no reason to believe that cable television sh uld be

treated any differently than regularly broadcast television Fur-

thermore, distinctions between cable television and regularly

broadcast television if any, are issues of fact net properly ad-

dressed by an Attorney General's Opinion.

Op. Okla. Att'y Gen. No. 79-384, at 3.

express terms.” Pacific Gas & Electric Co. v. State En-

ergy Resources Conservation and Development Comm’n,

No. 81-1954 (Apr. 20, 1983), slip op. 11. See Jones v.

Rath Packing Co., 480 U.S. 519, 525 (1977). As in

Fidelity Federal Savings & Loan Ass'n Vv. de la Cuesta,

458 U.s. 141, 154 (1982), the federal “intent to pre-

empt” state regulation of the content of cable advertis-

ing “is unambiguous.” The Commission has adopted a

regulatory system for cable television of ‘deliberately

structured dualism” (Cable Television Report and Order

in Docket No, 18897, 36 F.C.C.2d 1438, 207, on reconsid-

eration, 36 F.C.C.2d 326 (1972), aff’d sub nom. Amerti-

can Civil Liberties Union v. FCC, 523 F.2d 1344 (9th

Cir. 19751) 1, permitting state authorities to regulate the

narrowly-detined local incidents of cable television, while

preempting all nonfederal regulation of other matters.

See Report and Order in Docket No, 20272, 54 F.C.C.2d

855, 861 (1975). “The ultimate dividing line,”’ the Com-

mission has determined, “rests on the distinction between

reasonable regulations regarding use of the streets and

right-of-way and the regulation of the operational aspects

of cable communications” (ibid.'. The “operational as-

pects of cabie communications’’—explicitly preempted—

include “signa! carriage, pay cable, leased channel regu-

lations, technical standards, * * * and several aspects of

franchise responsibility” (id. at 863). The state and local

role in this scheme involves “the non-operational aspects

of cable franchising including bonding agreements, main-

tenance of rights-of-wavs, franchisee selection and condi-

tions of occupancy and construction” (ibid.1."

The Commission has left no doubt that its assertion

of exclusive federal regulatory authority over the ‘“opera-

tional aspects” of cable television precludes any state

regulation of carriage of television broadcast signals:

* The Commission has allowed state and local franchising authori-

ties to impose certain additional “affirmative obligations,” not in-

consistent with federal regulatory policies, now including, for ex-

ample, requirements for public access channels. See First Report

and Order in Docket No. 18397, 20 F.C.C. 2d at 223 n.28.

“The fact that this Commission has pre-empted jurisdic-

tion of any and all signal carriage regulation is unques-

tioned. * * * Franchising authorities do not have any

jurisdiction or authority relating to signal carriage.”

Clarification of Cable Television Rules, 46 F.C.C.2d at

178." The Commission’s exclusive regulatory jurisdiction

over program offerings extends to advertising as well as

other programming (see Second Report and Order in

Docket No. 14895, 2, F.C.C.2d at 756). and to non-

broadcast ‘or cablecast) as well as retransmitted broad-

cast programming. Community Cable TV, Inc.. No. 83-

925 #ECC Nov. 15, 1983), slip op. 13; Clarification

of GATV First Report as to Scope of Federal Preemp-

tion, 20 F.C.C.2d 741 (1969) - Time-Life Broadcast, Inc.,

31 F.C.C.2d 747 (1971). The Commission has accord-

ingly preempted regulation of the “rates, terms and con-

ditions” of video program services provided by cable

systems, including origination programming,’ pay pro-

gramming,'' and other video auxiliary services.'? The

*The Commission has chosen not to exercise control over the

programming decisions of cable operators, preferring “to afford a

period of free experimentation and innovation.” First Report and

Order in Docket No. 18397, 20 F.C.C.2d at 214; see Brookhaven

Cable TV, Inc. Vv. Kelly, 573 F.2d 765 (2d Cir. 1978), cert. denied.

441 U.S. 904 (1979). However, the conflict between state and

federal law does not “evaporate” merely because federal law is per-

missive in nature. Fidelity Federal Savings & Loan Ass'n, 458 U.S.

at 155. Just as the Federal Home Loan Bank Board in Fidelity

Federal explicitly preempted state due-on-sale clauses in order to

protect the flexibility and discretion of federal savings and loan

institutions (ibid.), here the Commission has explicitly preempted

nonfederal regulation of operational aspects of cable systems in

order to promote, inter alia, innovation and experimentation. First

Report and Order in Docket No. 18397, 20 F.C.C.2d at 214, 223.

'’ See Time-Life Broadcast, Inc., 31 F.C.C.2d 747 (1971).

'' See Clarification of Cable Television Rules, 46 F.C.C.2d at 199-

200; Report and Order in Docket No. 20272. 54 ".C.C.2d at 861-863:

Notice of Inquiry in Docket No. 20767. 58 F.C.C.2d 915, 915-916

(1976) ; Brookhaven Cable TV, Inc. v. Kelly, 573 F.2d 765 (2d. Cir.

1978), cert. denied, 441 U.S. 904 (1979).

‘2 Community Cable TV, Inc., No. 83-525 (FCC Nov. 15, 1983).

‘

purpose of its regulatory scheme, the Commission has

declared, is to ensure “that the benefits of cable com-

munications become a reality on a nationwide basis.”

