On January 19, 2021, the U.S. Supreme Court heard oral arguments in Federal Communications Commission v. Prometheus Radio Project, an important case involving issues of media ownership. Specifically, the Court will decide whether the U.S. Court of Appeals for the Third Circuit erred in vacating as arbitrary and capricious the Federal Communications Commission orders under review, which relaxed the agency’s cross-ownership restrictions to accommodate changed market conditions.
A distinguished panel joined The Federalist Society on January 25, 2021 to discuss the case, the arguments, and the implications.
- Ms. Jane E. Mago, Consultant in Media Policy and Law; former General Counsel, Federal Communications Commission
- Hon. Michael O'Rielly, Visiting Fellow, Hudson Institute; former Commissioner, Federal Communications Commission
- Mr. Christopher J. Wright, Partner, Harris, Wiltshire & Grannis; former General Counsel, Federal Communications Commission
- Moderator: Mr. Lawrence J. Spiwak, President, Phoenix Center for Advanced Legal and Economic Public Policy Studies; Executive Committee Member, Federalist Society's Telecommunications & Electronic Media Practice Group
As always, the Federalist Society takes no position on matters of legal and public policy. Expressions of opinion are those of the speakers.
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Nick Marr: Welcome, everyone, on this January afternoon, January 25. We’re having a special Courthouse Steps Oral Argument Webinar, a panel discussion covering the case FCC v. Prometheus Radio Project. Oral arguments were heard last week, and we’re reviewing it today with a distinguished panel. I’m Nick Marr, Assistant Director of Practice Groups here at The Federalist Society. As always, please note that expressions of opinion on today’s call are those of our experts.
I’ll just introduce our moderator before he gets the panel started. We’re very pleased to be joined this afternoon by Mr. Lawrence J. Spiwak. He’s President of the Phoenix Center for Advanced Legal and Economic Public Policy Studies. He’s also an Executive Committee Member of our Telecommunications & Electronic Media Practice Group, the sponsor of this panel today. So, Larry, without further ado, the floor is yours.
Lawrence Spiwak: Thank you very much, Nick. Welcome, everybody, to our panel today, Courthouse Steps FCC v. Prometheus Radio. We had bar arguments one day before the inauguration last week, and this is an absolutely fascinating case.
So before I get started, let me introduce our excellent panelists who I’ve had the privilege of knowing for a long, long time. We have first, starting with Jane Mago, who is former general counsel of the FCC. We have Chris Wright, another former general counsel of the FCC, and Mike O’Reilly, who is a former commissioner of the FCC. And I was just a mere staffer, so I never got up to that level. But here you all are, so I guess that says something.
So I’m really excited. We have an excellent panel. And the case is Prometheus Radio which deals with the FCC’s efforts to reform its media ownership rules which, believe it or not, has been going on for about 17 years. And the Supreme Court finally took cert this year. And so this case represents a lot of things to a lot of different people. My own view is I think that this is probably one of the biggest ad law cases that’s come up in front of the Court in the last couple of years, but, again, we’ll get to that.
Let’s start with just, as a good place to start, the beginning and some background so we can get into talking about the case. At bottom, the case involves the proper interpretation of Section 202(h) of the Telecommunications Act of 1996. So at bottom, the Congress required the FCC shall review its rules. It used to be biannually. They changed it to every four years under this regulatory reform.
And here’s the operative -- what’s at dispute. Quote, “and shall determine whether any of such rules are necessary in the public interest as the result of competition.” Next sentence, “The commission shall repeal or modify any regulation it determines to be no longer in the public interest.”
So that’s what the case is about. So I guess as background, although we can’t cite it in court, but I always love Mike because he likes to say he was there. So while it’s not in the commission’s record, at least we know that he was in the room. So just before we get into the details of the case, Mike, as you were a staffer way back in the day, what was going through people’s heads when they were trying to come up with this set of rules?
Hon. Michael O’Rielly: Well, thanks, Larry. And thanks for having me. I think you are right; it does date me as 25 years ago it started my professional career to get to this point.
So think back 25 years ago, and it’s really 1995, not 1996. It was signed in February if you come upon the anniversary, but it’s really 1995. And this is right after the ’94 election where the whole Congress changes over and Republicans storm in with a number of seats, the biggest change in decades, and with a different regulatory mindset, a different philosophy for how statutory construction is going to go and different philosophy on landing spots for different policies.
And so you work through ’95 and you get towards the end. The biggest issue in the ’96 act is telephone. It is how do you deal with the old Bell monopoly and the breakup of AT&T, the previous AT&T, the preexisting AT&T, and how do you deal with local and long distance and letting different providers into different markets? And that is the biggest piece by far. It is the engine driving the train.
There are other pieces that go with that. Media ownership is one. There’s a couple others that are along those lines. And media ownership becomes -- it’s funny to say. We actually—we, the staffers and the members—actually saw the telephone issues and get to the point where we’re like, everyone’s looking around going, “Okay, we’re done, right?” No, no. Media ownership becomes the last sticking point from a good portion of Republican members who really want to see changes and then believe that the text at the time doesn’t reflect their views. The changes that are in the statute in the rest of 202 don’t reflect where they want to go.
