Lead Opinion
Nеarly ten years ago, intervenor RKO General, Inc. filed an application for a three-year renewal of its license to operate KHJ-TV, Channel 9 in Los Angeles. Thus began a long saga which we may not even end today by affirming the Commission’s decision in favor of RKO.
I
RKO, a wholly-owned subsidiary of General Tire and Rubber Company, has operated KHJ since 1951. Joint Appendix at 52. Under the Federal Communications Commission’s license-renewal scheme, see 47 C.F.R. § 73.630 (1965), this license came up for three-year renewal with those of other California licensees in 1965, and RKO filed an application for renewal on August 31, 1965. Two months later, on October 25, 1965, appellant Fidelity Television, Inc. filed an application for a construction permit to build a station at Norwalk, California, also to operate on Channel 9 and to blanket the same area.
The Commission’s rules provide, however, that an applicant might petition the Review Board for an enlargement of the issues so that evidence could be presented on, e. g., character or programming. See 47 C.F.R. § 1.229 (1973). Fidelity, on June 27, 1966, filed such a petition, requesting the addition of three issues: which applicant would provide for a more fair, efficient and equitable distribution of television services; the “service philosophy” of each applicant;
This proceeding did not, however, simply run its ordinary course through the hearing examiner
On March 9, 1967, Fidelity filed a petition with the Commission requesting that it itself add programming and
Concurrently, on March 2, 1967, the Department of Justice filed suit in the United States District Court for the Northern District of Ohio against the General Tire and Rubber Company, Ae-rojet-General Corporation, A. M. Byers Company, and RKO General, Incorporated (the latter three companies were subsidiaries of General Tire). United States v. General Tire & Rubber Co., No. C—67—155 (N.D.Ohio, filed Mar. 2, 1967). This action alleged that the four companies had violated Sections 1 and 2 of the Sherman Act, 15 U.S.C. §§ 1, 2, in that they had, among other things, engaged “in a combination and conspiracy to utilize reciprocity whereby the purchasing power of all of said defendants is used to coerce and persuade certain actual and potential suppliers of the defendants to purchase tires, wrought iron products, advertising time and other products and services from said defendants, in unreasonable restraint of . trade and commerce; . . . ” Complaint at 6, United States v. General Tire & Rubber Co., supra.
Responding to this new development, Fidelity filed with the Review Board, on March 8, 1967, a petition to enlarge the issues to be considered at the comparative hearing to include a determination
in light of all the facts and circumstances surrounding the Complaint filed by the United States of America on March 2, 1967, against General Tire and Rubber Company, whether RKO General, Inc., is qualified to be a licensee of the facility for which it is applying herein, or alternatively, whether such matters bear upon the comparative qualifications of RKO General, Inc.; . . . [Joint Appendix at 164.]
The Board denied the petition on June 20, 1967, saying that Fidelity’s allegations of wrongdoing were not specific enough to warrant the addition of a “disqualifying character issue,” but that “relevant facts and circumstances forming bases for the civil suit — particularly as they relate to RKO’s broadcast practices — can be adduced by Fidelity under the standard comparative issue.” Joint Appendix at 167—68. The Board also said that any grant to RKO would be conditioned on the Commission’s right to reopen the case should the outcome of the antitrust suit be unfavorable to RKO.
The examiner’s decision, without an overabundance of enthusiasm, recommended that RKO’s application for renewal be denied and Fidelity be granted a construction permit to build a station to take over Channel 9. Joint Appendix at 151, 153. He found that General Tire and RKO had substantially contributed to the development of broadcast technology and had the capacity to run a good station. Ibid, at 137—41. However, he also found that KHJ’s past performance in programming and community relations, particularly in the station’s concentration on presenting old films and ignoring community criticism of excessive violence in some of the movies, was poor. Ibid, at 143. On the other hand, he gave Fidelity a demerit for an integration-of-ownership-and-management proposal which he felt was created just to win the license and would not be implemented. Ibid. at 150-51. Fidelity, however, was found superior in local ownership, in community-needs-ascertainment, and in providing for diversification of ownership of the mass media. Ibid. at 149. The examiner berated General Tire’s anticompetitive practices, but did not give RKO a special character demerit for them. Ibid. at 144—46, 148. Finding “neither applicant is any bargain as a broadcast licensee,” the examiner chose to give Fidelity a chance to improve on RKO’s performance. Ibid. at 151, 153.
Soon after the release of this initial decision, another RKO station, WNAC-TV, Boston, came up for renewal. Upon the filing of two other mutually exclusive applications for construction permits, the Commission, on December 11, 1969, designated the three applications for a comparative hearing. RKO General, Inc. (WNAC-TV), FCC 74D-36 at 2 (released June 21, 1974). Included in the hearing order was an “anticompetitive” issue much like that added in the current case after the record was closed. Ibid. at 3. On January 8, 1971, the Commission’s Broadcast Bureau filed a petition with the Commission asking that the KHJ record be reopened and consolidated with the WNAC record on the anti-
The Commission heard oral argument in the KHJ proceeding on October 12, 1971, but as of March 22, 1973, had not yet reached its decision. On that day, Fidelity filed with this court a petition for a writ of mandamus. Fidelity Television, Inc. v. Federal Communications Commission, No. 73-1313 (D.C.Cir., filed. Mar. 22, 1973). . On June 11, 1973, the court, while refusing to issue the writ, stated that the Commission’s decision had been unreasonably delayed and ordered it to report its progress within 30 days. Ibid. The Commission, although it did report on July 6, 1973, had still not issued a decision when, on November 21, 1973, Fidelity renewed its petition here. Ibid. On December 6, 1973, before the court could act, the Commission announced its decision. Joint Appendix at 1.
By a divided vote, the agency reversed the hearing examiner and granted RKO’s renewal application.
Going on to diversification, the opinion found that while RKO superficially looked poor in this category (in that the company was the licensee of AM and FM stations in Los Angeles as well as stations in other states and was a shareholder in several cable television systems), each station was operated independently and, particularly in the case of KHJ, was one of many media outlets in its market. Finding that the dangers of non-diversification, which it characterized as promotion of “any national or other uniform expression of political, economic, or social opinion,” did not exist in this case, the opinion concluded that “we are not persuaded that the nature of RKO’s interests is such as to have any adverse effect on the flow of information for the audience to be served here.” Joint Appendix at 17. The opinion also found that, since a Fidelity stockholder owned an interest in several suburban Los Angeles newspapers, the challenger was not entirely free of diversification problems. Finally, noting ongoing rule-making proceedings on the application of the diversification criterion tо renewal applicants, including a proposed rule requiring divestiture, the opinion concluded that “neither applicant has made a sufficient showing to warrant the award of any preference under the diversification criterion.” Ibid.
On the subject of integration, for which the hearing examiner had given Fidelity a demerit, the opinion found the two applicants equal. It said that Fidelity’s conduct as an applicant had indicated that “the record here gives little promise that Fidelity will effectively implement its paper integration promises.” Joint Appendix at 20. On the other hand, RKO was found to have achieved the purposes of integration — local control and accountability — through its policy of station independence, and by requiring active participation in community affairs by station employees. Ibid.
Finding the two applicants thus equal on the standard comparative factors, the opinion based the ultimate outcome on a policy decision that “credit must be given in a comparative renewal proceeding, when the applicants are otherwise equal, for the value to the public in the continuation of the existing service.” Ibid, at 22. This was found to have tipped the balance in RKO’s favor, and the license was therefore renewed — conditional with respect to anticompetitive practices on the final outcome of the WNAC proceeding.
Before considering the validity of the Commission’s ultimate decision under the applicable standards, it is necessary to consider some procedural and preliminary points pressed upon us by appellant.
First, Fidelity has argued (Brief for Appellant at 37—42) that this court should overturn the Commission’s decision or at least disqualify then Chairman Burch on the grounds that “the decision in this case is nothing more than an extension of the Commission’s operational bias in favor of incumbent licensees.” Brief for Appellant at 42. This bias has, appellant claims, been revealed in prior decisions of the Commission and in Chairman Burch’s testimony before Congress. The claim is almost exactly the same as that made and rejected in F. T. C. v. Cement Institute,
Next, Fidelity charges that the Commission’s ultimate decision was fatally defective because' it was based on a record limited by the Commission’s earlier, allegedly improper, decisions to restrict the hearing to the “standard comparative issue.” At various points in the proceeding, Fidelity unsuccessfully sought the addition of five issues — distribution of services (the so-called 307(b) issue), service philosophy, programming, needs ascertainment, and anticompetitive conduct. We consider each of these rulings of the Commission in turn.