Report and Order in Docket No. 20272, 54 F.C.C.2d at

S65.

The Oklahoma advertising ban plainly exceeds the

regulatory authority reserved to the states under this

system, and invades the exclusive jurisdiction of the

Commission over operational aspects of cable television."

Oklahoma retains authority over franchise selection.

rights of way, conditions of occupancy or construction,

financial responsibility, and the like; but the State may

not “interfer|e| with federally authorized CATV origi-

nation and advertising.” Time-Life Broadcast, Inc.. 31

F’.C.C.2¢ at 747.

‘In a recent Memorandum Opinion and Order addressing the

preemptive effect of federal cable regulation, the Commission reiter-

ated its understanding of preemption in precisely the circumstances

of this case:

While this proceeding is directed primarily to issues involving

state or local rate controls, we remain concerned with other

types of regulations that may impede new cable services and

burden interstate communications. State controls over adver-

tising on cable channels distributed by space satellite may both

undercut the economic base for such services and render their

operation on an interstate basis a practical impossibility. We

have in the past stated that local franchise provisions or regu-

lations that prohibit advertising in a manner consistent with

our rules are preempted. Federal Preemption of CATV Re gu-

lations, [20 F.C.C.2d 741 (1969)]. The types of regulation

promulgated by the state of Oklahoma in Oklahoma Telecasters

Ass'n V. Crisp, 699 F.2d 490 (10th Cir. 1983), petition for cert.

filed sub, nom Capital Cities Cable. Inc. v. Crisp, No. 82-1795,

would thus undermine the goals of preemption articulated by

the Commission in this and earlier cases.

Communitu Cable TV, Inc., No. 83-525 (FCC Nov. 15, 1983), slip

op. 14.n.26. A copy of this Memorandum Opinion and Order has

been lodged with the Clerk of this Court. As shown in text, this is

merely a restatement of longstanding FCC policy. Cf. Fidelity Fed-

eral Savings & Loan Ass'n, 458 U.S. at 155.

That the preemption of Oklahoma’s ban on liquor ad-

vertising over cable television derives from the regula-

tory policy of the Commission rather than directly from

an Act of Congress does not affect this conclusion. As

this Court stated in Fidelity Federal Savings & Loan

Ass’n, 458 U:S. at 153-154:

Federal regulations have no less pre-emptive effect

than federal statutes. Where Congress has directed

an administrator to exercise his discretion, his judg-

ments are subject to judicial review only to deter-

mine whether he has exceeded his Statutory authority

or acted arbitrarily.

See also Blum v. Bacon, 457 U.S. 132 (1982): Free v.

Bland, 369 U.S. 663, 668 (1962): United States V.

Shimer, 367 U.S. 374, 381-382 (1961).

B. The Oklahoma ban on liquor advertising directly

conflicts with federal regulations

I-ven aside from general federal preclusion of state

regulation of the operational aspects of cable television.

the Oklahoma ban on liquor advertising conflicts with

specific regulatory rules and policies of Congress and the

Commission.

First, Oklahoma’s ban on liquor advertising, as it ap-

plies to cable retransmission of broadcast signals, di-

rectly conflicts with nondeletion requirements of the

FCC regulations. The Copyright Act establishes a‘ com-

pulsory licensing system for the carriage of television

broadeast signals by cable systems. Section l11l(e) 13)

of the Copyright Act, 17 U.S.C. 111/e) (3). requires cable

systems, in order to avail themselves of the benefits of

'4 This Court held in Goldstein v. California, 412 U.S. 546, 556-

560 (1973), that although states had not relinquished exclusive

power to the federal government. to grant copyright protection,

where state and federal laws were in conflict, the federal law would

prevail.

the statutory scheme,'* to carry broadcast signals intact,

without deleting any material, including advertisements."®

This requirement is designed to protect the advertiser,

and thus the copyright holder, since the latter’s compen-

sation “is directly related to the size of the audience that

the advertiser’s message is calculated to reach.” H.R.

Rep. 94-1476, 94th Cong., 2d Sess. 94 (1976). The stat-

ute also protects broadcasters by preventing a cable sys-

tem from inserting advertising without having to bear

the same program costs that broadcasters must bear

(ibid.),

A similar prohibition against the deletion of advertise-

ments from retransmitted signals is contained in the

Commission’s rules (47 C.F.R. 76.55(b)):

Where a television broadcast signal is carried by

a community unit, pursuant to the rules in this sub-

part, the programs broadcast shall be carried in full,

without deletion or alteration of any portion except

as required by this part.

This nondeletion principle applies to commercial adver-

tisements as well as regular programming. See Garland

B. Pugh, 68 F.C.C.2d 997, 999 (1978): WAPA-TV

Broadcasting Corp., 59 F.C.C.2d 263, 272 (1976): Notice

of Proposed Rulemaking and Notice of Inquiry in Docket

No. 18397, 15 F.C.C.2d 417, 444 (1968): Second Report

'S Cable operators are permitted under the Copyright Act’s “com-

pulsory license” scheme to retransmit any broadcast signal without

making individual arrangements with the broadcast licensee. In-

stead, cable systems make payments to a royalty pool which is then

divided among broadcasters. 17 U.S.C. 111(d). The compulsory

license system was created in order to enable cable systems to carry

signals without having to negotiate with every copyright owner

whose work the cable operator retransmitted. Congress considered

such individual negotiations unfeasible. H.R. Rep. 94-1476, 94th

Cong., 2d Sess. 89 (1976).