And so they craft, and they work—and my old boss helped finagle this—and worked through this language. And basically, he’s punting it to the FCC, which is an aggressive action. Like you mentioned, two years to resolve these issues. And if you talk to anyone who was in the room elsewise, former commissioner Furchtgott-Roth would say, “I can never believe that we’re at this point and, really, the rules have not changed at all.”
No one who was in the room would have believe that’s the case. We thought that most of the people had thought at the time that the rules would go out in whether it was two years or four years to be done. It didn’t work out that way for lots of different reasons. I’m sure Jane can find some light to that. But it’s important even though the courts don’t really care about legislative history and there’s not a lot of legislative text in the conference report, which I helped write.
But in fairness, it’s important to put it in context. That was the mindset. And so when people say, “Oh, it can go either way. You can actually tighten the rules,” that was never in the debate. That was never part of the conversations about tightening the rules. It was really just a matter of how soon would the rules go away, and what would be the form of that, and what would it look like at the end of the day? And to be where we are now would be incomprehensible to those members who were in the room at the time.
Lawrence Spiwak: Okay. Thanks, Mike. All right. Well then, that brings us to the actual case procedural posture which, again, there were three. Chris, I don't know if you -- and also, I’ll let Jane do this. But, Chris, I don't know during your tenure as general counsel whether this whole thing -- you had a little envelope and got into this at all, but, Jane, why don’t you bring us through the rather long and tortured history of this 17-year case?
Jane Mago: Well, I think I’m going to try to make it a little shorter than the long and tortured aspect of it. But I also wanted to take us back for one minute, listening to you guys and knowing that I started into this a whole lot earlier, to really put in perspective that the FCC has had structural rules since the 1940s. That’s when all of this started. And those rules were challenged. And they were challenged, and they went to the Supreme Court. And the Supreme Court each time decided that it was within the scope of the FCC’s public interest to be able to have such substructural rules in some way, shape, or form.
Throughout the earliest part of my career in the ’70s, ’80s, and ’90s, the commission made various changes to those rules, recognizing at first that there was some difference in the media landscape. But they were minor, and they made a few little adjustments. And that was what led to the ’96 act and the importance in what Mike was just talking about of a real sense of we’re not moving fast enough, there’s got to be something, that we’ve got to move a lot faster.
And so I’m not going to talk about the first two efforts to implement 202(h). It was really the 2002. This is where we start with here, the 2002 review. The commission looked at the rules and said, “We should take a comprehensive approach to these rules. Instead of looking at them piecemeal, we’re going to look at them all together, and we’re going to devise an empirical test for the media ownership rules to decide when they could apply in a particular market.” And that it what started our long, strange journey that we have with the Third Circuit.
The case included an action in there that was getting rid of the failed station rule which had many elements in it that very much focused on minority and female ownership. The case went to the Third Circuit to three judges.
Personal aside for a second. Anyone who was at that oral argument the day that the first Prometheus case was argued will never forget it. It was a marathon argument, went for more than eight hours, as I recall. And seriously, there was a time where the judges looked around the room and said, “Hey, does anybody have anything else they want to say here?” It was stunning. Chris, were you there?
Christopher Wright: No, I missed that.
Jane Mago: Anyway, the Prometheus 1 decision was a split decision 2-1, which vacated and remanded the case to the FCC. Largely, it was focused on that empirical test and trying to tell the commission that it needed to explain that empirical test. But it also had a focus on the minority and female ownership aspect of it. And one of the most important pieces is that the court decided that it needed to retain jurisdiction over the case and added the element that they wanted to see what the FCC was going to do.
Well, you go to the 2006 quadrennial review, and, again, the FCC looked at the rules in a comprehensive way. They tried to relax some of the rules, including the newspaper broadcast ownership rule. And they also included a separate order that was to revoke ownership by eligible entities; not specifically minority and female because the commission concluded that that couldn’t pass strict scrutiny, but it included that aspect with it.
Now, several parties tried to take that case to different courts. In fact, I think the D.C. Circuit won the lottery, as I recall, but then it eventually got transferred up to the Third Circuit because of the remand. So once again, the commission was before the same panel, 2-1 decision again, remanded all of the case to the FCC, focused on minority and female ownership aspect of the eligible entity order, and required an explanation from the commission, again, as to how all the changes in the rules would increase minority ownership.
And time passed. So the 2010 and 2014 quadrennial reviews got smooshed in together because sometimes it’s just hard to get everything done all at the same time. The final order for those came out in 2016, which relaxed some parts of the newspaper cross-ownership ban but retained most of the other rules.
Now, again, we had a change of election, as Mike was pointing out, and there was a reconstitution of that 2016 order. And the 2016 order was the one that went a good deal further, repealed the newspaper cross-ownership rule, modified the local television rule. And the FCC again tried to separately ask for comment on whether there was any meaningful evidence about how the impact would be to changes on minority and female ownership.
The commission sought to address that separately in the incubator order, which was specifically designed to address those issues. And in fact, those orders went into effect because the Third Circuit decided that it would not stay, despite requests from some of the parties.
Nonetheless, at the end of the line, the Third Circuit, same panel, 2-1 again, decided that there was not enough evidence to support those conclusions on minority and female ownership. It vacated and remanded both the recon order and the incubator order. The parties asked for the Third Circuit as an en banc to look at it. They didn’t, so the parties once again went to the Supreme Court. And this time, the Court took the case, and here we are. It’s been all these years.