Section 307(b) of the Communications Act, 47 U.S.C. § 307(b) (1970), requires the F.C.C. “to provide a fair, efficient, and equitable distribution” of television service to the communities of the United States. Fidelity contends that “the Southland,” which it describes as Orange County and the communities to the south and east of Los Angeles, Joint Appendix at 198, is a community without television service but which deserves it under section 307(b). This is not technically a comparative issue, since if Fidelity were right then appellant, meeting the minimum requirements, could receive the license regardless of the merits of RKO’s operation of KHJ. See Anthony, supra note 3 at 85-87. However, a “307(b) issue” is, when properly raised, added to the comparative hearing order and considered as part of the comparative hearing. See, e. g., Southern Tier Radio Service, Inc.,
The Commission denied Fidelity’s request for addition of a 307(b) issue because Fidelity had failed to make the necessary first showing that “the South-land” was a community, let alone a separate community in need of television service. Joint Appendix at 160. The Commission’s decision cannot be overturned. In failing to define the South-land with greater specificity, Fidelity rendered its request facially insufficient under the standards previously announced. In Southern Tier Radio Service, Inc., supra, § 307(b) was held not to be relevant because the applicant was unable to define with precision “Greater Endicott.”
As part of the same petition, Fidelity asked the Commission to add a “service philosophy” issue. That concept, as we have noted, is a term of art used to describe an applicant’s intention to direct its programming only or primarily to a part of the area to be covered by a station’s signal. The Commission found that Fidelity fits directly into the mold developed in Petersburg Television Corp.,
Another additional issue rejected by the F.C.C. was programming. Prior to the 1965 Policy Statement,
Fidelity requested that the Commission add a programming issue because of its emphasis on local programming and the “marked differences in the percentages which the applicants propose to devote to the various program categories.” Joint Appendix at 205. The Commission refused on two grounds — that the program differences were mere differences in judgment and that Fidelity had not done an adequate needs survey to justify the insertion of the issue on the basis of “superior devotion to public service.” Ibid, at 161. If the agency’s decision had been based only on the first ground, it might well be questionable. Fidelity offered 22% less entertainment and twice as much educational and news programming as RKO. Ibid. at 205-06. These differences exceed those on which an issue was allowed in WPIX, Inc.,
Fidelity’s attempt to have a separate needs-ascertainment issue added requires little discussion. Commission rules provide (and have so provided since 1963) that a motion for enlargement of issues must be filed within 15 days after the notice of issues scheduled for the hearing is published in the Federal Register. 47 C.F.R. § 1.229(b) (1973). The Federal Register notice in this case was published on June 11, 1966, 31 Fed.Reg. 8253 (1966), so that the time to file a petition to enlarge ran out on Monday, June 27, 1966. The Review Board found that Fidelity had not shown that the petition filed July 24, 1967 could not have been filed in time, Joint Appendix at 178, and Fidelity did not appeal the Board’s ruling to the Commission. Fidelity having failed to exhaust its administrative remedies on this issue, the Review Board’s determination is not properly before this court. Cf. Pine v. United States,
Finally, we take up Fidelity’s request to have an issue relating to RKO’s anti-competitive conduct added to the hearing. While the Commission eventually did add such an issue, Joint Appendix at 187, it acted rather late and on a limited basis, and Fidelity argues that therefore it was not able to produce an adequate record on the subject. Appellant’s Brief at 19. The background has already been touched on in Part I, supra. Borrowing from the Justice Department’s suit against General Tire, Fidelity charged that RKO, through its parent General Tire, had engaged in “reciprocity,” the practice of obtaining sales by conditioning purchases on future orders. The challenge was in essence that KHJ, because of its place in the General Tire structure, automatically received advertising without competing with other Los Angeles stations. If proven, the anti-competitive effect on other stations would be obvious. Reciprocity is especially complex in a conglomerate like General Tire because its needs and products are diverse; for example, rubber purchases can be conditioned on advertising sales. Fidelity argues that, for this reason, it was necessary for it to be able to present evidence on reciprocity in the entire General Tire organization, and not simply that which was “patently germane to RKO’s stewardship of KHJ— TV,” as required by the hearing examiner. Appellant’s Brief at 17-20; see Joint Appendix at 182.
Given the nature of the charges, including the allegation of direct involvement by RKO and not merely General Tire, see Complaint at 7, United States v. General Tire & Rubber Co., supra, it seems that the Commission could well h’ave granted Fidelity’s initial request to enlarge the issues to include anticompéti-tive conduct. But the error proved harmless. By the time this case reached this court, Fidelity had managed to create a fairly substantial record in this proceeding on the reciprocity practices of RKO, not merely in its operation of
Ill
It will be helpful to consider separately one other matter before coming directly to the agency’s decision on the actual comparison of Fidelity and RKO. Before a comparative hearing can be held, or at least before the winner can receive a license, it is necessary for the Commission to determine that the applicant meets “the citizenship, character, and financial, technical, and other qualifications” the F.C.C. prescribes. See 47 U.S.C. § 308(b) (1970); Anthony, supra note 3 at 34. In this case, there was serious objection on the character issue only as it related to RKO’s alleged anticompetitive conduct.
The antitrust law on reciprocity is not entirely settled. The practice of explicitly and successfully conditioning orders for supplies on the supplier’s purchase of products from the buyer has been held to be a violation of at least Section 5 of the Federal Trade Commission Act since the 1930’s.
The evidence in this case largely shows, as the agency opinion found, ineffective attempts at reciprocity, particularly with respect to KHJ.
There are also instances in the record of successful reciprocity. Most of these have little to do with RKO, and even less with KHJ, whose ratings at times were so poor that, even with the added push of reciprocity, no advertising was received. Joint Appendix at 122-26, 132-35. In addition, as was typical following the coercive reciprocity cases of the 1930s, it appears that the reciprocity shown in this record was considered mutually beneficial by both companies, and that although purchases might in some cases be rerouted in response to reduced sales, General did not attempt to use coercion as an inducement.
Contemporary sources indicate that this type of noncoercive reciprocity was extremely widespread in the early 1960s, but more recent writings suggest that it has largely been abandoned in recent years. See Handler, Emerging Antitrust Issues: Reciprocity, Diversification and Joint Ventures, 49 Va.L.Rev. 433, 435 (1963); Hausman, Reciprocal Dealing and the Antitrust Laws, 77 Harv.L.Rev. 873, 874 (1964). Compare Kintner, The Anatomy of Reciprocity, 56 A.B.A.J. 232, 233 (1970). The practice was not affirmatively declared illegal until the 1966 General Dynamics case,
IV
We come now to our final task— scrutiny of the F.C.C.’s ultimate decision in the light of the standards for comparative renewal hearings developed by the agency in the past.
The two basic features of the present system as the Commission has developed it are that a renewal applicant will be judged on his past record, and that the so-called traditional comparative factors are largely predictors of the kind of service a new applicant would offer and not requirements for being a good licensee.
We consider first the Commission’s finding that RKO’s performance was “average” and not “poor” as the hearing examiner had found.
Having decided that RKO’s programming performance was only “average,” the Commission had to go on to the other traditional criteria, comparing Fidelity’s predicted success in achieving the goals of integration, local ownership, and diversification with RKO’s actual performance in those areas.
As we noted above, the examiner, but not the Commission, gave Fidelity a demerit for its integration proposal. The agency’s reversal of the hearing examiner on this point was more apparent than real, since both felt that the propos
On RKO’s behalf, the Commission found that, through the company’s policy which “requires tb,e management of its stations to involve themselves in a wide range of community and civic organizations and to use the information gained from such contacts to help determine the direction and programming of the station,” RKO’s management had acquired the kind of interest in local affairs which made the station responsive to the community — the ultimate goal of the integration and local ownership ente-rrar" Joint Appendix at 20. The examiner’s decision shows that KHJ’s supervising personnel were long-time residents, including natives, of the Los Angeles area, and were active in a wide variety of civic associations both locally and nationally. Joint Appendix at 55-56. The record also shows more formal efforts to ascertain community needs, as well as the results of these efforts in KHJ’s programming. Ibid, at 57—58.
