# Amicus Brief for the United States — Capital Cities Cable, Inc. v. Crisp > Briefs, arguments, decisions, and more. URL: https://www.frixlaw.com/law-library/documents/brief%3Amicro_IA40385010_0896%3A25 ## Record - **Collection:** Supreme Court brief - **Document type:** Amicus Brief for the United States - **Published:** January 1, 1984 - **Citation:** 467 U.S. 691 ## Text 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 a 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, 6 ~] 20 18 1] IV 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 VI 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 Copyright Act of 1976, 17 U.S.C. 101 et seq.: 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 ~] ~e ~] ~~] +] ~~] Miscellaneous: Copyright Law Revisions: Hearings 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) Copyright Law Revisions: Hearings on H.R. 4347. 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) Copyright Law Revis Ons: Hearings On S. 136] 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 v. 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) 9 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 3 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. 4 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). 5 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 6 Copyright Act and of federal regulations, as well as with 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 os ‘ 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. Q 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. 9 “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). ‘ 10 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. 11 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 Copyright Act of 1976, 17 U.S.C. 111(e)," and similar 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. 12 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). 13 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. 14 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- of 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). 15 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. 16 ments. This is a textbook case of 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. 26 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” 27 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). 28 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 8 U. &. GOVERNMENT PRINTING OFFice 19838 426707 1s4 --- Source: Frix Law Library, https://www.frixlaw.com/law-library/documents/brief%3Amicro_IA40385010_0896%3A25. Public record. Not legal advice.