FCC: Gray Should Have Known Anchorage Deal Violated Note 11 Rule
The FCC’s 2022 $518,000 forfeiture order against Gray Television over the 2020 buy of another broadcaster’s CBS affiliation in Anchorage doesn’t violate the First Amendment and doesn’t amount to the creation of new regulations without notice, the agency said in a brief filed Monday in Gray’s challenge of that forfeiture (docket 22-14274) in the 11th U.S. Circuit Court of Appeals (see 2301040059).
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A 2016 FCC rule -- known as Note 11-- that extended the agency’s prohibition against broadcasters owning two top-four stations in a single market to transactions involving their network affiliations, barred the Anchorage deal, the FCC said. “The text of Note 11 provided Gray, a sophisticated broadcaster with numerous stations nationwide, fair warning that its affiliation purchase would violate the top four prohibition,” said the brief.
The FCC forfeiture order against Gray concerned the broadcaster’s buy of the CBS affiliation of Denali Media's station KTVA Anchorage in 2020 in a sale of “non-license assets” and subsequent shifting of the programming to Gray’s station KYES-TV Anchorage -- now KAUU -- while continuing to own NBC affiliate KTUU-TV Anchorage. Gray argued the forfeiture amount is too high, and should be reduced because it took quick action to shift the CBS content to a low-power station which doesn't fall under the top four prohibition. “Gray’s remedial measures after learning that the agency staff had discovered its misconduct do not mitigate its culpability,” the FCC said.
Gray argued Note 11 has historically applied only to deals where stations swapped their affiliations, and thus doesn’t apply here. The “consideration” for which an affiliation is sold doesn’t matter, and Gray’s argument ignores the text and intent of Note 11, the FCC said. “The regulation targets network affiliation acquisitions only because they may be used to evade the top-four prohibition,” the FCC said.
Gray’s challenge to the FCC’s statutory authority should be discarded by the court because Gray didn’t raise it before the agency, the FCC said. The agency also said Gray arguments that Note 11 doesn’t prohibit deals that are the “functional equivalent of a license transfer” is the opposite of the argument it made before the FCC and should thus also be rejected by the court as a new argument.
Gray also argued that Note 11 doesn’t apply because ratings data close to the time of the transaction showed it already owned two top-four stations in the market. Since the deal wouldn’t “result” in a new top-four combination, the rule doesn’t apply, Gray has said. The ratings data in question wasn’t available to Gray at the time of the deal and so is invalid, the FCC said. Also, Gray’s interpretation would upend local ownership rules by allowing the owner of an existing top-four combination to acquire other top-four affiliations while preventing the owners of non-top-four combinations from doing so, the FCC said.
The courts have repeatedly rejected arguments that FCC broadcast ownership rules violate the First Amendment, and should therefore reject Gray’s arguments that the agency is targeting it over programming decisions, the filing said. “Note 11 applies to transactions that form top-four combinations, ‘regardless of the content of programming,’” the FCC said.