With respect to diversification, it was apparent on this record that Fidelity had far fewer media interests than did RKO
On the whole it is fair to say that the Commission found that the ultimate effect of its analysis of the record was that Fidelity and RKO were essentially equally poor contenders — or, at the, best, both were minimally acceptable applicants. While the agency was under no obligation to give the license to either competitor, we cannot say that it committed legal error when, in its attitude as of the times pertinent in this case, it took the view that “minimal service is to be preferred to no service at all.” Compare Broadcast License Renewal Aсt, H.Rep.No.93-961, 93d Cong., 2d Sess. 17 (1974). There is no need here to expand on “renewal expectancies.” We are not faced with a situation where a superior applicant is denied a license because to give it to him would work a “forfeiture” of his opponent’s investment. We merely confirm what we intimated in the Greater Boston Television Corporation case — that, when faced with a fairly and evenly balanced record, the Commission may, on the basis of the renewal applicant’s past performance, award him the license.
It is worth emphasizing the special posture of this particular case. It is based on a record built under standards which have since been upgraded or modified or reconsidered by the Commission. New community ascertainment criteria have been issued and there is now a requirement for something of a continuing dialog between a station and its audience. The agency has also undertaken its rule-making process on cross-ownership. The development, through rule-making, of standards of “substantial performance” also seems imminent and should prove helpful. We hold here only that under the former criteria the Commission, when faced with a poor challenger who offers little more and is likely in fact to provide somewhat less than the incumbent, did not commit reversible error by awarding the license to the incumbent.
Affirmed.
. Under the “holdover” provisions of the Federal Communications Act and the Commission’s rules, RKO has been operating the station in the interim. 47 U.S.C. § 307(d) (1970); 47 C.F.R. § 1.62(a)(1) (1973). The history of this case emphasizing the interplay of decisions by the F.C.C. and this court is set out in our earlier decision in Fidelity Television, Inc. v. F. C. C.,
. A construction permit is a necessary prerequisite to the licensing of a new station, and except in rare cases, it is also a guarantee of a licensee to operate the station once constructed. 47 U.S.C. § 319 (1970); 47 C.F.R. § 1.68 (1973). While Channel 9 is allocated to Los Angeles under the Commission’s overall television allocation scheme, 47 C.F.R. § 73.606 (1973), Commission rules permit a licensee to operate the station from anywhere within 15 miles of the city of license. 47 C.F.R. § 73.607(b) (1973). Norwalk is within 15 miles of Los Angeles.
. The theory of the standard comparative issue is that the Commission determines before setting the case for a hearing that each applicant has the minimum character, legal, financial, and technical capability to operate the station in the public interest. The purpose of the comparative hearing is to determine, on that basis, which would serve the public interest better. See Anthony, Towards Simplicity and Rationality in Comparative Broadcast Licensing Proceedings, 24 Stan.L.Rev. 1, 33-34 (1971) [cited as Anthony], Under this theory, an applicant’s ability to produce the programming set out on his application is considered a non-comparative financial issue, and is not ordinarily deеmed relevant in the comparative proceeding. See McClatchy Broadcasting Co.,
. The “service philosophy” issue deals with an applicant’s intention to direct his programming to, or primarily to, only a part of the area to which his signal reaches. See Central Coast Television,
. The title of hearing examiner was changed to Administrative Law Judge effective September 6, 1972. 37 Fed.Reg. 18034 (1972). Since all decisions in this case at levels below the Commission itself had been made before 1972, the title “hearing examiner” will be used in this opinion.
. A “needs ascertainment” issue relates to the manner and quality of an applicant’s efforts to discover community needs, as required by the Commission En Banc Programming Inquiry,
. The antitrust action was concluded by a consent decree, with judgment entered on October 21, 1970. The judgment stated that it was entered without “constituting evidence or admission by any party with respect to any issue of fact or law.” Final Judgment at 1, United States v. General Tire & Rubber Co, supra. It did, however, restrain.General Tire and its subsidiaries, including RKO, from engaging in the
. While the petition to reopen the record was pending before the hearing examiner, Fidelity filed on February 19, 1968, a second request with the Review Board for enlargement of the issues to include a determination whether RKO should be disqualified or assessed a demerit because of anticompetitive practices. Joint Appendix at 183-85. The Board denied Fidelity’s petition on May 10, 1968. Ibid. The Commission’s decision on review, released September 9, 1968, found that the hearing examiner’s decision to reopen the record had provided Fidelity with the opportunity to submit evidence on RKO’s anticompetitive conduct, so that no further relief by way of reopening the record was required. The Commission did, nevertheless, add to the issues to be decided by the examiner whether RKO should be disqualified or assessed a demerit for its trade practices. Ibid, at 187.
. Fidelity participated in the WNAC hearing through counsel who also represented one of the WNAC challengers. RKO General, Inc. (WNAC-TV), FCC 74D-36 at 1 (released June 21, 1974). The Review Board also added to the WNAC proceeding an issue relating to RKO’s candor in its testimony in the KHJ proceeding. RKO General, Inc.,
The Department .of Justice, meanwhile, filed a brief with the Commission urging disqualification of RKO if the Commission agreed with the facts found by the hearing examiner. Joint Appendix at 320, 348.
. After the Commission’s decision, Fidelity moved this court to dismiss its petition for a writ of mandamus as moot. The Commission did not oppose the move, and on December 21 this court entеred an order dismissing the petition. Fidelity Television, Inc. v. F.C.C.,
. There was no opinion subscribed to in toto by a majority of the participating members. Commissioners Robert E. Lee and Reid joined in an opinion (Commissioner Reid without hearing oral argument); then Chairman Burch concurred in the result without further statement; Commissioners Johnson and H. Rex Lee dissented in opinions; and Commissioners Wiley and Hooks did not participate. Joint Appendix at 1.
. See Policy Statement on Comparative Broadcast Hearings,
A past record within the bounds of average performance will be disregarded since average future performance is expected.
We are interested in records which, because either unusually good or unusually poor, give some indication of unusual performance in the future.
. We do not now have before us the Commission’s decision in the WNAC case, which has not yet issued. That decision and the agency’s interpretation of it in deciding whether to revoke RKO’s license for KHJ will of course constitute an appealable order of the Commission, which may then be appealed by either Fidelity or RKO. The fact that the ultimate decision of the Commission will be an appeala-ble final order does not, as we stated in our earlier decision, detract from our jurisdiction in the present case.
Commissioner Johnson dissented from the decision, calling it “the worst decision of this Commission during my term of seven years and five months.” Joint Appendix at 29. He objected to the decision on four grounds: (1) that RKO’s anticompetitive conduct should disqualify it as a licensee; (2) that RKO’s broadcast record was less than mediocre and the fact that it had promised no more was irrelevant; (3) that Fidelity was clearly superi- or in integration, local ownership, and diversity, characteristics which the Commission had often held absolutely to be plus factors, and (4) that Fidelity should have been able to adduce evidence on its proposed programming. Ibid, at 30-33.
Commissioner H. Rex Lee also dissented, largely because he thought that RKO’s anti-competitive conduct should totally disqualify the company.. Commissioner Lee, while not disagreeing with Commissioner Johnson’s assessment of Fidelity’s virtues on the traditional criteria, stated that if the Commission chose to disregard these criteria in a renewal proceeding, it should at least follow a recent precedent and decide the case on past performance which Commissioner Lee found “insubstantial.” Joint Appendix at 34-42; see A. H. Belo Corp.,
. The hearing examiner’s decision indicates that he would have found against Fidelity on a “service philosophy” issue. Joint Appendix at 149.
. See F.C.C. Forms 301, Statement of Program Service, Proposed Operation, in Birmingham Broadcasting Co., Dkt # 16761; Alabama Television, Inc., Dkt # 16760; Birmingham Television Corp., Dkt # 16758; Chapman Radio & Television Co., Dkt # 15461.
. Fidelity also maintains that it was error for the Commission to remand Chapman to the Review Board to allow Alabama Television, Inc., one of the competitors in that case, to show that its programming differences were related to the needs ascertained. See 169 U.S. App.D.C. pp. ---, 515 F.2d pp. 689-690, supra. The difference between Chapman and this case is that Alabama Television had done an adequate survey but had not shown how the ascertained needs matched the proposed programming. Here, the Commission found that Fidelity was missing one of the primary requirements, a proper survey, and therefore that no explanation by Fidelity could show how its programming met unknown needs.
. RKO and the Broadcast Bureau also filed petitions questioning Fidelity’s character, but the Commission refused to conduct hearings on those allegations. Joint Appendix at 188-94.
. The bearing of the WNAC record on this issue is left for future determination (if the problem should be raised).
