Nexstar Media Group says federal regulators acted outside the scope of their legal abilities when they issued a $1.2 million penalty against the broadcaster over its operational control of a New York City television station.
On Monday, the country’s largest independent television broadcaster filed its formal appeal against the fine, which was handed down by the Federal Communications Commission (FCC) last month after regulators found Nexstar’s operational control of WPIX-TV (Channel 11) exceeded federal ownership limitations.
Under long-standing federal regulations, no single company may own licensed broadcast stations that reach more than 39 percent of the American television audience. Nexstar owns around 160 local television stations that reach that limitation, and it operates another 40 stations through local marketing agreements (LMAs) with two other companies.
Several years ago, Nexstar was forced to divest WPIX and a number of other stations in order to secure regulatory approval to merge with Tribune Media. The deal was given the green-light after Nexstar agreed to sell WPIX to the E. W. Scripps Company.
Scripps later sold the station to Mission Broadcasting, a company whose broadcast outlets are entirely controlled by Nexstar. Immediately after that deal closed, Mission entered into an LMA with Nexstar, which gave the latter operational control over WPIX.
Acting on a complaint filed by Comcast, the FCC found last month that Nexstar had a little too much control over WPIX — the company hired staff, evaluated budgets, disciplined employees and entered into programming-related agreements. It also negotiated carriage of WPIX with cable and satellite providers, including Comcast, and withheld the rights to carry WPIX’s local and syndicated programming unless pay TV providers agreed to certain rates.
The arrangement led the FCC to conclude that Nexstar was a de facto owner of WPIX, and that the LMA with Mission was designed to pull a fast one on federal regulators. It ordered Mission to divest the station in one of two ways: By selling WPIX to an uninvolved third party, one that couldn’t enter into an LMA with Nexstar, or by selling the station to Nexstar contingent upon Nexstar divesting enough stations of its own to fall under the federal ownership cap.
On Monday, an attorney representing Nexstar said the FCC’s financial penalty and divestiture demand should be nullified because the agency, in its view, acted beyond its authority. Nexstar also said the order violated its due process rights and the Administrative Procedure Act, which prevents a federal agency from imposing a penalty “based on newly announced standards that were not clear at the time of the conduct.”
Nexstar says the FCC diverted from long-standing precedents that largely took a hands-off approach to LMAs like the one it entered into with Mission.
“The NAL’s finding of apparent liability is grounded in the Commission’s untimely about- ace with respect to the FCC’s express approval of the [LMA] and Nexstar-Mission Option, on which Nexstar, Mission, and WPIX have been relying on, in good faith, for over three years,” the appeal said. “Despite reviewing and approving the LPMA between Nexstar and Mission in 2020, the Commission has now, years after the review period for the WPIX Approval closed and with no prior notice to either party, abruptly changed its mind on what it thinks the LPMA means with respect to the operations of WPIX. The NAL offers next to nothing in the way of concrete explanation for the Commission’s sudden change of course. This in itself violates the Administrative Procedure Act, as it is a basic principle of administrative law that an agency may not depart from a prior policy without a reasoned explanation for doing so, particularly in contexts where, as here, regulatees have acted in reliance on a prior agency determination.”
Translation: The FCC approved every step of Nexstar’s divestiture of WPIX to Scripps, Scripps’ sale to Mission and the overall LMA business that Nexstar and Mission took advantage of with respect to operating WPIX. Then, after someone complained, the FCC decided the arrangement was somehow wrong, and that Nexstar and Mission violated the law.
“Even if the Commission had provided more explanation for its sudden reversal with respect to the WPIX Arrangement, it cannot lawfully rely on a spontaneous reassessment of the [LMA] as the principal basis for overturning a previously approved relationship and imposing severe penalties and divestiture obligations on Nexstar and Mission,” Nexstar’s attorney wrote. “The other factors cited by the Commission to bolster its allegation of de facto control under the ‘totality of the circumstances test,’ a test which itself is unconstitutionally vague, similarly fly in the face of express FCC rules and precedent.”
Nexstar also took issue with some of the FCC’s more-salient discoveries that the agency said were proof that the broadcaster had too much control over WPIX. In its order of proposed forfeiture, the FCC said WPIX’s newscasts ended with a graphic that included the Nexstar logo, and that certain materials on WPIX’s website pointed to Nexstar’s control of the station, both of which would give viewers “the impression that Nexstar is the only party involved” in the operation of WPIX.
Nexstar’s attorney said the graphic that appears at the end of WPIX’s newscasts was nothing more than a generic slate notifying the viewing public about copyright, and that WPIX’s website makes it clear that the station is “owned by Mission Broadcasting” and operated by Nexstar.
“The Commission does not – and cannot – point to any requirement under law, FCC rules, or the [LMA] that Mission’s logo must also appear in programming provided by Nexstar pursuant to the [LMA],” Nexstar’s attorney wrote.
The full 72-page appeal can be found here.