Lawrence Spiwak: All right, thank you. Chris, do you have anything on -- want to jump in on that?
Christopher Wright: Sure. So let me just say to highlight that while these involve all the various media ownership rules, the sticking point for the Third Circuit is focused on what effect consolidation following rule changes would have on ownership by women and minorities, and has kept asking the FCC this throughout all these arguments. And while I didn’t go to the first one, I certainly heard about it.
Jane Mago: He missed it.
Christopher Wright: And in fact, with -- let me acknowledge that I wrote an amicus brief in this case saying that the Third Circuit got it right on behalf of ten former FCC chairs and commissioners. Sorry we didn’t ask you to join it, Mike, but we thought that --
Hon. Michael O’Rielly: -- I think next time I’ll weigh in. How about that?
Christopher Wright: Anyway, I did call my friend, Jake Lewis—who was arguing the case for the umpteenth time, I think, now in front of the same panel—to suggest that he ought to take a toothbrush with him because given the Court’s prior rulings in this case and my readings of the commission’s order, which was sort of, “We don’t care what you think about this issue, Third Circuit,” that Jake might get held in contempt and thrown into the Third Circuit’s jail.
As it happened, nothing like that happened. I didn’t go to this one, but I heard the panel was very civil and polite. But certainly an aspect of the case that, from the Court’s perspective, the FCC just -- and multiple FCCs, including the Wheeler administration, have just not been responsive to the question they keep asking.
And let me just say what our take on the case is on the merit, which is the FCC has consistently said that minority and female ownership of broadcast stations is a proper concern under the public interest standard. And that’s what the Pai commission order said too. And I hope we could all agree that whoever is at fault, the evidence, the statistics on the subject have been rudimentary at best. The FCC has said, “We think this is important. We’ve got crummy statistics, but --” and I think this is where this commission went wrong, “ -- but we’re confident that consolidation won’t have a serious negative impact on broadcast ownership by women and minorities.
And the Third Circuit, of course, said that the FCC just flunked basic statistics here. So I think that’s right. In my view, this ought not be an important administrative law decision, although, of course, the Supreme Court can decide to make it one, depending on what it says, but that it’s simply a failure of reasoned decision making. And the FCC on remand will have to try to do a better job.
Lawrence Spiwak: Let’s drill down on that a bit. That’s sort of where I want to go next. This case represents, I think -- raises a whole bunch of issues. More importantly, I think it raises different issues to different people. Full disclosure, I filed an amicus brief, but I’m in the business of writing law and economic law reviews and academic papers. And I really want, in terms of how much deference do you give to an agency -- too much deference and an agency is run rogue; too strict a review, you’re improperly substituting your judgement for the commission. And then, maybe, did the judge go too far? We’ll drill down.
Other people -- a lot of the briefs were very emotional, and there was a factual thing about, again, the effect on women and minorities. The impact -- how does one define the public interest? So what I want to drill down -- one of the justices, I think, as I was listening to the oral argument, summed it up, that the appellants took the statutory approach on how to interpret 202(h). In other words, the context of what the public interest means in that particular clause versus the respondents did what Chris did a little bit and focused on just the arbitrary and capricious review of the agency’s decision making. But as with everything else in a legal case, sometimes it’s not that clean.
So let’s -- well, let me ask you this question first off. What do we think the legal question is here? It could be broad; it could be narrow. But, Jane, what do you think the Court—and then I’ll get to more specifics—but just if you’re sitting there, what is the question on review because I know the NAB’s question on review was different from the Justice Department’s question on review, which is different from what I wrote was the question on review.
I’m still trying to dig down to why did the Court take this case, and what is -- like it said, it could be a narrow ruling; it could be broad. I don't know. But what do you think, Jane, when I ask you what is the question on review?
Jane Mago: I think that the question on review is the scope of the Third Circuit’s decision. I agree with you, Larry, that I think this is an important administrative law case that deals with what is the scope of what a court can do in reviewing an agency’s decision. Here, one of the things that I mentioned when I was talking a little bit was the aspect of this case what how the commission was continuing to take a comprehensive review in looking at all the rules at the same time. I think that what kind of got mushed and lost in the course of this is that not every rule has the same impact on whatever concerns everyone has. And I think this was emphasized sometimes in the argument before the Court.
Members focused specifically on the newspaper cross-ownership rule. I don't think anyone has ever felt that taking away the newspaper cross-ownership rule was going to have a significant impact on minority and female ownership. Whether that’s part of the public interest standard that has to be applied to that case then becomes the real issue. And when you mix it all together, I think you cause great confusion. And I’m hoping that that’s what gets sorted out here.
Lawrence Spiwak: Okay. Chris?
Christopher Wright: Well, let me -- I don't know if I’m digressing or not here, but I noticed at the oral argument, all of the practical arguments supporting the rule changes focused on the newspaper-broadcast cross-ownership rule. And I certainly understand that one. I have yet to hear some plausible argument for why letting Sinclair buy all the radio stations in a market is going to be good for anybody.
And I think the justices, and certainly Justices Breyer and Kavanaugh, understood that that was almost certainly going to have an adverse effect on women and minority ownership. The last consolidation had had such an effect, and in that situation, you either have to say you don’t care about ownership by women and minorities, or you have to do a better job of explaining why consolidation there with respect to, say, the local -- the other rules other than the newspaper-broadcast rule aren’t going to have an adverse effect.