. Character is both a non-comparative and a comparative consideration. While the Commission can disqualify a party entirely on the basis of poor character, it has also retained the option to use lesser character blemishes as demerits in a comparative proceeding. Policy Statement on Comparative Broadcast Hearings,
. 15 U.S.C. § 45 (1970) (Section 5 of the Federal Trade Commission Act, 38 Stat. 719 (1914)); see Waugh Equipment Co.,
. 15 U.S.C. § 18 (1970) (Section 7 of the Clayton Act, 38 Stat. 731 (1914)); see F. T. C. v. Consolidated Foods Corp.,
. See generally United States v. General Dynamics Corp.,
. As indicated above, there was disagreement whether evidence relating to General’s reciprocity practices, but not to RKO’s or KHJ’s involvement in them, should have been admitted. We think it clear that if ail General Tire divisions except RKO had been involved in reciprocity, there would be no sufficient basis for a demerit in this broadcast license proceeding. While the entire corporate practice is relevant, this record shows that RKO’s role was substantially less than that of General’s' other divisions.
. While it is clear that the F.C.C. may take account of anticompetitive actions short of antitrust violations, National Broadcasting Co. v. United States,
. In addition, a strict reading of General Dynamics would be that all discussion of reciprocity as a Sherman Act violation is dictum since the court found that an insubstantial volume of commerce had been affected.
. As we have stressed, under the Commission’s decision the agency’s ruling on anticom-petitive practices is subject to reopening in the light of the WNAC proceedings (which have not yet been finally determined by the Commission).
. We are not required, for present purposes, to deal with the criticisms leveled in recent years against the comparative hearing process, especially as it involves renewal applicants. See, e. g., Anthony, supra note 3; Goldin, “Spare the Golden Goose”—The Aftermath of WHDH in FCC License Renewal Policy, 83 Harv.L.Rеv. 1014 (1970); Friendly, The Federal Administrative Agencies: The Need for Better Definition of Standards, 75 Harv.L.Rev. 1055 (1962); Grunewald, Should the Comparative Hearing Process be Retained in Television Licensing?, 13 Am.U.L.Rev. 164 (1964); Comment, The FCC and Broadcasting License Renewals: Perspectives on WHDH, 36 U.Chi.L.Rev. 854 (1969).
The 1965 Policy Statement on Comparative Broadcast Hearings,
. Johnston Broadcasting Co. v. F. C. C.,
. Service v. Dulles,
. Colorado Interstate Gas Co. v. F. P. C.,
. Columbia Broadcasting System, Inc. v. F. C. C.,
. See generally Greater Boston Television Corp. v. F. C. C.,
. See A. H. Belo Corp.,
. Citizens Communications Center v. F. C. C.,
. Broadcast License Renewal Act, H.Rep.No. 93-961, 93d Cong., 2d Sess. 16-17 (1974); Broadcast License Renewal Act, S.Rep.No.93-1190, 93d Cong., 2d Sess. 10 (1974).
. See Policy Statement Concerning Comparative Hearings Involving Regular Renewal Applicants,
. It was not until its 1970 Policy Statement that the Commission made it clear that only a licensee’s performance during the license period, and not any effort made to upgrade the station after a challenge was filed, would be taken into account on renewal.
It is, however, inappropriate to compare KHJ’s pre-1967 performance with 1971 standards, as one of the dissenters did in this case. Joint Appendix at 38. In fact, KHJ’s recent performance in non-entertainment programming can be said to have placed it among the top stations in the country in terms of the percentage of the broadcast day spent on news, public affairs, and local programming. F.C.C. News Release No. 31512, Oct. 8, 1974 at 118, 220.
.
. There is no issue of promise versus performance in this case as there was in Moline Television Corp.,
. Citizens Communications Center v. F. C. C.,
. While the hearing examiner found that “the most solid preference that Fidelity enjoys' stems from the fact that its proposal is backed by a comprehensive sampling of public opinion,” that sample was oriented almost entirely to “the Southland,” and was found by the examiner “to further contribute to the city of Los Angeles’ becoming the hole in the doughnut of its surrounding communities. Joint Appendix at 149. Furthermore, the affidavits provided by Fidelity to support its claim that its programming was community-induced were of the “here’s our schedule — -don’t you like it” variéty which the Commission now considers unacceptable. Joint Appendix at 208-12; see Ascertainment of Community Needs by Broadcast Applicants, 13 P & F Radio Reg. 2d 1903, 1904 (1968).
. The agency’s opinion used the ownership by one of Fidelity-S minor stockholders of a substantial interest in suburban Los Angeles newspapers to diminish Fidelity’s rating on diversification. Joint Appendix at 17. Fidelity contends, however, that the newspapers were mere advertising throwaways which cannot be considered media interests. Appellant’s Reply Brief at 37. This is one of the charges on -which no hearing was held; it should not have been used at all by the Commission. The er-rorj however, was minor and, in our view, did not control or significantly affect the outcome,
. The Commission’s decision states that there are 15 commercial television stations assigned to the Los Angeles Market. Joint Appendix at 16. However, only 12 commercial stations are currently operating. 44 Television Factbook, at 70-b.
. Judges, Leventhal and Davis join in the court’s affirmance of the Commission for the reasons given, but wish to note, speaking for themselves, that the Commission could have considered the alternatives of granting RKO a short or conditional license rather than limiting itself to a choice of nonrenewal or a full three-year license. The FCC’s authority to grant short licenses was made explicit by the 1960 Communications Act Amendments, now codified at 47 U.S.C. § 307(d) (1970), and the agency has in fact granted short licenses particularly where ex parte communications or other conduct have raised questions about a potential licensee’s character or where the successful licensee has succeeded only by default. See Greater Boston Television Corp. v. F. C. C.,
Particularly where a qualified competitor brings a licensee’s weaknesses to the FCC’s attention, the public interest might be better served by the Commission’s considering whether a short or conditional license would induce the licensee to correct the weaknesses — here going both to programming and to character. See Golden, supra note 26 at 1026-27. In addition, such a license could serve, if needed, as a basis for treating the licensee as a new applicant when the license comes up for renewal. See Greater Boston Television Corp. v. F. C. C., supra
Since this point, though suggested from the bench at oral argument, was not raised before the Commission, nor presented to this court in the appeal papers, it is not fairly before us for decision at this time. We note the point, however, to avoid the possibility that our affirmance will be taken as precluding such a more limited disposition when the FCC comes to consider the impact of the WNAC proceeding.
. Our affirmance, as already observed (see notes 9, 12, 17, and 25, the text appurtenant thereto, and the text at the end of Part III, supra), is conditional (as was the Commission’s decision) on the ultimate outcome of the WNAC proceedings. See Fidelity Television, Inc. v. F. C. C.,
Lead Opinion
Fidelity Television, Inc. has filed a petition for reconsideration of our March 6, 1975 decision in this case. Also, the Citizens Communications Center (CCC), a nonprofit organization supporting diversity in broadcasting, has asked for leave to file as amicus curiae a petition in support of rehearing or clarification of our decision, and has submitted such a petition. We regret that CCC did not ask to participate in this case at an earlier time. As intervenor RKO has noted in its opposition to CCC’s petition, the Center’s concern is really with what the Commission, rather than the court said and did, and the arguments it now makes could have been cogently made earlier. We have, however, decided to allow the Center’s petition to be filed, to give us the opportunity to reemphasize the limited scope of the previous opinion. Having done so, we deny the petitions for rehearing and reconsideration.
Our opinion affirmed the Federal Communication Commission’s decision to renew the license of intervenor RKO General, Inc. for station KHJ — TV in Los Angeles rather than awarding the license to challenger Fidelity Television, Inc. The decision in no way approves a return to the partial comparative hearing procedure of the 1970 Policy Statement Concerning Comparative Hearings Involving Regular Renewal Applicants,
What we decided 169 U.S.App.D.C. pages ---, 515 F.2d
As we pointed out in the opinion (169 U.S.App.D.C. pages -, -, 515 F.2d pages 702, 703), Fidelity did not show itself a superior or preferable applicant but rather “a poor challenger who offers little more and is likely in fact to provide somewhat less than the incumbent.” On this general subject the hearing examiner said: “Once it clears the easy (for it) hurdles — local ownership, radio diversification and public opinion — Fidelity does not look too good. Attached to its qualifications are no experience in the field of broadcasting, no contributions to the art, no proof through the school of experience of licensee answerability for stewardship, no proof, through the same school, of ability to stand the shock of adverse financial conditions, and no demonstrated ability to conceive and present programs of high quality [footnote omitted].” In the same connection, the examiner severely criticized the applicant’s integration proposals, which placed inexperienced stockholders, working part-time, in supervisory roles. He said: “If Fidelity is serious about its proposal, it is projecting an operation that will, at best, be signalized by confusion, and, at worst by chaos. * * * Proposals such as this are susceptible of two interpretations that should not be shrugged off. Either the proponents honestly believe that operation of a television station, unlike any other enterprise, can be effectively directed by an inexperienced group on a part-time basis, or they advance the proposal for show purposes only without intention to effectuate it. Neither inference is very palatable. The former suggests witlessness. The latter raises questions as to the advisability of entrusting stewardship to those who would attempt to fob off on a licensing agency such a tall tale.” That is the type of challenger this case concerns.