16 The Act contains a minor exception, not applicable here, for

“those engaged in television commercial advertising market re-

search.” 17 U.S.C. 111(c) (3).

and Order in Docket No. | $895, 2 F.C.C.2d at 753. 756.

The policy “is designed to prevent a loss of revenues to

local broadcasters sufficient to result in reduced service

to the public.” Garland B. Pugh, 68 F.C.C.2d at 999."

The Oklahoma provision at issue directly conflicts with

these prohibitions. Indeed, the deletion of advertisements

is precisely the practice the federal rules are directed

against. The economics of programming and broadcast-

ing are such that to permit cable operators to delete ad-

vertising would disrupt the system of payments and in-

centives needed to stimulate the business and reward

production. That the purpose of Oklahoma's liquor ad-

vertising ban is not to interfere with the federal] scheme

is immaterial (Perez v. Campbell, 402 U.S. 637, 651

(1971)); the effect ‘to the extent that compliance is

even technologically feasiblei'* is to allow—indeed, to

compel—Oklahoma cable operators to receive the benefits

of nationwide programming without carrying a portion

of the advertising that pays for it. Since compliance

with both federal and state law is a legal impossibility

the state law must yield. Florida Lime & Avocado

Growers, Ine. vy. Paul, 373 U.S. 132, 142-143 (1963):

Farmers Union v. WDAY, Inc., 360 U.S. 925, 531-535

(1959).

Second, the advertising ban conflicts with the Commis-

sion’s so-called ‘must carry” rules. In order to protect

local television programming and broadcasting, the Com-

mission adopted rules in 1965 requiring certain cable

systems to carry all television signals that were available

over the air in their service area (the “must carry”

rules!, and to delete certain imported programming that

'* Although a specific rule of this sort was first adopted in 1972

(Cable Television Report and Order in Docket No, 18292, 36 F.C.C.2a

at 230), the Commission had indicated as early as 1966 that its

Signal carriage requirements embraced an implicit prohibition

against any deletion or alteration of any portion (including adver-

tising) of signals carried. See Second Report and Order in Docket

No. 14895, 2 F.C.C.2d at 756.

18 See pages 16-17, infra.

duplicated local program: ‘the “nonduplication” rules) .'°

First Report avd Order in Docket No. 14890, 38 F.C.C

683 (1965), aff'd suh nom. Black Hills Video Corp. V.

FCC, 399 F.2d 65 (8th Cir. 1968). In 1966 the Commis-

Sion extended these rules to all cable systems and also

Imposed subdstantial restrictions on tne importation Ot

distant tele — signals by cable systems (the “distant

signal” } "ule Second Report and Order in Docket No.

f40ga, = F- 2d at 425. These rues were desiened to

ensure oly cable subscribers would continue to receive al]

available local signa!s. that the relative competitive pos!-

tions of the stations in the area would be preserved. and

that the system of loca] broadcasting created by the Com-

mission under Section 3071 b) of the Chateihinatices Act

would not be jeopardized by competition from cable SVSs-

tems. Second R, port and Order in Docket No. [4090, 2

F’.C.C.2d at 735-736.2°

In 1972 the Commission promulgated a nprehensive

scheme of regulation for cable television svstems that in-

cluded, in addition to other regulations, “must carry,”

‘distant signal” and “nonduplication” rules of the type

described above, — Tele hiSTON Re port and Ord r in

Docket No, 18.397. } F.C. 2a i on reconsideration.

36 P.C.C.3a 326 fret , aff'd s nom, Ann rican Civil

Liberties Union Fu. 523 F.2d 1344 (9th Cir, 1975)

It was as part of this scheme that the Commission

'The nonduptication rules evolved into two different sets of

von one dealing with network programs and the other with n

letWork programs. The latter rules were referred to as the ‘Sy¥ndi-

cated program ex« lusivity” rules. See. « 9., Cable Television Re p

and Order in Docket No. (S397, 36 F.C.C.2d at 181-185

“" See Cable Tels vision Report and Order in Docks? No, 18397. 26

F.C.C.2d 143, 164. 165. , n reconsideration, 36 F.C.C.2¢ 3826 (£972)

aff'd sub nom. American Civil Liberties Unicn \ FCC, 523 F.2d

1344 (9th Cir. 1975); Second Report and Order in Docket No.

14895, 2 F.C.C.2d 125, 781 (1966), aff'd sub nom Black Hills

Video Corp. Vv. FC & a 339 F 2d 65 (8th Cir. 1968 ; Fy) st Re port and

Order in Docket No. 14595, 38 F.C.C.2d 683, 700, 713 (1965). See

also Arlington Te lecommunications Corp., 70 F.C.C.2d 229]. 2298-

2299 (1979).

adopted the “deliberately structured dualism” (see page

S, supra) that permits state authorities to regulate the

local incidents of cable television service while preempt-

ing regulation of operational aspects of cable systems.

See Cahile Television Report and Order in Docket No.

18397, 36 F.C.C.2d at 207.

