Document ID: A:\NAITPD1.TXT NATIONAL ASSOCIATION OF INDEPENDENT TELEVISION PRODUCERS AND DISTRIBUTORS, Petitioner, v. FEDERAL COMMUNICATIONS COMMISSION AND UNITED STATES OF AMERICA, Respondents. WESTINGHOUSE BROADCASTING COMPANY, INC., Petitioner, v. FEDERAL COMMUNICATIONS COMMISSION AND UNITED STATES OF AMERICA, Respondents. WARNER BROS., INC., AND COLUMBIA PICTURES INDUSTRIES, INC., Petitioners, v. FEDERAL COMMUNICATIONS COMMISSION AND UNITED STATES OF AMERICA, Respondents. AMERICAN BROADCASTING COMPANIES, INC., COLUMBIA BROADCASTING SYSTEM, INC., TIME-LIFE FILMS, INC., MCA, INC., NATIONAL BROADCASTING COMPANY, INC., NATIONAL COMMITTEE OF INDEPENDENT TELEVISION PRODUCERS, SAMUEL GOLDWYN PRODUCTIONS, Intervenors Docket Nos. 74-1168, 74-1283, 74-1348, Nos. 1026, 1027, 1047 - September Term, 1973 UNITED STATES COURT OF APPEALS FOR THE SECOND CIRCUIT 502 F.2d 249 April 5, 1974, Argued June 18, 1974, Decided PRIOR HISTORY: Petitions to review order of the Federal Communications Commission amending section 73.658 DISPOSITION: Granted in part, dismissed in part, and remanded. COUNSEL: Katrina Renouf, Washington, District of Columbia (Margot Polivy, Edward J. Kuhlma butors. John D. Lane, Washington, District of Columbia (J. Carter McKaig, Ramsey L. Woodworth, Stuart Robinowitz, New York, New York (Theodore C. Sorenson, George P. Felleman, Donald r Petitioners Warner Bros., Inc. and Columbia Pictures Industries, Inc. and Intervenors Na Ronald Konecky, New York, New York (Hardee, Barovick, Konecky & Braun, New York, New Yo Arthur Scheiner, Washington, District of Columbia (Robert D. Hadl and Wilner & Scheiner Kenneth Cox, Washington, District of Columbia, for Sandy Frank Co. as Amicus Curiae. Thomas N. Frohock, Washington, District of Columbia (James A. McKenna, Jr. and McKenna, J. Roger Wollenberg, Timothy B. Dyk, Sally Katzen, and Wilmer, Cutler & Pickering, Wash Joseph A. Marino, Associate General Counsel, Federal Communications Commission (Daniel ef), for Respondents Federal Communications Commission and United States of America. Thomas E. Kauper, Assistant Attorney General, and Howard E. Shapiro, Attorney, Departme JUDGES: Hays, and Oakes, Circuit Judges; Christensen, District Judge. * * Of the United States District Court for the District of Utah, sitting by designation. OPINIONBY: HAYS OPINION: [*251] HAYS, Circuit Judge: This action comes to us on petitions to review an order of the Federal Communications C s to become effective. We enjoin the Commission from making the amendments effective befo ngs it may deem desirable. I. In May 1970 the FCC, after lengthy preliminary studies and extensive hearings, enacted in the fifty largest metropolitan areas from broadcasting network programs in more than th dently created programs, the rule prohibited the showing of feature films recently televis - - - - - - - - - - - - - - - - - -Footnotes- - - - - - - - - - - - - - - - - - n1 For descriptions of events leading to adoption of PTAR see Report and Order, In re C C. 2d 1081 (1974); Mt. Mansfield Television, Inc. v. FCC, 442 F.2d 470, 473-76 (2d Cir. 19 egulations, 25 F.C.C. 2d 318, 319-20 (1970). The original rule as promulgated read: "(k) Prime time access rule. "(1) After October 1, 1971, no television stations, assigned to any of the top fifty marke tal of more than three hours per day between the hours of 7:00 p.m. and 11:00 p.m. local t paragraph, network programs shall be defined to exclude special news programs dealing wit "(3) The portion of the time from which network programming is excluded by subparagraph (1 sly broadcast by a station in the market. "(4) The top fifty markets shall be determined o ed States. "(5) Nothing in this paragraph shall be construed to apply to educational, non- lic broadcasting television network systems." n2 To supplement PTAR the Commission also enacted the "financial interest" and "syndica and from syndicating programs for non-network or foreign television. - - - - - - - - - - - - - - - - -End Footnotes- - - - - - - - - - - - - - - - - The FCC enacted the rule to combat the stranglehold the three major networks had acquir The Commission found that "the public interest requires limitation on network [*252] On petitions for review we held that PTAR and the financial interest and syndication ru e constitutional issue we held that the rule, "far from violating the First Amendment, app d that our holding did not preclude a further review of experience with the rule if it pro inimical to the public interest. Id. at 479. The FCC from the start also