Moreover, we stated several times in the opinion that our review of the Commission looked to the manner in which, in 1973, not 1975 or any date in the future, the agency applied its then existing policy and rules to the case at hand. At that time, the Commission, by rule and by decision, consistently distinguished, in making assessments under the diversification criterion, between situations in which a multiple licensee wished to obtain a new station and those in which the organization was applying for renewal of a preexisting license. On the other hand, the Commission’s decision in this case was rendered prior to promulgation of the 1975 newspaper cross-ownership rules, Second Report and Order, Docket No. 18110, F.C.C. 75-104 ¶ 131 (Jan. 31, 1975). These rules adopt a structural rather than a functional approach to diversification even as to existing licenses under which an entity which owns a newspaper may not, in some structurally specified cases, retain a broadcast license. We made and make no decision whether, undеr such an approach, it would be possible to allow any entity to retain multiple licenses. We decided only that, as of 1973, the FCC applied its contemporaneous diversification policy which, as to renewal applicants, encompassed consideration of functional separation of activities, in a manner which was essentially consistent with prior law.
When the smoke clears away, we are left with the distinct impression that
The petitions for rehearing and reconsideration are denied.
Statement of BAZELON, Chief Judge, as to why he voted to grant rehearing en banc:
In an earlier day, this court tended to affirm comparative licensing decisions with only the most limited inquiry into the process of decision-making. If the FCC denominated the factors operative' in its decisions with some reasonable clarity, this court would not intervene even if the decision under review was illogical in terms of Commission policy, conflicted with past decisions of the agency or otherwise was not fairly reasoned out from established standards. In recent years this court has, it appeared to me, moved away from this posture into a more demanding stance, requiring of the Commission that it adhere to the rule of law in its comparative and other discretionary decisions.
The purpose of this statement is to discuss these matters in the course of demonstrating the manner in which the Commission has failed to follow the rule of law in this case. This project involves a consideration of the administrative policies and judicial decisions which the Commission either ignored or misаpplied in its decision. The organization of the statement is as follows. First I indicate the manner in which the Commission has granted an illegal renewal expectancy to RKO General, Inc., one of the comparative participants, in contravention of our decision in Citizens Communication Cen
1. RKO General Was Granted an Illegal Renewal Preference
A. CCC and the Permissible Extent of Renewal Expectancies
As the court explains, RKO General, Inc., a wholly owned subsidiary of the General Tire and Rubber Company, was until 1965 the licensee of KHJ — TV, Channel 9 in Los Angeles. On August 31, 1965, RKO filed an application for renewal of its license for KHJ — TV. On October • 25, 1965, Fidelity Television, Inc., filed a mutually exclusive application for a construction permit to operate Channel 9. The two applications were set down for a comparative hearing. There then ensued four years of litigation over Fidelity’s attempts to enlarge the issues to be heard in the comparative hearing. The result of this litigation is described and criticized in Part II. On August 13, 1969, the Hearing Examiner recommended that Fidelity’s application be granted and that RKO’s application be denied. Two further years of delay ensued as the Commission pondered whether to reopen the record at the comparative hearing to take further evidence of anti-competitive violations by General Tire. Having decided against this course of action,
Accepting for the moment the scope of the hearing held and the propriety of the Commission’s treatment of the standard comparative issues, the ratio decidendi of the Commission was this:
*707 From our consideration of these [applications] up to this point, we have established that each applicant is basically qualified to be a licensee, that the characteristics of the [applications] differ in certain respects, but that. none of those differences provides a basis for making a choice between the two applicants in this proceeding. Nonetheless a selection must be made, and so we shall look to other aspects of the record affecting the public interest. In this connection, we believe that recognition must be given to the rights and expectancies of an ordinary renewal applicant.
[In light of RKO’s substantial investment in the station to make the Channel viable and in light of the renewal expectancies of RKO], we believe that there is a public interest, both in the Los Angeles area and the nation at large, in insuring the predictability and stability of broadcast service. If there is no such security for applicants seeking facilities with the intention of providing good service to the public, the overall development and motivation of the industry will suffer. . . . [We] are persuaded that credit must be given in a comparative renewal proceeding, when the applicants are otherwise equal, for the value to the public in the continuation of existing service. . . . [Since] the record is clear that Fidelity has not demonstrated that it will in fact provide a better service than RKO, we’ are convinced, for the reasons set forth above, that RKO’s renewal application . . . must be preferred.
Initially, it appears that the court misapprehends this rationale for decision. The reader may wish to compare the foregoing quotation with the following representation of it in the court’s opinion:
On the whole it is fair to say that the Commission found that the ultimate effect of its analysis of the record was that Fidelity and RKO were essentially poor contenders — or, at the best, both were minimally acceptable applicants. . . . [We] cannot say that [the Commission] committed legal error when, in its attitude as of the times pertinent in this case, it took the view that ‘minimal service is to be preferred to no service at all.’ Compare Broadcast License Renewal Act, H.Rep.No.93-961, 93d Cong., 2d Sess. 17 (1974). There is no need here to expand on ‘renewal expectancies.’ We are not faced with a situation where a superior applicant is denied a license because to give it to him would work a ‘forfeiture’ of his opponent’s investment. We merely confirm what we intimated in [Greater Boston Television Corp. v. FCC,143 U.S.App.D.C. 383 ,444 F.2d 841 , 854, 859 (1970), cert. denied,403 U.S. 923 ,91 S.Ct. 2229 ,29 L.Ed.2d 701 (1971)]—that, when faced with a fairly and evenly balanced record, the Commission may, on the basis of the renewal applicant’s past performance, award him the license.
The court does not inform us from whence comes the quote “minimal service is to be preferred to no service at all.” It surely does not come from the Commission’s opinion. The Commission referred to the value of “continuation of existing service” and not to the value of minimal service over no service at all. And indeed it had no other choice since we confront here not a petition to deny — where the value of minimal service over no service at all is certainly relevant — but rather a comparative hearing — where the issue is not the existence of service but rather who shall provide it. Why the court finds no need to “expand upon renewal expectancies” is not at all clear to me, since I read the Commission as basing its decision squarely on renewal expectancies.
The court suggests that the Commission’s decision was based on a rule that among equal applicants, the renewal applicant may be preferred on the basis of “past performance.” First, the court’s point about the non-superiority of Fidelity’s application is entirely circular since
Second, the Commission did not, repeat did not, award renewal to RKO on the basis of RKO’s past performance. The previously quoted excerpt should make that point clear. If further proof is needed, the following additional quote should provide it:
[We] are persuaded that there are sufficient good points to offset the less favorable aspects of KHJ — TV’s performance and that, on balance, its record must be deemed to be within the bounds of average performance expected of all licensees, thus warranting neither a preference nor a demerit.
Earlier in its opinion, the court expressly affirms this holding.
The issue thus delineated is whether the Commission may use the value of “continuation of existing service”, quite apart from the quality of that existing service, as a factor in comparative renewal hearings. Initial reference to the relevant statutory provisions would indicate that this factor is legally irrelevant.
This court provided the framework for analysis of that issue in Citizens Communications Center v. FCC,
In particularly famous dicta, the CCC court defined the proper consideration of renewal expectancies:
We do not dispute, of course, that incumbent licensees should be judged primarily on their records of past performance. Insubstantial past performance should preclude renewal of a license. ... At the same time, superior performance should be a plus of major significance in renewal proceedings. The court recognizes that the public itself will suffer if incumbent licensees cannot reasonably expect renewal when they have rendered superior service.
The statement reflected administrative practice (or, at least, stated administrative practice) and was quickly adopted by the Commission after the CCC decision.
We thus have seen that the renewal expectancy awarded to RKO is quite distinct from that approved in CCC and accepted by the Commission. It remains to be seen whether that renewal expectancy is inconsistent With the holding and reasoning of CCC and the Federal Communications Act.
