Court Seeks to End Media-Consolidation Ban

Orderes the FCC and consumer groups to “show cause” why stay should not be dropped

Get ready for a flood of media consolidation deals.

Two years after the Federal Communications Commission changed its rules so newspapers and broadcasters could buy each other — only to see any combinations immediately blocked by a court — the court may be about to reverse itself.

A three-judge panel of the 3rd Circuit Court of Appeals in Philadelphia, which had put the stay in effect, Thursday ordered the FCC and consumer groups to “show cause” by mid January why the stay should not be dropped.

The FCC adopted the cross-ownership rule change in December 2007. It was the one major change supported by former FCC Chairman Kevin Martin after an earlier FCC attempt to allow far broader consolidation was rejected by the same court.

Where newspapers and broadcasters have been banned from buying each other in individual markets, the new rule said combinations would be presumed as OK in the top 20 markets, unless they could be shown as bad for consumers.

In smaller markets, the combinations generally would be barred — but the FCC could make exceptions.

Newspapers and their association and some broadcasters have argued that the FCC ban was anachronistic — reflecting a time when newspapers only competition for news and advertising were each other. Today, both face the web and cable competion, too.

They also argued that a combination of some of the major broadcasters and newspapers in a market would bring increased news coverage and cost savings that would strengthen financially troubled media companies.

Consumer groups vociferously fought the changes, arguing that newspapers and broadcasters are still each others biggest competitors. They’ve warned that the “savings” cited could leave citizens with fewer independent choices for city hall coverage and local advertisers little price competition.

They’ve also suggested that while the rules change is supposedly aimed at bigger markets, the FCC is likely to allow combinations in smaller markets where finding independent sources for news is an even greater challenge.

The court’s action surprised some in the case.

The FCC had asked the court to leave the stay in effect while it reviewed media ownership rules.

“I don’t know what to make of it,” said Andy Schwartzman, director of the Media Access Project, the public interest law firm that represents consumer groups in the court case. It isn’t clear if the court wants to update itself on the case or if it really is considering dropping its stay, he told TheWrap.

Corie Wright, policy counsel for Free Press, another consumer group in the fight, agreed. She told TheWrap that the group is still worried that consolidation could hurt consumers.

“Our concern is that if the rule goes into effect, the promises for more local news the FCC asks for are so vague, there will be little to no public benefit,” she said.