conceded the experimental nature of the rule and declared i king, 37 F.C.C. 2d 900, in which it announced its intention to consider modifications in o the Commission announced that it had decided on certain changes in the rule. These were f modifications of the rule ordered by the Commission. The Commission modified the rule in several ways. n3 First, it eliminated access [*25 stern and Pacific Time Zones, 6:30-7 P.M. in the Central and Mountain Zones). Second, the public affairs programs). Third, the Commission made certain adjustments for time zone di - - - - - - - - - - - - - - - - - -Footnotes- - - - - - - - - - - - - - - - - - n3 Section 73.658(k) was amended to read: "Evening programming requirements. The provisions of this paragraph apply to stations (j) of this section), with respect to their evening programming starting on the date betwe "(1) After such date in September 1974, each station shall devote not less than six (6) ature film; Provided, however, That; (i) one (1) of these six (6) half-hours each week may consist of children's specials, d (ii) ' Documentary ' programming means any program which is non-fictional and education "(2) The following types of material are not considered 'network programming ' for purp (i) 'Runovers ' of sports events carried on the network during late afternoon or early d by 7:00 p.m., ET. (ii) For stations in the Mountain and Pacific time zones, the 'live ' broadcast of any ded the network's schedule for the evening including such telecasts complies with the prov (iii) Telecasts of an international sports event such as the summer or winter Olympic g votes all of its time after 8 p.m. E.T. or P.T. (7 p.m. C.T. or M.T.) the same evening to (iv) 'Pre-game shows' in connection with important sports events carried by the network (v) Special news programs dea with fast-breaking news events, on-the-spot coverage of n (vi) Material carried on a commercial or other network other than the three national ne "(3) For those portions of the Eastern and Central time zones where 'daylight saving ti and other feature film material shall be one hour earlier than those specified in subparag at . n4 The Report also contained the following at para. 3(c). "Although not stated in the rule, it is expected that some of the five or six half-hour programs directed to the needs and problems of the station's community and coverage area, - - - - - - - - - - - - - - - - -End Footnotes- - - - - - - - - - - - - - - - - Two groups of petitioners have attacked the revised rule. n5 The first group, which we This group contends that the Commission did not give the rule an adequate test period and e group further argues that the effective date of the modifications is unreasonable. - - - - - - - - - - - - - - - - - -Footnotes- - - - - - - - - - - - - - - - - - n5 American Broadcasting Companies, Inc. filed a brief in support of the rule as modifi Department also filed a brief in support of the modified rule. n6 Westinghouse Broadcasting Company, Inc. commenced an independent action for review s and expressed similar views. - - - - - - - - - - - - - - - - -End Footnotes- - - - - - - - - - - - - - - - - A second group, which we shall identify with Warner Bros., Inc., seeks total repeal of s further that the ban on feature films and off-network programs in access time is contrar - - - - - - - - - - - - - - - - - -Footnotes- - - - - - - - - - - - - - - - - - n7 Columbia Pictures Industries, Inc. joined the petition of Warner Bros. The National - - - - - - - - - - - - - - - - -End Footnotes- - - - - - - - - - - - - - - - - In view of our disposition of the case we need not consider the merits of either of the II. NAITPD and Time-Life Films have attacked the effective date of the new rule as unreason ventures without unnecessary expense. We agree. The FCC first mentioned the September 1974 effective date in its informal report of Jan ive date for only eight months or less. The FCC claims that the effective date is unassailable because it complies with section . As the language of the statute indicates, this provision merely establishes a minimum p In its Report the Commission noted that Warner Bros. and MCA had urged that immediate r ded to make the changes effective in September 1974. Id. para. 113, 44 F.C.C. 2d at . t a lengthy lead time was unnecessary "in view of the limited expansion of network program In promulgating the original rule the Commission allowed a much longer grace period. T e networks to dispose of their inventories of re-runs without incurring larger