B. The Renewal Expectancy Granted to RKO Shortcireuits the Comparative Hearing Procedure
The first thing one notices about the renewal expectancy granted to RKO and considered in this comparative hearing is that it has nothing whatsoever to do with RKO’s comparative merit as a licensee. Rather it is a general policy, existing wholly apart from RKO, which mandates that renewal will be granted unless a challenger proves that it will “in fact” provide better service than the existing licensee. Initially, we may strike the “unless” clause off the last sentence. The comparative factors in general are designed to determine which competing applicant will provide the “best practicable service.”
The whole of the Commission’s effort in its opinion prior to the passage quoted in Part A above is to establish that neither applicant has a significant advantage over the other. Making the heroic assumption that the Commission succeeded in this effort, it still must, under CCC, make a comparative choice; it must make a selection. The mandate of the Act is that the Commission must choose and it has on previous occasions managed to choose on the basis of fairly equal records.
It is no answer to this analysis to assert that the Commission simply imposed a “burden of proof” on the challenger to prove that it is better qualified under the comparative criteria. First, the Commission has not heretofore ever informed challengers that they have a special burden of proof which exists wholly apart from the comparative criteria and, as far as one can tell from the language of the reports, has never expressly applied such a “burden of proof.” The Commission advances no reasons in its opinion for departing from its prior practice and none are apparent. Thus, the matter should at least be remanded for that purpose.
But more important than these two points, I would hold that the renewal expectancy granted to RKO violates the
There are substantial antitrust and First Amendment considerations which support my position. As CCC expressly recognizes, perhaps the most significant comparative qualification which is ignored by a' policy that entrenches the incumbent licensee is diversification of ownership.
I conclude from the foregoing discussion that the court’s decision in the present case is inconsistent with CCC both because it shortcircuits the comparative hearing process and because it eliminates the competitive spur upon which CCC relied in significant part in its holding. Moreover, I think the renewal expectancy granted to RKO violates the Federal Communications Act independently of CCC. A review of the Commission’s treatment of the diversification guides in the present case provides additional evidence that the Commission both shortcircuited the comparative hearing process and violated the Federal Communications Act with its renewal expectancy for RKO.
C. The FCC Failed to Follow Its Own Precedent In Its Ruling on Fidelity’s Diversification Advantage
The FCC hаs traditionally granted a significant comparative advantage to. an applicant which possesses no other media interests over an applicant which does possess other media interests. In its 1965 Policy Statement on Comparative Broadcast Hearings, the Commission had this to say about the diversification guides:
We believe there are two primary objectives toward which the process of comparison should be directed. They are, first, the best practicable service to the public, and, second, a maximum diffusion of control of the media of mass communications. . . . Since independence and individuality of approach are elements of rendering good program service, the primary goals of good service and diversification of control are also fully compatible.
As in the past, we will consider both common control and less than controlling interests in other broadcast stations and other media of mass communications. The less the degree of interest in other stations or media, the less will be the significance of the factor. Other interests in the principal community proposed to be- served will normally be of most significance, followed by other interests in the remainder of the proposed service area and finally, generally in the United States. However, control of large interests elsewhere in the same state or region may well be more significant than control of a small medium of expression in the same community. The number of other mass communications outlets of the same type in the community proposed to be served will also affect to some extent the importance of this factor in the general comparative scale.
The following facts were developed. RKO was the licensee of standard, FM and broadcast television licenses in New York City (#1 viewing market in the country); Los Angeles (#2 viewing market); Boston (# 5 viewing market); Windsor, Ontario (serving # 6 Detroit market) and Memphis (#45 viewing market). RKO was the licensee of standard and FM stations in Washington-Bethesda (#9 viewing market) and San Francisco (#10 viewing market). RKO has controlling interests in a massive number of CATV franchises serving almost 100 cities and towns. Several towns are within the Grade B contour of Channel 9. RKO has other media interests, including microwave communications facilities, a chain of movie theaters, programming and advertising services and a small interest in a newspaper in Schenectady, New York. Fidelity has no other media interests. A 3% stockholder of Fidelity has a 10% interest in a CATV franchise 50 miles from Los Angeles. That is the extent of Fidelity’s media interests.
From these facts, the FCC reached the miraculous conclusion that neither applicant was entitled to a diversification “preference.” Before indicating the absurdity of this conclusion, it is necessary to point out that this finding of no “preference” does not mean that if a comparative evaluation were made, Fidelity would have no advantage on diversification. If the FCC had in fact made a comparative determination, a diversification advantage of some kind would clearly be required. The Commission avoids this, by avoiding a comparative decision, as was noted in Part B above. As will be seen, all the Commission’s arguments against Fidelity’s “preference” or diversification advantage serve only to reduce its significance, not eliminate it entirely. The vestige is eliminated not by arguments directed to diversification policies but by avoidance of a comparative decision.
Taking a deep breath, I note the following arguments for reducing Fidelity’s diversification advantage. First, the Commission points out that there are 15 television stations, 126 radio stations and numerous newspapers within Channel 9’s signal contour. Second, the Commission finds that RKO has never sought to influence the operation of KHJ — TV to promote a uniform expression of views. Third, the. Commission will not attempt to restructure the broadcast industry in comparative hearings.
First, as the 1965 Policy Statement clearly provides and as has been followed in every case decided since its promulgation,
Second, none, repeat none,
The court affirms this bizarre, vertiginous reasoning by simply incanting it out loud and citing in support two of the leading cases upholding a strict application of the diversification guides. The court does not cite and shows no awareness of the multitude of Commission cases which are inconsistent with this reasoning, even though we have only recently reaffirmed the proposition that the Commission must follow its own precedent or explain why it has not
Perhaps what underlies this extraordinary holding is the instinctive feeling that despite its substantial diversification advantage, Fidelity is not really that good an applicant. This feeling is apparently based on several comments of the Hearing Examiner to the effect that Fidelity’s lack of experience renders it suspect as a licensee.
D. Other Comparative Factors Misapplied By the Commission
The Commission’s mutilation of the diversification guides is, unfortunately, only indicative of its treatment of the other comparative factors. Again, as with the diversification guides, the manner in which the Commission removes Fidelity’s advantages or RKO’s disadvantages does not fully eliminate the existence of advantages and disadvantages. Rather, as I have said, that is performed by a failure to make a comparative decision.
The Commission takes its hatchet to the “integration of ownership into management” factor and here we get the stench of procedural bias. Fidelity, the Commission admits, has an obvious advantage in this factor. The Commission adduced these reasons for giving Fidelity no “preference” on the factor. First, the Commission notes that the managers of KHJ, while not owners, do have autonomous control of the station. This argument, of course, nullifies the factor and has never been considered to my knowledge in comparаtive evaluation of the “integration” factor.
The Commission’s second argument is characterized in Fidelity’s brief as a “monstrous abuse of Fidelity’s right to due process.”
The court wisely ignores this second half of the Commission’s butchering of the integration factor. Instead the court returns to the rationale of the Hearing Examiner who held that Fidelity’s integration proposal could not be implemented because the management-owners had no broadcast experience. Apparently, neither the court nor the Hearing Examiner consulted the 1965 Policy Statement which advises us this way on that issue:
Previous broadcast experience, while not so significant as local residence, also has some value when put to use through integration of ownership and management. . . . Since emphasis upon this element could discourage qualified newcomers to broadcasting and since experience generally confers only an initial advantage (Lack of experience, unlike a high concentration of control, is remedial . . .), it
will be deemed of minor significance. This, of course, does not dispose of contentions that an integration proposal can not be implemented but it does call into doubt all the confident assertions by the Hearing Examiner that Fidelity’s plan is a “foolish piece of business.”
We next come to the Commission’s treatment of the character issue set down against RKO because of its admitted reciprocal dealings, a violation of Section 5 of the Federal Trade Commission Act and Sections 1 or 2 of the Sherman Act.
The court is clearly mistaken in its assertions about the nature of the reciprocal dealings. Both the Commission and the Hearing Examiner found completed acts of at least mutual patronage involving KHJ that resulted in significant advertising revenues to the station.
In terms of procedural unfairness to Fidelity, the preceding instances are unfortunately not exclusive. In its treatment of the programming issues suggested by Fidelity, the Commission continued to avoid a comparative evaluation through controversial procedural decisions.
