FCC Reviewing FCBA Anti-Collusion Rule Interpretation

FCC anti-collusion rules will put strong controls on bidding-related communication between TV licensees during the incentive auction, without preventing broadcast attorneys from representing more than one licensee in the proceeding, experts on the issue said in interviews Friday and Monday. As long as an attorney doesn’t act as a ”conduit” for one licensee to learn about another’s bidding strategy, that attorney can represent more than one client in the reverse auction, they said. That interpretation of the rules was brought to the FCC by representatives of FCBA in a letter posted Wednesday to docket 12-268 asking for commission guidance on whether FCC officials disagree with FCBA’s view of the rules (see 1505140068).

The FCC Incentive Auction Task Force is reviewing the matter, said a commission spokesman. The FCBA letter and a filing earlier last week from broadcast lawyers on their meeting with commission officials (see 1505110054) were the first time the association publicly discussed the concerns. It had denied our request last year to reverse a first-of-a-kind decision to make off the record an FCBA event on the subject. Industry lawyers had said auction conflicts could be negotiated through having law-firm clients sign disclosures (see 1411280041) and 1409290022).

Attorneys studying the conflict problems posed by the auction have also previously raised concerns about complying with bar association ethics rules. But there’s no plan to send a similar letter to the Bar Association of the District of Columbia or state bar associations, said Fletcher Heald broadcast attorney Steve Lovelady. Law firms will individually judge how best to represent clients in the auction while complying with bar association conflict rules, said Lovelady, who helped arrange an FCBA continuing legal education seminar on possible conflicts in the auction last year.

Attorneys are already prohibited from communicating confidential information about a client to other clients or entities, or using that information to benefit other clients, the FCBA letter said. “There can be no doubt those stations’ decisions concerning bids or bidding strategies would be viewed as such confidential information.”

Broadcast attorneys representing TV stations need to know well in advance of the auction whether they’re on the same page as the commission in their view of the anti-collusion rules because of the serious penalties for violating them, said broadcast attorney Jack Goodman, who was among those who approached the FCC task force about the matter. Full-power and Class A TV licensees are banned from “directly or indirectly” disclosing bids or bidding strategies to any forward auction participant or to any other full powers or Class A's from the date of the reverse auction application deadline until the FCC announces auction results, said the FCC incentive auction order. The penalty for violating those rules could include forfeiting incentive auction bid payments, license revocation, or a lifetime ban from auction participation, the order said. “If clients will not be able to continue to obtain advice and counsel from their regular FCC counsel, the [FCBA Mass Media Practice Committee] believes that they should be made aware of that fact well in advance of the auction participation deadline,” said the FCBA letter.

The structure of the incentive auction makes it unlikely that two broadcasters would directly conflict with each other, attorneys have said (see 1411280041). They were concerned that a lawyer representing a client who challenges another client after the auction would need to cease representing one of the parties, a scenario Goodman called unlikely. “Unlike some previous situations, there does not appear to be likelihood of post-auction proceedings where one broadcast client would be opposing another,” said Goodman.

Most broadcast licensees are more likely to depend on communications attorneys for procedural information about the auction and correctly filing applications than real-time bidding advice, industry lawyers have said. That and the nationwide nature of the reverse auction limits the opportunities for a lawyer with knowledge of the bidding strategy of multiple clients to use the information to gain an advantage, attorneys said.

Some law firms may address the possibility of perceived conflicts of interest with client letters, said Lovelady and Holland & Knight broadcast attorney Charles Naftalin. The lawyers wouldn’t comment on whether their respective firms would send such letters. That’s what Holland & Knight has done in the past, Naftalin said. “You have to be upfront.” It’s too early for firms to send such letters now, Naftalin said, because it’s not yet clear enough how the auction will proceed.