losses. Th prohibition on off-network programs and feature films "to permit ample time for changeove The Commission has not shown that the public interest in making rule changes effective The evidence before the Commission strongly indicated that a longer lead time would be dependents for access time. Even if the Commission's claim that the modifications are not r one hour shows planned for access time. It may prove very difficult to market these sho case. The networks themselves (including NBC and CBS, both of which advocate total repeal of twork programing. This directly contradicts the Commission's claim that a shorter time wo y further reducing the possibility that quality network programing will be ready by Septem The position of Warner Bros. and MCA concerning the effective date of the amended rule feature films in particular, on the ground that it was inimical to the public interest. ight to views of Warner Bros. and MCA on when the modifications adopted by the Commission n8 - - - - - - - - - - - - - - - - - -Footnotes- - - - - - - - - - - - - - - - - - n8 Moreover, in proceedings concerning the original rule, MCA claimed that it needed ab - - - - - - - - - - - - - - - - -End Footnotes- - - - - - - - - - - - - - - - - Thus virtually all the relevant testimony recommended a longer grace period than the Co The Commission contends that a rule is not invalid merely because it has retroactive co he court in General Telephone found that petitioners there should not have relied on the C ioners had good reason to rely on their status under the rule. The FCC did not merely acq to foster a healthy syndication industry. n9 Notice of intent partially to reverse this p djust to the new rule. - - - - - - - - - - - - - - - - - -Footnotes- - - - - - - - - - - - - - - - - - n9 See 23 F.C.C. 2d at 386, 395. - - - - - - - - - - - - - - - - -End Footnotes- - - - - - - - - - - - - - - - - The court in General Telephone made it clear that a rule with retroactive consequences - - - - - - - - - - - - - - - - - -Footnotes- - - - - - - - - - - - - - - - - - n10 "Where the rule has retroactive effects, it may nonetheless be sustained in spite o ts, provided they are reasonable." Id. (emphasis added). n11 As the Supreme Court stated in SEC v. Chenery Corp., 332 U.S. 194, 203, 91 L. Ed. 1 "Such retroactivity must be balanced against the mischief of producing a result which is c it is not the type of retroactivity which is condemned by law. See Addison v. Holly Hill - - - - - - - - - - - - - - - - -End Footnotes- - - - - - - - - - - - - - - - - We conclude that any effective date earlier than September 1975 would be unreasonable b to permit the Commission to specify precisely what the effective date should be. III. In view of our disposition of the foregoing issue we have decided to postpone considera her experience with the original rule may aid its deliberations and our own. We therefore While we refrain from directing the Commission to hold further hearings or to determine The FCC originally justified PTAR, and we upheld it, as a means to weaken [*256] netw e. They claim that by shrinking network prime time to three hours per night the rule has s. In making these arguments petitioners rely heavily on the report of Alan Pearce, the FC not weakened, by the prime-time access rule." Economist's Report 1. - - - - - - - - - - - - - - - - - -Footnotes- - - - - - - - - - - - - - - - - - n12 Final Report, "The Economic Consequences of the Federal Communications Commission's the report. - - - - - - - - - - - - - - - - -End Footnotes- - - - - - - - - - - - - - - - - The Commission rejected the arguments of the Warner Bros. petitioners and of its econom matter. See Report, Appendix D, 44 F.C.C. 2d at . The Commission might accept an oppos e Commission are supported by "substantial evidence." Administrative Procedure Act @ 10(e) - - - - - - - - - - - - - - - - - -Footnotes- - - - - - - - - - - - - - - - - - n13 "Its was vigorously urged that the rule works to increase network control and dominance, r suppliers. This must be regarded as somewhat speculative, in view of the strong degree o d three buyers on the other hand facing more than 100 producer-sellers. By contrast, the ons in the success of access-period material is considerable, but this appears to be somew any more than indicated above." Report para. 97, 44 F.C.C. 2d . - - - - - - - - - - - - - - - - -End Footnotes- - - - - - - - - - - - - - - - - The Department of Justice submitted a brief in these proceedings in which it noted that network