II. The Commission Improperly Denied A Hearing on Fidelity’s Specialized Programming Issue
A. Fidelity’s Petition to Enlarge Issues to Consider Programming
A major factor motivating Fidelity’s application for Channel 9 was its belief that communities in Orange County and southern Los Angeles do not receive sufficient attention from television stations in Los Angeles proper. The owners of Fidelity believed Channel 9 could be programmed in such a manner as to meet what they perceived to be the unfulfilled communications needs of the “South-land.” Since programming issues will not be considered in a comparative hearing unless they are specifically set down by the Commission,
The Commission rejected the petition. Its finding on the § 307(b) issue is acceptable. I would also affirm its holding denying a general programming issue since Fidelity’s petition alleged no facts in regard to the need for greater local or news programming in general. The Commission has since 1965 become increasingly strict about the relation of the ascertainment survey to general differences in percentage of news and local affairs programming because of its concern that applicants were engaging in “promise” battles to obtain a license.
But I perceive no basis at all for the Commission’s refusal to accord Fidelity a hearing on its “service philosophy” issue. Fidelity’s “service philosophy” is merely a form of specialized programming designed to meet the alleged needs of an underserved portion of a particular service area. The Commission has granted a significant comparative preference on the basis of “service philosophy” in Central Coast Television,
The Commission’s Review Board denied Fidelity’s proposed “service philosophy” issue for these reasons. First, Fidelity has neither alleged nor shown that the Southland is more underserved than other parts of the service area. Second, Fidelity has not made “factual allegations” that it will not ignore the remainder of the service area. Third, there is no indication that the community leaders surveyed have sought and refused television time. Fourth, Fidelity has not shown a need for the programs directed to the Southland.
The first three reasons are utterly devoid of rational content. What possible relevance is there in the fact that other areas of Los Angeles may be as under-served as the Southland? Such an argument defeats every specialized programming issue. The argument is implicitly rejected by WEFM. A similar point may be made about the third reason. Does the Commission seriously expect proponents of specialized programming to prove that their listeners have unsuccessfully sought other broadcasters to carry the specialized programming? And how can the Commission hold Fidelity to the actions of community leaders when those leaders expressly state that there are local needs not being served by present communications outlets?
But the second “reason” deserves more scrutiny. Fidelity expressly states in its petition that if the § 307(b) issue is denied, it will serve the entire service area with particular attention to the needs of the Southland.
The court attempts to affirm this second reason by altering the Commission’s rationale. Where the Commission had complained of a lack of factual allegations to support the contention that the entire service area would be covered, the court states that the Commission’s decision is controlled by Petersburg Television Corp.,
I conclude that these first three reasons are largely make weight. The fourth reason is the more serious since it incorporates the Commission’s policy of correlating ascertainment efforts with proposed programming in order to put down a programming issue. Apparently, the FCC’s position was that the data stated in Fidelity’s petition did not support its specialized programming proposal since the ascertainment survey did not identify any community problems or needs to which that programming would relate. The most cursory reading of Fidelity’s petition indicates that it has offered substantial proof that little if any television programming in Los Angeles is directed to the local interests of the Southland. I do not understand the Commission to dispute this. Rather, the argument is that the ascertainment survey has no evidence on what those local interests are and why they require a telecommunications outlet. This requirement, as noted previously, originated in Commission attempts to control “promise” battles among applicants in regard to percentages of local affairs and news programming. Its rationale is seemingly not applicable in a “service philosophy” specialized programming issue since the
The court does not consider this issue of the ■ relation of Fidelity’s ascertainment survey to its specialized programming proposal, apparently content to rest its affirmance on the deficiencies it “finds” in Fidelity’s survey even though that survey was not introduced in evidence and no hearing was held on it. The court does attempt to affirm a related Commission decision to deny Fidelity an opportunity to amend its petition after the Commission reformulated its pleading standards • for proposed programming issues in Chapman Radio & Television Co.,
B. First Amendment Implications of Consideration of Program Content
Consideration of Fidelity’s proposed specialized programming issue and also of RKO’s past performance in programming Channel 9 in making a comparative decision raises significant First Amendment problems. I have discussed those problems at length previously
Far more difficult problems are encountered when one turns to the Commission’s scrutiny of RKO’s past programming. In this case, RKO was awarded neither a preference, or renewal expectancy nor a demerit because of its past programming. Fidelity vigorously challenges this conclusion, arguing that the evidence indicates that RKO should have been given a substantial demerit for past programming. This evidence tends to prove that RKO programmed very little news or local affairs, engaged in excessive commercialization and largely utilized old movies dealing with crime and violence.
III. Conclusion
Former Commissioner Johnson, dissenting, stated that the “decision, granting RKO’s renewal application for KHJ— TV in Los Angeles, may very well be the worst decision of this Commission during my term of seven years and five months.”
But I remain curious as to why the court labors so valiantly to affirm this
The court also points to the Hearing Examiner’s colorful language describing Fidelity’s lack of experience in broadcasting. No financial issue was put down against Fidelity. As I indicated previously, if lack of experience is a disqualification — and the Commission certainly did not, repeat did not, suggest that it was even a demerit — we might as well do away with the diversification guides. Let the networks own all the licenses; they have proven experience. The Hearing Examiner’s penchant for hyperbole on the integration factor obscures the modesty of Fidelity’s proposal and the express statement in the 1965 Policy Statement that past experience is not all that significant in weighing the integration factor. And, of course, the Commission took a completely different tack than did the Hearing Examiner in arguing that the integration proposal of Fidelity could not be implemented. The Hearing Examiner’s rhetoric has absolutely no decisional significance. And all the court’s enthusiasm for the Hearing Examiner obscures the fact that the Examiner recommended that the license be granted to Fidelity.
The court’s characterization of Fidelity as a “nothing” applicant constitutes apparently a flailing effort to avoid what is clearly a dangerous precedent in comparative hearings. The ironic truth is that the court need not clutch at such straws since we can be sure the Commission will manage to erect some ethereal distinction of this case that will prevent it from becoming a precedent in non-renewal comparative cases. But the court’s characterization of Fidelity as a “nothing” applicant raises the question in my mind as to what the court would desire from a “something” applicant. Here Fidelity has an important diversification advantage which it seeks to translate into a specialized programming proposal; it seeks to modestly integrate ownership into management and is locally owned. It appears to me that this is exactly the kind of application which we should find to be “something” indeed, a truly new voice in the highly concentrat
Perhaps what makes the court’s opinion so difficult for me is the realization that this debate between diversification and past experience is a repetition of a battle I thought had been fought and won long ago. In 1958, seventeen years past, I criticized the Commission thus:
I think that by . attributing to these by-products of concentration [e. g. past experience] a greater degree of importance than it attributes to the traditional, and antipodal, preference for decentralization of ownership of the mass media of communication, the Commission has effectively nullified the diversification and anti-monopoly policy long since recognized as ‘one of the basic underlying considerations in the enactment of the Communications Act.’
There may be cases in which the Commission can properly find that experience resulting from an applicant’s ownership of communications facilities offsets a competing applicant’s freedom from ownership of other communication interests. But ‘Commission expertise alone cannot support so pivotal (a divergence)’ from basic communications philosophy. A convincing explanation is required.
I do not think either the court or the Commission offers such an explanation. Rather we are regaled with all the advantages of experience and all the advantages of diversification are quietly but securely swept under the rug.
As with the last battle, this repetition of it will be won or lost by future appointments to the Federal Communications Commission and whether those appointments arrive, like those in the early 1960’s, with a desire to reduce the concentration of control of the telecommunications industry. But what do we say to the owners of Fidelity in the meantime?
This question is not merely personal. Reliance on judicial techniques of reasoned judgment lends to the comparative decision process an expectation of rationality and predictability. Perhaps naively, the owners of Fidelity relied on that expectation and spent a good deal of money in the process of that reliance. Fidelity, too, is entitled to its “challenge expectancies” of a fair and rational comparative process. I simply cannot believe that serious students of communications policy would conclude that expectation has been fulfilled in this case.
This injustice leads me to further question whether we ought not give up the pretense that the comparative evalu
. In para. 33, the Commission stated that there was a “repeated failure to make timely and necessary reports of new developments affecting a proposal.” It noted that “this practice continued even after its attention was directed to the need to keep its house in order.” It concluded “we believe that the record here gives little promise that Fidelity will effectively implement its paper integration promises . . . .” (JA 19-20).
. Even as of 1973, this was not a ruling that excluded all newcomers. Even a newcomer to TV can make a presentation built on the experience of at least one or two key stockholders identified with management, on a reasonably bona fide and practicable approach, the kind presented by at least one applicant in the much-discussed WHDH case, see Greater Boston TV Corp. v. FCC, infra,
. See Greater Boston Television Corp. v. FCC,
. See RKO General, Inc.,
. The history of the extraordinary delay in this case is discussed in Fidelity Television, Inc. v. FCC,
. RKO General, Inc.,
. Id. at 136-37 (emphasis added).
