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Supreme Court of the United States • 2021

FCC v. Prometheus Radio Project

592 U.S. 414

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Takeaway

In short, this case confirms that under deferential APA review, an agency may make a reasonable predictive judgment from an incomplete record; it need not produce perfect data or commission new studies before changing its policy.

Background

The FCC regulates broadcast ownership in the public interest. For decades, it maintained rules restricting common ownership of newspapers, radio stations, and television stations within a market. Section 202(h) of the Telecommunications Act of 1996 requires the FCC to review specified ownership rules every four years and repeal or modify rules that are no longer necessary in the public interest as the result of competition.

In 2017, after reconsidering a 2016 decision, the FCC concluded that changed media markets—including the growth of cable television and the Internet—made three rules unnecessary to promote competition, localism, and viewpoint diversity. It repealed the Newspaper/Broadcast Cross-Ownership Rule and the Radio/Television Cross-Ownership Rule, and relaxed the Local Television Ownership Rule. The FCC also concluded, based on the limited record before it, that the changes were not likely to harm minority and female ownership.

Prometheus Radio Project and other public-interest groups challenged the order under the Administrative Procedure Act. The Third Circuit vacated it, holding that the FCC lacked adequate record support for its conclusion about minority and female ownership. The court directed the FCC to develop evidence through new empirical research or an in-depth theoretical analysis. The Third Circuit also vacated a related 2018 Incubator Order and the FCC's definition of an "eligible entity."

Issues

Issue #1

Whether the FCC's 2017 decision to repeal two broadcast-ownership rules and modify a third was arbitrary and capricious because of its treatment of minority and female ownership.

Holding

No. The FCC acted reasonably and gave an adequate explanation under the APA's deferential arbitrary-and-capricious standard.

Reasoning

The APA requires an agency to make a reasonable decision and reasonably explain it; it does not allow a reviewing court to substitute its own policy judgment for the agency's. The reviewing court's role is to determine whether the agency considered the relevant issues and remained within a zone of reasonableness.

The FCC thoroughly examined evidence showing that the media marketplace had changed substantially since the rules were adopted. It reasonably concluded that the three rules no longer served its traditional public-interest objectives of competition, localism, and viewpoint diversity, and that allowing more efficient combinations of media outlets could benefit consumers.

The FCC also considered the possible effects on minority and female ownership. It had repeatedly requested evidence on that question during multiple regulatory reviews, but received sparse data and no persuasive evidence showing that the rule changes were likely to cause harm. Some comments even suggested that repealing the newspaper/broadcast restriction could increase minority ownership opportunities.

Prometheus challenged the data on which the FCC relied, but the Commission acknowledged the data's limitations. Given the absence of better countervailing evidence, the FCC could reasonably use the available data, together with the lack of evidence of likely harm, to make a predictive judgment about the effects of its rules.

The FCC did not ignore the two Free Press studies cited by Prometheus. Rather, it read them differently and explained that they were consistent with a longer-term increase in minority ownership after earlier rule relaxations. Moreover, the studies were backward-looking and did not provide statistical analysis predicting the effects of the particular 2017 changes.

Neither the APA nor the Telecommunications Act generally requires the FCC to conduct or commission its own empirical or statistical studies before acting. Although the Commission lacked perfect data, imperfect evidence is common in agency decisionmaking, and its prediction on this sparse record did not fall outside the APA's zone of reasonableness.

Issue #2

Whether the Third Circuit's vacatur of the related 2018 Incubator Order and the 2016 definition of "eligible entity" could stand after reversal of its ruling on the 2017 Reconsideration Order.

Holding

No. Those vacaturs must also be reversed because the Third Circuit supplied no independent basis for them.

Reasoning

The Third Circuit vacated the Incubator Order and the eligible-entity definition solely because it believed the FCC had inadequately considered minority and female ownership in the 2017 Reconsideration Order. Once the Supreme Court held that the 2017 order satisfied the APA, the premise supporting the other vacaturs disappeared.

Concurrences

Justice Thomas

Reasoning

Justice Thomas agreed that the FCC's orders were not arbitrary and capricious, but he identified an independent basis for reversal. In his view, the Third Circuit improperly imposed a nonstatutory procedural requirement by requiring the FCC to consider minority and female ownership at all.

Section 202(h) directs the FCC to evaluate whether ownership rules remain necessary in the public interest as the result of competition; it does not specifically require consideration of ownership by women or minorities. Courts may not add judge-made procedural obligations to an agency's statutory duties, so the Third Circuit could not compel the FCC to undertake that inquiry.

Thomas rejected the argument that the FCC's past references to ownership diversity made it a freestanding objective that the agency had to continue considering. Historically, he explained, the FCC's ownership rules were designed to serve consumer-focused goals—viewpoint diversity, competition, and later localism—not to advance demographic diversity among owners for its own sake.

When the FCC discussed minority and female ownership in connection with ownership rules, it generally treated demographic diversity as a possible proxy or means for advancing viewpoint diversity or competition. Thus, once the FCC reasonably concluded that its substantive objectives no longer justified the rules, it could repeal or alter them without separately evaluating ownership diversity.