8th Circuit Ruling on 2018 Quadrennial Vacates Top-4 Limit

The court rejected the request of petitioners Zimmer Radio, Nexstar, NAB, Beasley Media and Tri-State Communications to overturn radio ownership limits and reject the FCC’s definition of the broadcast ad marketplace. However, it did rule that the QR process allows the FCC only to loosen rules, not expand them. The removal of the top-four prohibition isn’t expected to spur a surge of dealmaking because the Media Bureau has lately been regularly waiving the rule, but broadcasters said the decision is seen as a win for the industry. “This is a major step forward for local television broadcasters seeking to compete and thrive in a vastly transformed media marketplace,” said NAB CEO Curtis LeGeyt in a release.

The FCC didn’t provide sufficient evidence in the 2018 QR order (released in 2023) that common ownership of two of the top four stations in a market is anticompetitive, said the unanimous opinion written by Judge Bobby Shepherd, who called the FCC’s arguments for retaining the rule “factually questionable.” The record shows that combinations of the third- and fourth-ranked station in a market don’t necessarily result in a single entity controlling an outsized share of the market, he wrote. “Here, in light of the evidence against the Top-Four Prohibition and in the absence of any record-supported reason for keeping the rule, we find that the FCC acted arbitrarily and capriciously in retaining the rule.” In vacating the prohibition, the court also vacated the FCC’s methodology for calculating audience share to determine the top four stations, which the broadcasters had also challenged.

The court’s elimination of the prohibition isn’t yet final; the ruling gives the FCC 90 days to provide better justifications for retaining the prohibition before the court issues its mandate. Broadcast industry officials don’t expect the FCC to provide justification given that as a commissioner, FCC Chairman Brendan Carr was critical of the 2018 QR order. “For decades, the FCC’s approach to regulating the broadcast industry has failed to promote the public interest. That has only made it harder for trusted and local sources of news and information to compete in today’s media environment,” said Carr in a released statement Wednesday. “That is why I dissented from the Biden-era FCC’s decision to retain a regulation that does not match marketplace realities. I am pleased to see that the court agrees and has vacated that regulation.”

Broadcast industry officials said that outside the national ownership cap, the top-four limit was one of the last ownership limitations on TV broadcasters. However, media broker Gregory Guy told us he doesn’t expect a surge of dealmaking on the heels of the decision. Under Carr, the FCC has already signaled a willingness to waive the top-four prohibition, he said. “Could this open the gates? In theory. But the FCC has indicated they were going to be open to it anyway,” he said. “If you see an uptick in the activity, I think it is mostly coincidental.”

The court also vacated the FCC’s extension of the top-four prohibition to multicast channels and LPTV stations, ruling that the statute requiring quadrennial reviews doesn’t allow the agency to expand its rules as part of that process. Section 202(h) of the Communications Act directs the FCC to “repeal or modify” its rules during a QR if they are no longer in the public interest. In expanding a rule that barred station swaps that would violate the top-four prohibition to include multicast channels and LPTV, the agency “evidently believed” the rule was in the public interest, Shepherd wrote. “Once the FCC made that determination, its authority expired. It could not repeal or modify the rule at all.”

Contradicting a previous ruling by the 3rd Circuit, Shepherd said that the FCC’s interpretation of the 202(h)’s directive to repeal or modify should be narrow. “When read with ‘repeal,’ ‘modify’ is better understood under its more limited reading, which allows the FCC to loosen the regulation but not tighten it,” he wrote.

Interpreting the statute to only allow rules to be loosened during quadrennial reviews runs counter to other legal precedents and “would produce incredibly irrational results,” said Cheryl Leanza of the United Church of Christ Media Justice Ministry. Leanza filed an amicus brief in support of the FCC in the case and has litigated in past QR court battles. The agency should be able to modify rules it considers to be in the public interest, she said. The 8th Circuit’s ruling creates a circuit split with the 3rd Circuit on the interpretation of Section 202(h), she said. “I think the Supreme Court would be very sensitive to the idea that you could hamstring the agency from being able to make modifications to its own rules.”

The 8th Circuit was less amenable to broadcaster arguments against the FCC’s retention of other rules. Although broadcasters cited last year's U.S. Supreme Court Loper Bright v. Raimondo ruling against deference to agencies, the court in this case deferred to most of the FCC’s determinations on retaining rules. In weighing whether to retain broadcast ownership rules, “the FCC properly considered all three of its public interest goals—competition, localism, and viewpoint diversity,” said the opinion. “In sum, Petitioners have not shown that the Commission’s decision was not reasoned or reasonable.”

Broadcast industry officials told us they expect the remaining limits on broadcast ownership are likely to be addressed in the FCC’s national ownership cap proceeding and the 2022 QR, which is expected to be issued by the end of 2025.

“Fortunately, FCC Chairman Brendan Carr has long been a champion for empowering local stations, and we look forward to working with this FCC to modernize its local radio ownership rules and ensure local broadcasters can thrive in the communities they serve across the nation,” said LeGeyt in the release. The decision “gives the FCC the freedom to modernize its rules in the 2022 Quad to allow broadcasters to compete against their digital, unregulated rivals,” said former FCC Commissioner Robert McDowell, now with Cooley. The 2022 QR will likely end up in court as all the previous versions have, said University of Minnesota media law professor Chris Terry. “This is just the next step in the process,” he said. “No matter what happens, we end up back in court.”

The 8th Circuit panel's other two judges were Raymond Gruender and Duane Benton.