The “must carry” rules are still in effect today, al-

though in somewhat modified form. See 47 C.F.R. 76.51-

76.61 (1980).*"| Under these rules, certain cable opera-

tors are required to carry the signals of particular tele-

vision broadcast stations, In particular. cable operators

may be required to carry the signals of a broadeast sta-

tion within a “specified zone” (35 miles! or if the sta-

tion is “significantly viewed” in the community served by

the cab'e operator. 47 C.F.R. 76.59(ai(1). (5) and (6).

The “must carry” rules often require the cable operator

to carry signal's from a broadcast station in a nearby

State. J.A. 22, 35: II R. 34-35, 52-53. Under 47 C.F.R.

76.55 (1

99/6," the signals must, moreover, be carried with

no modifications or deletions. even of commercials.

Oklahoma's ban on liquor advertising over cable di-

rectly conflicts with these rules. The Commission staff

estimates that approximately one-third of the land area

of Oklahoma now receives out-of-state television broadcast

signals that are required to be carried under the “must

carry” rules. See Television Digest. Inc.. Telerision &

Cahle Facthook 699-717 (1982-1983 ed.\. Cable operators

required to carry out-of-state signals that include liquor

advertisements would face criminal prosecution under

state law as a result of compliance with federal] require-

*! The “distant signal” and “syndicated exclusivity” rules have

been rescinded, on a finding that they were no longer necessary to

protect the viability of local broadcasting and had come to restrict

competition and diversity in programming. Cable Television Syndi-

cated Program Exclusivity Rules, 79 F.C.C.2d 663, 813-814 (1980),

aff'd sub nom. Malrite T.V. v. FCC, 652 F.2d 1140 (2d Cir. 198)),

cert. denied, 154 U.S. 1143 (1982). Network nonduplication rules,

like “must carry” rules, remain in effect. 47 C.F.R. 76.92-76.99.

** Discussed at pages 12-13, supra.

ments. This is a textbook case of<conflict, compelling a

finding of federal preemption. Florida Lime & Avocado

rs, Inc. V. Paul, 373 U.S. at 142-143: Farmers Un-

ion V. WDAY, Ine., 360 U.S. at 531-535.

Finally, even for non-broadeast (or cablecast?

gramming (to which the “must carry” rules, the Copy-

the FCC non-

Grows

pro-

right Act nondeletion requirements, and

deletion requirements do not apply!, compliance with the

Oklahoma ban on wine commercials as well as federal

regulations may well be “‘a physical impossibility.’ ”

Pacific Gas & Electric Co.. slip op. 11 ‘quoting Florida

Lime & Avocado Growers, Inc. v. Paul, 373 U.S. at 142-

143). Not all cablecasted programming contains adver-

tising—HBO is a well-known example that does not—but

it is more common for it to do so. See J.A. 25: II R. 39.

Among the advertisements carried are wine commercials

(ibid.'. The Oklahoma’ advertising ban thus creates a

technical difficulty for cablecasting. The district court

made a factual finding that “|t]here exists no feasible

way for [cable operators] to block out the advertise-

ments” (Pet. App. 41a). See also J.A. 24, 26, 29, 39;

IT R. 37-38, 40-41, 44, 58.

Unlike television broadcast stations, which are required

by FCC regulations to have operators supervise their

transmissions (‘see 47 C.F.R. 73.1860), cable television

systems face no such requirement and are often fully

automated with no regular operator on duty. Moreover,

while a broadcast station transmits only a single signal,

a cable system normally transmits a minimum of 12 sig-

nals, and often more than 30, simultaneously. Constant

monitoring of all of these signals to delete wine com-

mercials as required by the Oklahoma law, even where

such deletion is permissible, would be a_ prohibitively

burdensome task. The Congress reached a similar can-

clusion in adopting the Copyright Act of 1976. A ma-

jor reason why Congress concluded that imposing full

able was that the technical and logistical problems of

interposing the necessary personne! and equipment to

block out programs as to which the cable operator had

not obtained copyright permission would be insurmounta-

ble. See, e.9.. Copyright Law Revisions: Hearings on

H.R. 2273 Be fore the Subcomm., On Courts, Civi/ Lihe l-

ties, and the Administration of Justice of the House

Comm. on the Judiciary. 94th Cong., Ist Sess., Pt. 1. at

798 (19751): Copyright Law Revisions: Hearings on S.,

1261 Before the Subcomm. on Patents. Trad marks, and

Copyrights of the Senate Comm. on the Judiciary, 93d

Cong., Ist Sess. 291-292, 400-401 (1973): Copyright Law

Revisions: Hearings on H.R. 4347. H.R. 5680. H.R. 6831,

H.R. 6835, Before Subcomm. No. 3 of the House Comm.

on the Judiciary, 89th Cong., lst Sess., Pts. 1 & 3. at 36.

1251-1254 (1965).

The Oklahoma provision thus cannot be harmonized

with our national cable communications system. Given

the structure of the industry, as developed in response to

FCC and statutory policies precluding selective deletion

of broadcast signals, cable operators are not now able to

comply with state laws based on an entirely different

premise.

