May 12, 2014 3:39pm PT by Eriq Gardner
Broadcasters Take FCC Regulation of 'Sidecar' Deals to Appeals Court
The National Association of Broadcasters is challenging the FCC's presumption against transactions involving shared-service agreements. On Monday, the trade association filed a petition at the U.S. Court of Appeals for the D.C. Circuit.
Known by industry insiders as "sidecar" pacts, shared-service agreements have been criticized as allowing media companies to skirt regulatory rules set up to limit companies from owning more than one TV station in a local market. Under the terms of such a deal, stations can agree to share facilities and employees, jointly sell advertising or work together to acquire programming. Defenders of these deals maintain that the arrangements constrain costs and helps smaller stations survive.
In March, the FCC issued a public notice concerning shared-service agreements and indicated that in future broadcast assignments or transfer applications, the applications would have to provide sufficient information establishing that any deal concerning multiple stations in the same market "would not impair the existing licensee's control over station operations and programming, result in attribution of the relationship, or be otherwise contrary to the public interest."
That same month, the FCC voted 3-2 to limit joint sales agreements whereby TV stations sell advertising for another in the same market.
These limitations are expected to impact companies such as Sinclair Broadcasting, Nexstar Broadcasting and LIN Media, which could be forced to divest some of their assets.
The NAB is now taking the issue to a federal appeals court.
According to its petition, the heightened regulatory scrutiny on shared-service agreements amounts to "a practical prohibition" on such deals. Additionally, the NAB says the rules violate the notice and comment requirements of the Administrative Procedures Act, is "arbitrary, capricious, and an abuse of discretion" and goes beyond delegated authority. The NAB demands that the public notice be vacated.