. 169 U.S.App.D.C. pages -, -, 515 F.2d pages 702 (emphasis added).
. RKO General, Inc.,
. 169 U.S.App.D.C. pages -, -, 515 F.2d pages 699, 700. At - U.S.App.D.C. at page -,
. See RKO General, Inc.,
. See 47 U.S.C. §§ 301; 304; 307(d); 309(h)(1) (1970), quoted and discussed Citizens Communications Center v. FCC,
. Hyde, FCC Policy and Procedures Relating to Hearings On Broadcast Applications in Which a New Applicant Seeks to Displace A Licensee Seeking Renewal, 1975 Duke L.J. 253, 256-61. See also Citizens Communications Center v. FCC,
. Policy Statement Concerning Comparative Hearings Involving Regular Renewal Applicants,
. Citizens Communications Center v. FCC,
.
. See Formulation of Policies Relating to the Broadcast Renewal Applicant,
This kind of renewal expectancy is supported by the various statements of this court on the issue. See, e. g., Greater Boston Television Corp. v. FCC,
. See p. 6 & nn. 7-9, 169 U.S.App.D.C. page - & nn. 7-9, 515 F.2d pages 690-692 & nn. 7-9. supra.
. Compare Formulation of Policies Relating to the Broadcast Renewal Applicant,
. See Policy Statement on Comparative Broadcast Hearings,
. See Terre Haute Broadcasting Corp.,
. See, e. g., Star Television, Inc. v. FCC,
. Johnston Broadcasting Co. v. FCC,
. See Garrett v. FCC,
. RKO General, Inc.,
. This point might, at first glance, appear too attenuated. If the reader has this reaction, I would suggest a comparison between the cases cited in note 20 supra and the discussion in Parts C and D infra in regard to their treatment of relative “preferences” and “demerits.” Reference may also be made to Mid-Florida Television Corp.,
. See authorities cited notes 10-11 supra,
.
. Id. at 1213 n.36.
. Terre Haute Broadcasting Co.,
. See Hale v. FCC,
. See Citizens Comm. to Save WEFM v. FCC,
. See Bazelon, FCC Regulation of the Telecommunications Press, 1975 Duke L.J. 213, for a complete discussion of this point.
. Policy Statement on Comparative Broadcast Hearings,
. The FCC asserts that another stockholder of Fidelity of an unstated interest has a 26% interest in a corporation publishing “newspapers” in the Los Angeles suburbs. RKO General, Inc.,
. RKO General, Inc.,
. See Terre Haute Broadcasting Corp.,
. See cases cited note 35 supra.
. Policy Statement on Comparative Broadcast Hearings,
. Billy T. Pirtle,
. See Multiple Ownership of Standard, FM and Television Broadcast Stations,
Even when one considers intra-viewing market concentration, RKO would under established precedent be entitled to a substantial diversification demerit. RKO,. as stated in the text, owns an AM and an FM station in Los Angeles as well as certain cable franchises within Channel 9’s Grade B contour. See, e. g., Industrial Business Corp.,
. The court makes a rather extraordinary cite to McClatchy Broadcasting Co.,
Turning to the Commission’s true rationale, it is clear that ad hoc inquiry into whether diversification demerits translate into a failure of diversity would require a prescience of what is “uniform” expression of views, a skill the Commission is not required to achieve and which has shown no success in achieving. Cf. Multiple Ownership of Standard, FM and Television Broadcast Stations,
. See United States v. Socony-Vacuum Oil Co.,
. See sources cited note 22 supra.
. See RKO General, Inc.,
. See SEC v. Chenery Corp.,
. See, e. g., Terre Haute Broadcasting Corp.,
. Brief for Fidelity Television, Inc., at 123.
. RKO General, Inc.,
. See Policy Statement on Comparative Broadcast Hearings,
Fidelity’s explanation of these events is recited in the Commission’s opinion denying the requested character issue, RKO General, Inc.,
. Policy Statement on Comparative Broadcast Hearings,
. RKO General, Inc.,
. See sources cited note 44 supra.
. 15 U.S.C. §§ 1, 2, 45 (1970); see discussion in note 59 infra.
. RKO General, Inc.,
. Id. The Commission’s reference to RKO’s “unblemished” record is somewhat baffling since it had just finished concluding that RKO had engaged in illegal acts, had only an average past record (at best) and was the member of a sizeable communications conglomerate. What does the Commission think is a “blemished” record?
. 169 U.S.App.D.C. page -, 515 F.2d page 698.
. Id. 169 U.S.App.D.C. pages -, -, 515 F.2d pages 697, 698.
. Id. 169 U.S.App.D.C. pages -, -, 515 F.2d page 698.
. In particular, the record establishes that General Tire, RKO’s parent company, engaged in successful mutual patronage reciprocity with Pepsi-Cola, Olin Mathieson, Alcoa, American Airlines and Hertz that resulted in significant (respectively, $36,500, $12,350, $8,069, $9,650 to $14,500, $15,210 to $90,025) increases in KHJ advertising revenues. See RKO General, Inc.,
. See FTC v. Consolidated Foods Corp.,
The Commission’s off-the-cuff assertion in RKO General, Inc.,
The one ambiguity in this record relating to RKO’s violation of the anti-trust laws concerns the degree of market power necessary to make reciprocity illegal. There is some confusion in the cases, particularly when one refers to the tie-in cases, on whether some kind of market leverage must be shown to make reciprocity illegal. Cf. Turner, Conglomerate Mergers and § 7 of the Clayton Act, 78 Harv.L.Rev. 1313, 1386-93 (1965). This issue, while serious from my examination of the facts in this case, was not considered by the Commission. Since the case should be remanded under my view I think the Commission should explore the matter further with the aid of the Justice Department.
. See National Broadcasting Co. v. United States,
. See RKO General, Inc.,
. See RKO General, Inc.,
. Policy Statement on Comparative Broadcast Hearings,
. Id. See Moline Television Corp.,
. See Citizens Comm. to Save WEFM v. FCC,
. See
. See RKO General, Inc.,
. Petition to Enlarge Issues of Fidelity Television, Inc. at 11, Joint App. at 205, citing Petersburg Television Corp.,
. This was mentioned by the Hearing Examiner. See RKO General, Inc.,
The court mistakenly informs us, 169 U.S.App.D.C. at page - n.14,
. In fact, the Commission later assigned a UHF channel to Anaheim expressly to meet the local needs of the Southland. Table of Assignments,
. See the evidence adduced and apparently accepted by the Hearing Examiner, summarized RKO General, Inc.,
. Compare the analysis of Jimmie H. Howell,
. 169 U.S.App.D.C. at page - n.16,
. RKO General, Inc.,
. See Citizens Comm. to Save WEFM v. FCC,
. Id. at 281-83. See generally Bazelon, supra note 31.
. See RKO General, Inc.,
. See Citizens Comm. to Save WEFM v. FCC,
. See Public Communications, Inc., 32 P & F Radio Reg.2d 319 (1974); Editorializing by Broadcast Licensees,
Of course, in enforcing such a standard of significant amounts of journalism the Commission should require strict requirements of pleading to ensure that percentage differences in programming among applicants truly relate to community needs. These pleading requirements will protect applicants from the chilling effect of amorphous and unsubstantiated challenges and the costs incident to defense thereof. See National Broadcasting Co. v. FCC, 170 U.S.App.D.C. -, at -,
. See Citizens Comm. to Keep Progressive Rock v. FCC,
. Formulation of Policies Relating to the Broadcast Renewal Applicant,
. RKO General, Inc.,
. Id. at 138. But the Commission even vacillated on this issue, later arguing that its decision was not a final order. Fidelity Television, Inc. v. FCC,
. See Geller, A Modest Proposal for Modest Reform of the Federal Communications Commission, 63 Geo.L.J. 705, 715-18 (1975) and leading authorities cited which include Professor Jaffe, Judge Friendly, Professor Jones and a member of the panel that decided this case.
. Sunbeam Television Corp. v. FCC,
. Compare Garrett v. FCC,
. Tennessee Television, Inc. v. FCC,
. Pinellas Broadcasting Co. v. FCC,
The decisive factors in comparable [sic] selections may well vary . . . And it is also true that the Commission’s view of what is best in the public interest may change from time to time. Commissions themselves change, underlying philosophies differ, and experience often dictates changes. . '. . All such matters are for the Congress and the executive and their agencies. They are political, in the high sense of that abused term. They are not for the judiciary.
. Compare Carroll Broadcasting Co. v. FCC,