Lawrence Spiwak: All right. Well, let’s drill down for a second because, again, this case has so many layers. Let’s first talk about -- and this is why I think this case is important because it plugs in -- we’re now talking about the infamous public interest mandate. And I’m very proud that I put in my amicus brief the old joke that the public interest means whatever gets you three votes on the eighth floor. Now, I guess the tenth floor.
But one of my pet peeves —and this is something I’ve decided we need a junior associate—there’s actually a lot of law on the public interest. I think the commission has been derelict over the last 25 years in ignoring that law. But there is law. It is not a concept. And in this particular case, it’s not a statutory factor. It is you consider it along with public interest factors. It doesn’t delineate what it is. And there are instances where the commission has or Congress has delineated women, minorities. The DE program for spectrum auctions is a good example.
So one of the things I think that the justices were sort of wrestling with was how much discretion do you give to a non-statutory factor? In the past, it was heavily weighed. Back in the days -- you look at the cases back from the ’70s. It’s becoming less so, but where do you draw that line? And then that goes exactly to your point, Chris. Justice Barrett—I’ve got my notes here—said to focus on the distinction between enhancing and not harming. You see that a lot, by the way, in the FCC’s merger analysis, which I think they’re problematic, but without going into that argument. And then as you said, Justice Breyer, he kept saying, this merger approach, what’s the theory?
So let’s start with the bounds of the public interest mandate. We’ll go to you, Jane. Where do you think -- how do you think the Court’s going to look the discretion on non-statutory factor than the evolution -- it seemed there was almost like a bit of a Fox Television aspect to it where you had put all this weight over in the past, but now you’re departing from the policy. They didn’t say so explicitly, but it seemed to me one could infer. So let’s tackle that first. I think that’s an important question.
Christopher Wright: Sure. I think there’s very much a Fox aspect here that sort of -- we spent a fair amount of our amicus brief on behalf of the former commissioners and chairs countering the NAB’s argument, which was that the interest in women and minorities is a creation of the Third Circuit in this case. They just couldn’t be more wrong. And so we even had Newt Minow in our briefs from the ’60s up through a whole lot of other jurors and commissioners to say that. And of course, Congress in 1993 had given the FCC auction authority, had specifically required the commission to take into account ownership by how using an auction was going to affect women and minorities.
And so at the time the ’96 act was passed, it was well-settled that an important aspect of the public interest standard was, with respect to broadcast, was ownership by women and minorities, along with interest in encouraging treatment of local issues and other matters. And so when I read Section 202(h), the exact language mentions public interest twice. And the question seems to be, does anything about competition mean that ownership by women and minorities is no longer important, or whatever? And --
Jane Mago: -- I think you’re focusing too much -- I’m sorry, Chris.
Christopher Wright: Go ahead.
Jane Mago: I think you’re focusing too much. The commission’s definition of public interest—and Larry’s gone into it a little bit—has always had a lot of different elements to it. Non-petition, localism, and diversity have been the ones that the commission’s identified over and over again. And to the 2002 order, the commission went through a fairly extensive discussion of what was the meaning of diversity. Diversity had five different aspects to it, lots of different things. And the minority and female ownership was an element of that, but you can go back to the ownership rules.
And that’s one of the reasons why I mentioned some of the earlier cases here. The diversity that was at issue here was always a diversity of viewpoints and having more inclusiveness, not anything that was specifically focused on minorities and females, but rather having an open amount of forums to be able to have that discussion. And I think that’s where the commission is getting it right at this point is in recognizing that this isn’t the only aspect, the only place where there can be that expression of viewpoints, and that includes all of the other elements of diversity.
Christopher Wright: Well, that’s certainly true. But at least the NAB’s brief here seemed to me to try to draw a line that just doesn’t make much sense. I mentioned the auction authority case. Congress did the same thing in the ’80s when it introduced lotteries and instructed that the commission had to consider the effect on minorities and women when it used lotteries to distribute licenses.
So NAB would have us believe here that it’s very important to examine the effect of minorities and women when you’re distributing licenses. But we don’t care whether minorities and women keep the licenses if consolidation makes their participation in a particular marketplace untenable.
Hon. Michael O’Rielly: I just want to jump in here and say a couple of things. One, Chris made the point in terms of the Third Circuit and Jake Lewis going to get his hand slapped. Look, I think that many members of the commission who did the recon -- certainly, I was of the mindset that we’re going to look past the Third Circuit knowing that they have gotten it wrong for quite a while in getting to this exact point we’re at. And this is something that was going to the Supreme Court, and so I didn’t much care about what the Third Circuit’s opinion was and was moving past that point.
But in terms of the public interest that Larry raises, there were a great -- in my time working on the committee, there were a great number of members who wanted to define the public interest and put it in statute what it could be because they were from the commission in the ’90s to abuse what the public interest is.
And I have another point here before I get to Larry’s bigger point, but it’s been mentioned women and minorities. After Adarand, the commission has changed its viewpoint. It’s not women and minorities. It’s small entities. And if you look just in the auction authority or you look elsewhere, it’s no longer that. When the Third Circuit is searching for the commission to do its own studies on women and minorities, it has no grounds, in my basis, to statutory grounds to require such a thing. So to tie those things together and say this is what the commission has always done, or -- I think that got exposed in the Supreme Court oral arguments.