C. The Oklahoma ban on liquor advertising stands as

an obstacle to the achievement of the Commission's

full purposes and objectives

This Court has frequently reiterated that state law is

preempted if it “ ‘stands as an obstacle to the accomplish-

ment and execution of the full purposes and objectives of

Congress.’ "" Pacific Gas & Electric Co., slip op. 11 ( quot-

ing Hines V. Davidowitz, 312 U.S. 52, 67 (1941)): Fidel-

ity Federal Savings & Loan Ass'n. 458 US. at 153°

Florida Lime AG Avocado Growers, Tne. Vy, Paul, 373 US.

at 142-143. And, as noted at page 11, supra, the preemp-

** See also Cable Television Report and Order in Docket No. 18397.

36 F.C.C.2d at 165, in which the Commission rejected as technically

unfeasible a proposal to allow commercial substitution by cable

operators. It is also significant that many cable-originated pro-

gram distributors, such as CNN, contractually forbid deletion of

advertising.

tion doctrine applies to valid federal regulations no less

than to Acts of Congress.

In accordance with the broad authorities and policies

of the Communications Act of 1934, the Commission has

fostered a nationwide system of over-the-air and cable

television communications designed to expand the range

of voices and programming available to viewers in all

parts of the country.** The regulatory scheme is intended

not merely to protect—but actively to promote—this ob-

jective. See United States v. Midwest Video Corp., 406

U.S. at 667. “I]t has long been a basic tenet of na-

tional communications policy that ‘the widest possible dis-

semination of information from diverse and antagonistic

sources 1s essential to the welfare of the public.’”’ First

Report and Order in Docket No. 18397, 20 F.C.C.2d at

205 (quoting Associated Press v. United States, 326 U.S.

1, 20 (1945)). See also FCC v. National Citizens Com-

mittee for Broadcasting, 436 U.S. 775, 796-798 (1978).

Cable is particularly important as a means of providing

television service “in areas too small in population to

support a local station or too remote in distance or iso-

lated by terrain to receive regular or good off-the-air

reception.”” Second Report and Order in Docket No.

14895, 2 F.C.C.2d 725, 781 (1966), aff'd sub nom.

Black Hills Video Corp. v. FCC, 399 F.2d 65 (8th Cir.

1968). As the record in this case indicates, in many

towns of Oklahoma the only available television signals

24 The Commission's pursuit of a strong and diverse cable televi-

sion communications system is grounded in First Amendment, as

well as statutory, concerns. See Columbia Broadcasting System, Inc.

Vv. Democratic National Committee, 412 U.S. 94, 122 (1973). The

Commission has regulated cable television signal carriage only where

such regulation is believed to be necessary to protect local television

service, and even then has fashioned its rules in such a way as to

impose “the least possible restrictions on First Amendment free-

doms.” Tulsa Cable Television, 74 F.C.C.2d 382, 385 (1979) (citing

United States Vv. O'Brien, 391 U.S. 367 (1968) ); Arlington Telecom-

munications Corp., 70 F.C.C.2d 2291, 2299-2300 (1979).

are those of out-of-state stations imported by cable sys-

tems. J.A. 37; II R. 55-56.

The Oklahoma provision at issue affects not only the

advertising of alcoholic beverages: it also has the effect

of banning the carriage of many out-of-state broadcast

and cablecast programs by Oklahoma cable operators.”

Oklahoma cable subscribers will be deprived, for exam-

ple, of the programming of distant out-of-state stations.

including cable “superstations’” whose programming has

wide national appeal. Further, because carriage of out-

of-state broadcast signals is what attracts many sub-

scribers to cable, cable systems are likely to lose much of

their appeal, and therefore substantial revenues, as a re-

sult of the ban, as the district court found (Pet. App.

42a).°" If cable systems cease operations or are required

to restrict severely the programming that they carry, the

public will be denied access not just to retransmitted

television broadcast signals, but also to other cable serv-

ices, including specialty news, public affairs, motion pic-

tures, and sports cable channels. The Oklahoma ban

against wine commercials, therefore, threatens a substan-

tial decrease in program availability and diversity for

residents of Oklahoma, thus thwarting the national pol-

icy favoring the dissemination of information from varied

and diverse sources “to all the people of the United

States” (47 U.S.C. 151).

*5 If the Oklahoma advertising ban is enforced. cable operators in

that state will be unable to satisfy the requirements for obtaining

the compulsory license provided under the Copyright Act. This

problem alone would be devastating to their programming because

it would require them to undertake the protracted royalty negotia-

tions found infeasible by Congress. H.R. Rep. 94-1476, supra, at 89.

*6 See Malrite T.V. Vv. FCC, 652 F.2d 1140, 1145 n.4 (2d Cir. 1981).

Cf. Fidelity Federal Savings & Loan Ass'n, 458 U.S. at 156 (“By

further limiting the availability of an option the Board considers

essential to the economic soundness of the thrift industry, the State

has created ‘an obstacle to the accomplishment and execution of the

full purposes and objectives’ of the due-on-sale regulation. Hines

V. Davidowitz, 312 U.S., at 67.”).

II. THE FCC REGULATIONS THAT PREEMPT THE

OKLAHOMA PROVISION ARE VALID AND AU-

THORIZED BY STATUTE

This Court held in Fidelity Federal that when an

agency adopts regulations intended to preempt state law,

the court’s inquiry becomes whether the policy “ ‘repre-

sents a reasonable accommodation of conflicting policies’ ”

and “is within the scope of the [agency’s] delegated au-

thority.”” 458 U.S. at 154 (quoting United States v.

Shimer, 367 U.S. at 383). The.FCC rules at issue here

easily satisfy that test.

