Gray Television: FCC Exceeded Its Authority by Imposing $518,000 Penalty

The FCC’s authority over broadcast license transfers doesn’t apply to Gray Television’s 2020 purchase of another broadcaster’s CBS network affiliation because no licenses were transferred, said Gray's reply brief late Wednesday (docket 22-14274) at the 11th U.S. Circuit Court of Appeals. The FCC’s rule barring affiliation swaps, called Note 11, “is a freestanding and unbounded prohibition on certain programming purchases that has no basis in the FCC’s licensing authority,” said the brief. Congress didn’t grant the agency power over sales of network affiliation and the FCC “cannot fall back on” arguments that it has ancillary authority over other transactions “whenever it wants to do more than Congress allowed,” Gray said. By interpreting Note 11’s language against swaps to also apply to affiliation purchases and applying the rule to Gray’s deal with Denali media, the FCC “improperly redefined and expanded” Note 11 to bar any deal that creates a new top-four combination while the text of Note 11 states that the rule applies to transactions that result in a broadcaster owning two top-four stations. Since Gray already owned two top-four stations in the Anchorage market in 2020, it has argued that Note 11 doesn’t apply. With this interpretation of Note 11, the FCC “violated the principle that an agency must give fair notice of prohibited conduct before imposing penalties,” Gray said. The agency also “botched” the calculation of the $518,000 forfeiture by adding to the penalty for every day of the violation and adding the explanation that the violation was egregious “only after Gray responded to the NAL,” said the brief. “None of the FCC’s unauthorized transfer of control precedents supported the imposition of such a penalty,” Gray said. The FCC’s assertion it considered Gray’s efforts to mitigate the violation in calculating the forfeiture is an “empty boilerplate statement" and the agency provided only “incompetent evidence” that the Denali transaction led to substantial economic gain for Gray, the brief said.