And that’s why I think Larry points out, which is the approach? What is the legal issue? I think the NAB’s approach was that statutory construction -- I think Warner did a really good job of -- I didn’t really think her tone really worked to the members that she was speaking to in her questions, but I think it worked for the other members. And that’s what I think was really helpful in drilling down to exactly what was at issue was critical for the members that were trying to figure out how do I win the right votes to get to my end goal?
Larry Spiwak: I keep going back, again, having written more law reviews on the definition of public interest than you can shake a stick at, it’s just been my personal pet peeve over my career. I keep going back to the Supreme Court case called NAACP v. Federal Power Commission where the Court basically said the public interest is not the -- you can’t solve the world’s problems with public interest. There are constraints. You have to look at the statute.
And what’s actually -- I even made this argument in a brief. If you look at how one defines a public interest, the purpose, going back to, I think it’s Section 1 of the act, it’s really -- the emphasis is on deployment of facilities. Ownership was sort of irrelevant, which is why -- we talked about it, but if you want to go back to the statute. But again, how much that public interest -- again, from the 20,000-foot level, can the public interest be used to solve the world’s problems or not I think is really one of -- how the impression comes of this case.
And the answer is, I don't know. We don’t know how the Court’s going to do it, but I think that that’s a really interesting point. I think going to Jane’s point, again, if one takes the statutory argument, that’s why I read the statute. It’s the public interest in the context of that 202 because it says necessary in the public interest as a result of competition. So it should be interesting. Now, whether or not -- again, we don’t know how the justices are going to view it.
All right, so let’s then move on to the second, I think, really big question, which Chris alluded to earlier, and that is the sufficiency of the evidence. The FCC made a statistical analysis based on what data it had. But the Third Circuit, one of the things that they said was, “We’re not going to let the media reform rules -- media deregulation go into effect until you produce a new study that meets with my satisfaction.” I think that’s an important legal point. So this is something -- and also, all three of you because you’ve all served at the commission at high ranking levels.
One of the problems with comments is the way it works is garbage in, garbage out. And I think in this case, Justice Gorsuch made the direct point going, “The FCC asked for data, and nobody put anything in the record. So what do we do?” That’s a really -- think about all the big rulemakings and adjudications going forward where how much -- what is the standard of an administrative -- the duty of administrative agency to go out and solicit new data, not to do it. I think that’s a really big argument. And then that also gets you into the problem, or lack thereof, of the validity of predictive judgement.
So Mike, let’s start with you about -- you know what it’s like. You’ve got to make a decision based on the record. What would it be like just as a policymaker sitting there going, “Wow, this record stinks, and Lord knows we’ve seen plenty of records stink at the FCC.”?
Hon Michael O’Rielly: Two things. It’s not just -- it’s statutory construction and it is the record behind the decisions, certainly, when I sat in that seat.
But to your point, how do you balance these issues when you have a very empty record? I don't know how many times I begged outside parties on cost-benefit analysis or -- except for net neutrality—and we’re not going to go into that today, obviously—the record is paltry in so many different issues. And there’s only so many times you can ask people, whatever your views, weigh in here. I don’t even care what they are, but I need a fuller record to be able to either agree with or disagree with or analyze to be able to make a better, sound decision.
And you see that in a number of items where it comes back and the staff and the draft will say, “No comments were filed on these exposed issues.” And you have to then make a decision based on best reconstruction and where you think the best interest lies in where the decision is to go. It’s not an easy case to make. You beg people to do so, and when they don’t deliver, what are you to do? And that’s why it gets to the point of the Court mandating, in effect, that the commission come forward with its own studies. I think that’s far beyond what the statute requires and what their authority should have been.
Lawrence Spiwak: Chris?
Christopher Wright: So I would point out here that this is a situation where, of course, the broadcasters have the information, and they’re certainly the logical ones to come forward with something. And the most relevant evidence, I think everybody agreed, was what happened after the consolidation about 20 years ago. And we know that the numbers went down in the short run and recovered in the longer run.
And that seems like what’s most likely to happen again if there’s further consolidation. The numbers will go down, at least in the short run. Maybe they’ll recover, but it’s hard for anybody other than the broadcasters to explain why that would happen. They have the data. The FCC collects this data on this Form 343 or something. And I looked at that, and, boy, that does look like a hard form to make sense of.
But anyway, I digress. But I think in this situation, if there was a good reason to think that further consolidation wouldn’t reduce the numbers of broadcast stations owned by women and minorities, the people seeking consolidation should have the burden to make that case.
Jane Mago: I’m not sure what data you think broadcasters have, Chris, but to the extent that what you’re trying to do is -- I think what you just said highlights again that you’re focusing on one aspect. When you try to look at the broad public interest, you have to look at all of the elements in what is there. And broadcasters’ argument has consistently been that there needs to be some consolidation in order to retain economic viability of the broadcast industry in the course -- against all of other things that are changing in the marketplace around us.