The Commission has been entrusted with “broad au-

thority” over cable television, deriving from Section 2/(a)

of the Communications Act of 1934, 47 U.S.C. 152(a).*?

United States v. Southwestern Cable Co., 392 U.S. 157,

178 (1968). The Act has been held to provide a “ ‘com-

prehensive mandate’, with ‘not niggardly but expansive

powers’”’ (id. at 173, quoting National Broadcasting

Co. v. United States, 319 U.S. 190, 219 (1943)). This

statutory delegation of authority provides a sufficient ba-

sis for regulatory action that is ‘reasonably ancillary to

the effective performance of the Commission’s various

responsibilities for the regulation of television broadcast-

ing” (392 U.S. at 178). The authority is exercised both

to protect the “system of local television broadcasting”’

(id. at 177), and to “promote the objectives for which

the Commission had been assigned jurisdiction over broad-

casting.” United States v. Midwest Video Corp., 406 U.S.

at 667 (plurality opinion). The breadth of the Commis-

sion’s ancillary powers over cable television was con-

firmed in Midwest Video Corp., which made clear that

the Commission’s authority encompassed cable retrans-

27 This section provides in relevant part: “The provisions of this

[Act] shall apply to all interstate and foreign communication by

wire or radio.” 47 U.S.C. 152(a). The Communications Act has

been held to apply to cable television, even though that technology

did not exist at the time of passage of the Act. United States v.

Southwestern Cable, 392 U.S. 157, 167-169 (1968).

mission of television broadcast signals as well as cable-

casting (406 U.S. at 653 n.6, 662-663).

The Commission’s regulation of cable programming and

preemption of conflicting state regulation are designed

to serve precisely those objectives identified by this Court

in Southwestern Cable Co. and Midwest Video Corp.

as warranting federal regulation of the cable industry.

The Commission’s initial objective in regulating signal

carriage by cable systems was to ensure that the devel-

opment of cable television would not disrupt the Com-

mission’s national television allocation policies. This was

plainly within the Commission’s authority to take regu-

latory action that is “reasonably ancillary to the effective

performance of the Commission’s various responsibilities

for the regulation of television broadcasting.” South-

western Cable Co., 392 U.S. at 178. The Commission’s

regulation of cable programming is also designed to serve

the objective of increasing program availability and di-

versity. See Midwest Video Corp., 406 U.S. at 662-670.

Moreover, the Commission’s decision to preempt non-

federal regulation of cable programming was a reason-

able exercise of the Commission’s jurisdiction. The Com-

mission has concluded that its regulation of cable Sys-

tems is essential “to promote national communications

objectives’’ and that its rules are intended to “assur/[e]

that the benefits of cable communications become a real-

ity on a nationwide basis.” Report and Order in Docket

No, 20272, 54 F.C.C, 2d at 864-865. Federal preemption

is required to enable the cable television industry to de-

velop its “vast potential” (id. at 865) free from state or

local regulation that might inhibit diversity of offerings

or weaken the economic base of the industry. While some

may disagree with the Commission’s judgment that “the

public interest would best be served for the present by

encouraging [cable television] to experiment and develop

its originations free from * * * limitations as to types

of programming” (First Report and Order in Docket No.

18397, 20 F.C.C.2d at 205), that judgment is plainly

within the scope of the Commission’s charter to promote

frat sae

a “rapid, efficient, Nationwide and world-wide wire and

radio communications service.” 47 U.S.C. 151. When

a federal agency has adopted reasonable regulations

within its authority, as the Commission has done here, a

conflicting state law such as Oklahoma’s must yield.

Fidelity Federal Savings & Loan Ass’n, 458 U.S. at 153-

154; Free v. Bland, 369 U.S. 663, 666 (1962).

Ill. THE AUTHORITY GRANTED THE STATES BY

THE TWENTY-FIRST AMENDMENT TO REGU-

LATE THE IMPORTATION OF ALCOHOLIC BEV-

ERAGES DOES NOT VALIDATE OKLAHOMA’S

ADVERTISING BAN

As set forth above, the application of Oklahoma’s ad-

vertising ban to cable broadcasters is preempted by valid

federal regulations designed to foster the nation’s cable

communications system. The state’s authority under the

Twenty-first Amendment to control the “transportation

or importation” of intoxicating liquors does not alter this

result.?*

The states admittedly have broad power under the

Twenty-first Amendment to regulate commerce in in-

toxicating liquors within their borders. See State Board

of Education v. Young’s Market Co., 299 U.S. 59, 64

(1936). But the “added presumption in favor of the

validity of the state regulation in this area” (California

v. LaRue, 409 U.S. 109, 118 (1972)) is not without

limits. The Amendment did not pro tanto repeal the

Constitution with respect to state liquor regulation, but

rather “primarily created an exception to the normal op-

eration of \the Commerce Clause.” Craig v. Boren, 429

28 Section 2 of the Twenty-first Amendment provides:

The transportation or importation into any State, Territory,

or possession of the United States for delivery or use therein

of intoxicating liquors, in violation of the laws thereof, is here-

by prohibited.

nt ©

U.S. 190, 206 (1976). See, e.g., Hostetter v. Idlewild

Liquor Corp., 377 U.S. 324, 330 (1964): Carter v. Vir-

gimta, 821 U.S. 131, 189-140 (1944) (Frankfurter, J.,

concurring); Joseph S. Finch & Co. v. McKittrick, 305

U.S. 395, 398 (1939) .*

Even as to the Commerce Clause, the Amendment does

not preclude all federal regulation. Hostetter v. Idlewild

Liquor Corp., supra; Nippert v. City of Richmond, 327

U.S. 416, 425 n.15 (1946): William Jameson & Co.