dominance. However, the Department cited no factual basis for its assumption that ons of PTAR on competition, the Department ultimately concludes that, in light of the fact tions. Whether the FCC or this court need weigh the views of the Department of Justice on issu rate in regulating the broadcast media. FCC v. RCA Communications, Inc., 346 U.S. 86, 94, adcasting Co., 309 U.S. 134, 137, 84 L. Ed. 656, 60 S. Ct. 437 (1940). It would seem that Yet the Commission does not indicate that the Department participated in the proceedings n, our review could be facilitated if the Commission solicited and evaluated the views of Another economic issue raised by the current petitions is the impact of PTAR on employm grams produced outside the United States. n14 The Commission's Report displays the same am sion asserts that the issue involves "areas outside the normal ambit of the Commission's e sion finds the whole issue too uncertain and complex. Id. para. 99, 44 F.C.C. . A mor eighs that impact in its regulations would aid our review. - - - - - - - - - - - - - - - - - -Footnotes- - - - - - - - - - - - - - - - - - n14 The extent of the resulting impact, if any, on American employment was vigorously d - - - - - - - - - - - - - - - - -End Footnotes- - - - - - - - - - - - - - - - - B. Consideration of Views of Various Groups As we have noted, Congress has directed the FCC to make the public interest paramount i f the viewing public in the FCC's exercise of its powers. See, e.g., Red Lion Broadcastin ts duties, FCC v. Pottsville Broadcasting Co., 309 U.S. 134, 138, 84 L. Ed. 656, 60 S. Ct. 50, 92 S. Ct. 2042, 32 L. Ed. 2d 338 (1971); WAIT Radio v. FCC, 135 U.S. App. D.C. 317, 41 These dictates should apply with even greater force where the Commission's conduct has , indirectly, may affect all prime time programing. The courts have held that under such circumstances the FCC and other federal agencies m 384 U.S. 941, 16 L. Ed. 2d 540, 86 S. Ct. 1462 (1966), the role of the Commission "does not permit it to act as an umpire blandly calling balls and strikes for adversaries The Commission may reach compromises, Gross v. FCC, 480 F.2d 1288, 1290 (2d Cir. 1973); GT v. United States, 396 F.2d 601, 614 [*258] (2d Cir.), cert. denied, 393 U.S. 914, 89 S c interest. See WBEN, Inc. v. United States, supra, at 618. n15 - - - - - - - - - - - - - - - - - -Footnotes- - - - - - - - - - - - - - - - - - n15 Several passages in the Commission's Report might be construed to mean that it had - - - - - - - - - - - - - - - - -End Footnotes- - - - - - - - - - - - - - - - - If parties do not volunteer to represent the various facets of the public interest the 449 F.2d 1109, 1119 (1971); Office of Communication of United Church of Christ v. FCC, 138 We cannot say that the FCC totally failed to entertain or consider the views of groups l labor union groups. See Report, Appendix D 1-7, 44 F.C.C. 2d at . It also considered - - - - - - - - - - - - - - - - - -Footnotes- - - - - - - - - - - - - - - - - - n16 For a list of the parties who participated in the proceeding see Report paras. 26-2 - - - - - - - - - - - - - - - - -End Footnotes- - - - - - - - - - - - - - - - - However, without holding that the Commission's efforts were insufficient as a matter of bout the rule. The Commission should not only receive and carefully consider these commen on the comments of the two groups of petitioners, for it has admitted as much. n17 - - - - - - - - - - - - - - - - - -Footnotes- - - - - - - - - - - - - - - - - - n17 "Most of the discussion [in the Report] is based on the 12 longer comments filed [b - - - - - - - - - - - - - - - - -End Footnotes- - - - - - - - - - - - - - - - - We have already mentioned that the Commission might solicit the views of the Department n prime time. n18 Minority groups might discuss the impact of the rule on programing for m ho might participate. The list is not binding and certainly not exclusive. - - - - - - - - - - - - - - - - - -Footnotes- - - - - - - - - - - - - - - - - - n18 One objection raised to the rule is that it produced an increase of commercials in . 2d at . - - - - - - - - - - - - - - - - -End Footnotes- - - - - - - - - - - - - - - - - IV. We wish to emphasize once more that we do not intend the foregoing discussion to intima t might be helpful if it did so. Neither should our failure to discuss other claims raise The petitions are granted to the extent that respondents may not enforce the proposed m ssion has had an opportunity to conduct such further proceedings as it deems appropriate.