And that includes entries by new interests, and that’s why I think the commission’s incubator program in particular was one that made far more sense than trying to retain structural rules until somebody can prove that there’s not going to be an impact on minority and female ownership, short term, long term. But you have to focus your regulation on the problem at hand. And I think that’s where this case has gone awry is that there’s been sort of a generalized angst by the Third Circuit that has caused a stagnation that is not acceptable.
Hon. Michael O’Reilly: I was just going to say that the two things you have to take into account is that we talk about the data from previous consolidation. Well, this item, the recon, basically didn’t deal with radio. So a lot of -- saying that that should be part of the analysis is in the data from the ’96 act and the resulting caps that were put in there is hard to match here.
And I would say Congress spoke to this and said, “Here’s the standard we want you to use.” And it’s just like they did in the broadcast incentive auction. We recognized—and I helped draft that language—recognized that it was likely to reduce the number of small entities, women and minority, that were broadcast holders of television licenses and require the commission to move forward, notwithstanding. And so the policy has been articulated. Whether people like it or not is a different story.
Lawrence Spiwak: Well, let me ask you this. It actually brings me to my second question in this particular topic. I mean, again, going back to the legal issue at hand, we’re talking about the validity, essentially, of predictive judgements. That comes up a lot. It came up -- and very often, sometimes, it’s a generalist court. I can say this because I work with economists, and people go, “You must be an economist.” And I say, “No, no. I don’t do math.” And I know that any lawyer, they see math in front of them, they just freak out. I got it.
But you do have this issue here of the validity of a predictive judgement. But I think that Judge Scirica, who did the dissent in the Third Circuit, made an interesting point which bears to this case in terms of is it okay to deregulate when you do have a backstop? And in this case, the statute is clear. It is an iterative process. You’ve got to go back and look.
And the argument that Judge Scirica made, which I thought was a good one, was if you let the deregulation go into effect, if everyone is complaining about, “We have no data,” -- and all the data that was in the studies that were in there were not predictive, either. They were backwards-looking; they were not forward-looking. Then you let the rules go into place. Then you can have a counterfactual, and then you can decide whether they’re good or not, what one commission can undo and the next commission can do, or vice versa.
What about that argument in this particular case because it is an iterative process, this isn’t the proverbial, as I like to say in the old school, set it and forget it, you deregulate, you never see it again. You’ve got to come back under the statute every four years. Why is that a problem here? Chris, let me ask you that question.
Christopher Wright: Well, let me start with more generally unpredictable judgements because I’m sure a Federalist Society group who understands the dangers of letting federal agencies make predictive judgements willy-nilly isn’t like --
Lawrence Spiwak: -- If they rely on our work, go ahead. Other people, no.
Christopher Wright: It’s a bipartisan failing. I don’t -- it’s sort of what would we like to do? Let’s make a predictive judgement on the --
Lawrence Spiwak: -- That’s part of the function of the problem. Exactly.
Christopher Wright: -- if we do that, but there is a need for courts to reign that in. And again, if what the commission had actively said was, “We don’t really care about the effect of consolidation on ownership by women and minorities. We think that the effect, the health of the radio industry is going to outweigh that,” we’d have a very different case.
They might or might not be right about that, but it would be a different case from this one where they made a predictive judgement that consolidation isn’t going to harm ownership by women and minorities. And I don’t think that passes a straight face test, and courts ought to reign them in.
Lawrence Spiwak: All right. Well, Jane, again, going back to the iterative process, this isn’t like net neutrality, which may or may not come in. This is by statute. You must come back and look at the rules and the market every four years. How would you respond to Chris’s argument on that?
Jane Mago: Well, I think it’s true. The commission does have to come back and look at it every four years, and they need to make some sort of changes. If you just stick in the same world over and over again without having -- and then expect to have more evidence, you’re not going to find it.
But I think the concept of the predictive judgement here is that the commission has to do the best that it can. And I disagree with Chris’s characterization of what happened in this order. I think what the commission said was, “Look, we don’t think that this is going to cause a massive problem. We think that based on the evidence we got, this is the best we’re going to do, and we need to move forward.” And that’s the iterative process. That’s how you do it. And if you have a problem in a few years, then you look at it again.
Lawrence Spiwak: All right. Well, let me move on here real quick because we’re running short of time. So I have two big things to talk about. My next topic is what I would describe as the primacy of the Third Circuit. We kind of talked about this at the very beginning. And I was actually surprised, Jane, even though you gave the procedural history of the case, that many justices were confused, as am I, why this is still sitting here at the Third Circuit for 17 years. In fact, I forgot which justice it was, but they used the phrase they’re concerned with both, quote, “both the duration and the scope of the Third Circuit review.”
And so I think, though, if you pare that down to the ad law question, under State Farm, agencies are supposed to have -- they’ve got to show the whys and wherefores, but they’re also supposed to be accorded great deference. And where the line is -- and again, I’m not sure where the line is in this situation. Where the Court gets into it here is did this court improperly substitute its judgement for that of the commission? That’s really one of the issues here.
And then what’s interesting to me is the precedential value of this whole thing because if you look at my brief, as I was doing this, I found a law review from Justice Breyer, then Judge Breyer, when he was back on the First Circuit -- Mikey, you’re being photobombed by your adorable daughter. It’s okay. That’s perfectly acceptable.
Hon. Michael O’Rielly: She had to get her Minnie Mouse, okay?
Lawrence Spiwak: These are important far more than this case.