Morgenthau, 307 U.S. 171 (1939) (per curiam). As this

Court has explained, “the Twenty-first Amendment grants

the States virtually te control over whether to per-

mit importation or sale of liquor and how to structure

the liquor distribution system. Although States retain

substantial discretion to establish other liquor regulations,

those controls may be subject to the federal commerce

power in appropriate situations.” California Retail Li-

quor Dealers Ass’n vy. Midcal Aluminum, Inc., 445 U.S.

97, 110 (1980).

In analyzing the impact of the Twenty-first Amend-

ment on state regulations, therefore, this Court has dis-

tinguished between the scope of a state’s authority to act

under the so-called “dormant” or ‘negative’ Commerce

Clause (e.g., Joseph E. Seagram & Sons, Inc. v. Hostetter,

384 U.S. 35, 41-45 (1966); State Board of Education v.

Young's Market Co., supra), and: the resolution of con-

flicts under the Supremacy Clause (California Retail

Liquor Dealers Ass’n v. Midcal Aluminum, Inc.. supra).

The Court has recognized that the states have wide lati-

29 » The Court has concluded that a “State may not exercise

its power under the 21st Amendment in a way which impinges

upon the Establishment Clause of the First Amendment” (Larkin

Vv. Grendel's Den, Inc., No. 81-878 (Dec. 13, 1982), slip op. 6 n.5),

nor does the Amendment permit a state to “alter the application of

equal protection standards that otherwise govern” (Craig v. Boren,

429 U.S. at 209-210) or dilute the due process requirements of the

Fourteenth a (Wisconsin V. Constantineau, 400 U.S. 433,

436 (1971)). See also Department of Revenue v. James Beam Dis-

tilling Co., 377 U.S. 341 (1964) (state may not tax imported liquor

in violation of the Export-Import Clause).

tude to regulate the distribution of alcoholic beverages

within their borders, virtually unrestrained by the “dor-

mant’’ Commerce Clause; however, the Court has yet to

sustain a state regulation under the Twenty-first Amend-

ment in the face of an actual conflicting federal law

otherwise entitled to preemptive effect under the Su-

premacy Clause. See California Retail Liquor Dealers

Ass'n V. Midcal Aluminum, Inc., supra; Collins v. Yose-

mite Park & Curry Co., 304 U.S. 518 (1938); ef. Joseph

E. Seagram & Sons, Inc. v. Hostetter, 384 U.S. at 45

(finding ‘‘no such clear conflict” between state and fed-

eral laws).

Here, there is unquestionably a conflict between state

and federal law. Accordingly, resolution of this case

entails a “pragmatic effort to harmonize state and fed-

eral powers.” California Retail Liquor Dealers Ass’n,

445 U.S. at 109. However, the analysis need not neces-

sarily reduce to an ad hoe comparison of the interests to

be served by the conflicting federal and state laws. Sec-

tion 2 of the Twenty-first Amendment has one narrow

though important purpose: it was “designed only to

augment the powers of the States to regulate the impor-

tation of liquor destined for use, distribution, or con-

sumption in its own territory.” United States v. State

Tax Commission, 412 U.S. 363, 878 (1973) (emphasis

added) (citing Collins v. Yosemite Park & Curry Co., 304

U.S. at 538); see United States v. Frankfort Distilleries,

Inc., 324 U.S. 293, 299 (1945) .%°

This purpose suggests both geographical and substan-

tive limitations on the Twenty-first Amendment powers

of the states vis-a-vis otherwise preemptive federal laws.

%°“In determining state powers under the Twenty-first Amend-

ment, the Court has focused primarily on the language of the provi-

sion rather than the history behind it. In terms, the Amendment

gives the States control over the ‘transportation or importation’ of

liquor into their territories.” California Retail Liquor Dealers

Ass'n, 445 U.S. at 106-107 (citation omitted; footnote omitted).

This Court has recognized that the states have no en-

hanced authority under the Twenty-first Amendment to

regulate the importation or transportation of alcoholic

beverages outside their boundaries—in sister states or

federal enclaves. State Tax Com mission, 412 U.S. at 378.

We urge the Court to recognize a parallel limitation with

respect to the nature of the industries o> transactions

that are the subject of the federal-state conflict. We sub-

mit that there should be a strong presumption in favor

of enforcing federal provisions that govern the conduct

of parties not directly involved in the distribution of al-

coholic beverages. State authority over “how to struc-

ture the liquor distribution system” (California Retail

Liquor Dealers Ass’n, 445 U.S. at 110) should not “ ‘in-

crease [the states’] jurisdiction’” (State Tax Commis-

ston, 412 U.S. at 378 (citation omitted) ) over other ac-

tivities in interstate commerce—especially not over en-

tities lacking any economic interest in or contractual re-

lationship with the business of liquor distribution. A

state may not prohibit importation of pretzels merely

because they whet the appetite for beer.