But what was interesting about Breyer’s law review from, this was like ’85, was that he was talking about the problem of too strict review. And he said if you’re an agency and you know that no matter what you do, you’ve always got a hostile court, you’ve got a million things on your plate, the phrase used was, “why bother?” And that’s kind of what -- I thought that was really fascinating.
So let’s talk about that for -- Mike, let’s talk about this. You’ve sat there as a former commissioner. One of the things is that, again, it’s been one court for 17 years. And commissioners are busy. The commission’s got a lot of stuff on the agenda. They’ve got to do this. You get to that “why bother?” problem.
Hon Michael O’Rielly: It’s a real issue. No one takes the job as commissioner and goes, “Oh, I’d love to jump in the middle of this debate that’s not going to ever solve itself.” I worked on this for an awful long time, and we’re still in the same exact spot as we were.
I’m hoping that one way or the other, this holy grail of the Supreme Court will provide some guidance and not just punt it back without much direction. Let’s clear the decks and tell us what the rules are so we can figure this out because that can get us to the next point, which you have to explore at some point, is what’s the practical effects of what we’re talking about? A lot of this debate, we’ve moved past it.
And so I would comment about predictive judgements. I would agree with Chris’s point. I was one of the few that said that -- and I proposed that we time limit predictive judgements. I didn’t win the debate anytime there, and I probably won’t ever. But I do agree there are limits to how long and what are the ramifications for predictive judgements, so there’s something to be said there.
But the Third Circuit, in my opinion, improperly captured this case and would not let anything go forward without an imperceivable study that it was seeking. It was never going to be possible. And you look at that and you say, “Oh, it wasn’t just the Republicans.” But also Tom Wheeler had no desire to do the studies and made clear that they were not going to do the studies that the court was seeking, and that one was thrown back to the FCC. So no matter what the administration is, it was getting sent back in the same direction. No matter how liberal or conservative, we’re getting the same outcome. And no one wants to sit there and spend time on this if you’re going to get the same outcome.
So here, I appreciate this commission took the right course in terms of substance but also was willing to push it forward. And now, finally, I’ve said we have to challenge this at the Supreme Court. Now let’s have at it. Now, finally, we can get an outcome in the next couple of months and hopefully, it will just provide the guidance that we so needed to move forward, one way or the other.
Jane Mago: I think that is going to be the importance of this case going forward is that there needs to be that kind of a guidance of just what are the parameters of what a court can do. I made a joke earlier about the 2010 and 2014 reviews being squished together, and Mike’s point is right. The reason was that nobody wanted to try to deal with what they had seen from the Third Circuit from the 2006 review. How were you going to deal with that? And it made it very difficult for the agency, and it is good that we’re hopefully going to be able to have some clarity here.
Christopher Wright: So this is an interesting issue about courts retaining jurisdiction and when within courts of appeals they decide to have the same panel review the next statements and decision. And of course, the arguments that are made in the transfer motions in this case are the ones that appear in all sorts of filings here, which is that there’s a virtue in efficiency for the court that already became familiar with some massive record and the background of the case, take a look at what the agency did. And that presumably prevailed. All the transfer motions have been granted here.
On the other hand, if you’re -- it does raise questions of three judges become the super FCC for a particular issue. That’s a problem. On the other hand, if you’re concerned about agencies thumbing their noses at the courts, well, maybe you want courts to retain jurisdiction the way they do. I will say that when I was on the rules committee of the D.C. Circuit long ago and we asked the court for a little more transparency about when they decide whether the same panel’s going to hear the next case or not, we were told to stop asking that question.
Lawrence Spiwak: All right. Well, let me ask the final question. And we’ve got a couple of questions here in the chat, some of which I think we’re going to cover in this last portion. But I was listening to oral arguments, and I think Justice Gorsuch said something and sort of gave the money line of the whole oral argument. And he basically said, “We’re dealing with media rules from the 1970s that Congress asked the FCC to review 25 years ago with the Telecom Act, yet here we are.”
I think everybody knows that the media market business has dramatically changed, even over the 25 years since the ’96 act. Justice Thomas made out his point to recognize that now courts are a proverbial black box, and this is not a lot of fun. But somebody asked me here on the chat over here is that if SCOTUS does nothing -- again, we don’t know if this is going to be a narrow ruling or whether it’s going to be a broad ruling. Let’s say SCOTUS upholds the Third Circuit. Where do we go from here? What do we do going forward? Does the FCC do another review and take another bite at the apple? Does Congress step in or not?
Nowadays, we’re now choosing what we think is appropriate under the public interest, including -- not necessarily the consumer welfare standard. What do we do? And I think that’s sort of the -- we don’t know what the Court’s going to do, but the precedential effect of this could be huge. So let me turn it over to you, Mike, first and then comment on that, and we’ll keep going.
Hon. Michael O’Rielly: I hope the Supreme Court doesn’t affirm the Third Circuit opinion. If it does, I think were in for more morass, probably a 10-year process that will keep going down this road. The next commission, I suspect, doesn’t have any desire to address these issues, and if they do, they’ll do it very narrowly. And if they lose, they’ll be fine with losing because they don’t -- there’s no political benefit in addressing these issues if you’re on one side of the equation different than my opinion.