We do not dispute that, pursuant to its authority un-

der the Twenty-first Amendment, a state may impose

reasonable restraints on advertising by those who sell

liquor, such as liquor permit holders. See Queensgate In-

vestment Co. Vv. Liquor Control Commission, No. 81-2174

(Oct. 4, 1982).*" But, unlike the restriction at issue in

Queensgate, which prevented certain liquor permit hold-

ers from advertising prices outside their business prem-

ises, the advertising ban at issue here is directed at an

entirely separate industry—cable television—that has no

*1 New York State Liquor Authority v. Bellanca, 452 U.S. 714

(1981), and California v. LaRue, 409 US. 109 (1972), both of which

concerned state regulations governing lewd dancing and similar con-

duct in bars and cocktail lounges, are thus distinguishable. The

regulations in Bellanca and LaRue were directed exclusively at

liquor permit holders, and conflicted with no federal statutes or

regulations.

relevant contractual relationship to the liquor industry

and indeed no economic interest in liquor advertising.”

Moreover—and critically for purposes of this contro-

versy—the industry to which the ban is applied is fos-

tered and encouraged under and, for these purposes, ex-

clusively regulated by federal law. The Twenty-first

Amendment was not intended to limit the power of Con-

gress to delegate to a federal agency exclusive authority

to regulate the communications industry.

Even if the Court is not willing to adopt at this time

a categorical presumption in favor of the supremacy of

valid federal regulations governing industries not di-

rectly involved in liquor distribution, it seems beyond

doubt that the federal interests at stake in this contro-

versy far outweigh any marginal benefit the State may

reap in its efforts to dampen the demand for alcoholic

beverages. The Commission’s regulation of cable televi-

sion is vital to achievement of a diverse and economi-

cally healthy national communications system. Okla-

homa’s ban on liquor advertising, as applied to the cable

industry, would impede these objectives and effectively

deny the benefits of cable television to many of the resi-

dents of the State. As discussed in Part I, supra, be-

cause of economic considerations and the Commission’s

“must carry” rules a cable broadcaster cannot simply

delete all out-of-state broadcast signals from its service,

nor can it block out wine commercials without losing its

compulsory license under the Copyright Act and violating

applicable Commission regulations. Therefore, in the

understated prose of the court of appeals, the state ad-

vertising ban indeed places cable broadcasters in a “diffi-

cult “position” (Pet. App. 23a)—directly between the

82 Cable broadcasters do not derive revenues from the advertise-

ments contained in the signals they import. Thus, it makes no eco-

nomic difference to a cable broadcaster whether, at any given time,

an imported television program contains oven cleaner or wine com-

mercials. See Pet. App. 40a; J.A. 29; II R. 44-45.

Le”

twin disasters of economic ruin and state criminal prose-

cution.

The detrimental impact on cable broadeasters of a de-

cision in favor of the State, moreover, would not. be

limited to Oklahoma. A diminished national market for

cable services necessarily decreases the resources avail-

able for national programming. Moreover, should other

states adopt similar or conflicting liquor advertising re-

Strictions, the cable broadcast copyright scheme envi-

sioned by Congress would be progressively gutted; the

resulting financial and practical dislocations could well

render an “efficient, Nation wide” cable broadcasting

System unattainable. 47 U.S.C. 151, 152(a).

The federal concerns that undergird the preemption of

Oklahoma law in this case are thus “both familiar and

substantial.” California Retail Liquor Dealers Ass'n,

445 U.S. at 110. For almost fifty years, the Commission

has been charged with fostering a nationwide system of

communications, capable of reaching persons throughout

the land. In so doing, the Commission has found it ex-

pedient to preclude state and local control over cable tele-

vision operations, including their carriage of commer-

cial advertisements. Oklahoma’s undoubted “control over

whether to permit importation or sale of liquor and how

to structure the liquor distribution system” (id. at 110)

simply does not justify the provision at issue."

The Supremacy Clause of the Constitution, therefore,

requires reversal of the decision below. notwithstanding

the state’s authority under the Twenty-first Amendment.

“The relative importance to the State of its own law is

not material when there is a conflict with a valid federal

83 Oklahoma could easily exempt cable transmission of out-of-state

signals from its ban, just as it has exempted print media imported

into the State. Pet. App. 5a n.1, 28a-24a. See Dunagin Vv. City of

Oxford, No. 80-3762 (5th Cir. Oct. 31, 1983). slip op. 473-474 ( Mis-

sissippi’s ban on liquor advertising has been interpreted by the

State as not requiring interruption or deletion of out-of-state wine

commercials transmitted by cable television).

law, for the Framers of our Constitution provided that

the federal law must prevail.” Free v. Bland, 369 U.S. at

666. See also Fidelity Federal Savings & Loan Ass'n,

458 U.S. at 153 (‘standard preemption principles not in-

applicable merely because an area of specia! importance

to the state is involved).

CONCLUSION

The judgment of the court of appeals should be re

versed.

Respectfully submitted.

REX E. LEE

Solicitor General

PAUL M. BATOR

Deputy Solicitor General

MICHAEL W. MCCONNELL

RICHARD G. WILKINS

Assistants to the Solicitor General

BRUCE E. FEIN

General Counsel

DANIEL M. ARMSTRONG

Associate General Counsel

C. GREY PASH, JR.

Attorney

Federal Communications Commission

NOVEMBER 1983

U. &. GOVERNMENT PRINTING OFFice 19838 426707 1s4

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