So the status quo works right now politically for many people. It doesn’t work for the marketplace, and I think that’s what came through in a couple of the comments. Both Justice Thomas early on and then later on, and then Justice Gorsuch -- the marketplace is completely different, and so what we’re doing is we’re hamstringing broadcasters and penalizing them on a standard that makes no sense. But if that’s what the Supreme Court comes up with, then we’re stuck, and the next commission is stuck, Hopefully, that’s not the case.
Jane Mago: Larry, you’re right that the Supreme Court is a black box, but I think that the fact that they’ve had the opportunity to look at this case a couple of times before and chose to look at it this time is at least a predictor that they think that there’s something important in this case. And having listened to the oral argument, I think what they think is important is the principle of administrative law, and what should really be the standard of review, and how one has the relationship between a court and an agency, and how that relationship is supposed to go forward. And I’m hoping for language that really helps to clarify that.
Christopher Wright: So I’ll just repeat my point that if the Court does reverse, that’ll empower agencies to disregard the judicial oversight. But let me couple that with I’ve been meaning to say thank you for Mike for his service to the country in defending the proper interpretation of Section 230, which was really a great thing to do.
Hon. Michael O’Rielly: [Laughter] Well, such is life. I don’t think everyone agrees with your opinion there, so thank you.
But I would say one last thing. I hope we’re going to talk about practical impacts because I’ve had the opportunity to talk to broadcasters over the many years of my service and ask them if you had the chance today, you own a television station, you own a radio station, would you buy a newspaper? Oh my goodness, the answer is heck no. Nobody wants a newspaper. There were a couple in very small markets in the right situations in the right circumstances. There were going to be very little -- the practical implications of all of these are really narrow.
A number of -- we have evidence of combined stations in the marketplace already, and in those instances, it’s been beneficial, in my opinion; more news, more benefits to consumers and viewers on the television side, and on the other side, hopefully someday we’ll get the caps to be raised. But I think the practical impact of limiting this is it’s just harmful to the broadcast industry in comparison to everybody else that’s fighting for the same audience.
Lawrence Spiwak: All right. Well, let me ask -- we have time for one last question. And I’m looking in the chat here, and I think this is -- again, we’re at the Supreme, so we’re establishing broad precedents. And some might ask, is there a bias against deregulation in federal administrative law? And if we look at this case as a question, Congress did say they have an express preference for deregulation. So again, how does that then affect the precedent because there are other sections, the other part of Section 230, for example, the good part that everybody likes to cite, that the internet shall be unfettered by state and federal regulation.
There clearly is, until they change the law, a congressional preference for deregulation in the Communications Act. The agency very often has done that kicking and screaming. And sometimes, it hasn’t done it at all. And that’s a really interesting point. Do you think it’s possible that the Court might go, “Here, Congress said go do this. Why aren’t you doing it?” Or if they don’t, is that going to help clarify the problem because that is certainly a precedent and I can see that would affect a wide range of administrative -- of ad law agencies across the board. So, Chris?
Christopher Wright: Well, I don’t think there should be. I think deregulation and regulation should be treated the same, and the agency’s decision should be judged by the same standards, whether it’s doing one or the other. And I would just note that Congress in ’96 act only changed some of the media ownership rules. And of course, it could have done more, and it could do more at any time.
Lawrence Spiwak: Jane?
Jane Mago: They did change some of the media ownership rules. In fact, it eliminated the national radio cap, which was a pretty significant event. But I think that you do have to focus on the language of the statute. You can’t just ignore the specific direction that’s here. And whether the Court tells the agency that it’s got to look at it that way, I’m not sure. But I think that you do have to give meaning to all of the words in the statute, and that’s what I think this is going to turn on in the end.
Hon. Michael O’Rielly: Well, I would just say that 202(h) is exactly the only point that Congress did answer a number of different pieces. And this was the, “Okay, let’s do the rest of it. And we’re going punt it to the commission to do deregulation.” It wasn’t both sides of the coin. But the pre-future commission decided differently, and they were able to do, harmfully, in my opinion.
But I think there is a slight disagreement or inertia against deregulation. And I’ve fought that in my time on Capitol Hill and at the commission. It’s heavier lift to do deregulation, and that’s not an insult to the great staff that the commission has or the practitioners in the audience. But it takes more effort to deregulate than it does to regulate.
Lawrence Spiwak: All right. Well, listen, as I see Nick’s face popping up, that means we’re out of time. So I’d like to thank our excellent panelists, Jane Mago, Chris Wright, Mike O’Rielly. I’m Larry Spiwak. Thank you again for a really excellent discussion. Maybe we’ll do this again when the Court actually issues an opinion. And I’ll throw it over to Nick here. So, Nick?
Nick Marr: Thanks, Larry. And thank you all very much. I’m just popping back in to close down. Thank you to our panelists for calling and for participating in this great panel, especially to Larry for moderating, organizing this, bringing some questions beforehand. Of course, to our audience for calling in and your great questions, thanks for sending those in. As always, be checking your email and our website for announcements about upcoming teleforum calls and virtual panels like this. But until the next one, we are adjourned.
Dean Reuter: Thank you for listening to this episode of Teleforum, a podcast of The Federalist Society’s Practice Groups. For more information about The Federalist Society, the practice groups, and to become a Federalist Society member, please visit our website at www.fedsoc.org.