In Re Application of WDSU-TV, INC., ASSIGNOR and COSMOS BROADCASTING OF LOUISIANA, INC., ASSIGNEE For Assignment of License of Station WDSU-TV, New Orleans, La.
FEDERAL COMMUNICATIONS COMMISSION
39 F.C.C.2d 534
NOVEMBER 29, 1972
THE COMMISSION BY COMMISSIONERS BURCH (CHAIRMAN), ROBERT E. LEE, REID, WILEY AND HOOKS, WITH COMMISSIONER H. REX LEE CONCURRING AND COMMISSIONER JOHNSON DISSENTING AND ISSUING A STATEMENT, APPROVED THE ABOVE ASSIGNMENT OF LICENSE.
[*534] WDSU-TV, NEW ORLEANS, LA., LICENSE ASSIGNED TO COSMOS BROADCASTING OF LOUISIANA, CONSIDERATION $16,000,000
Application for assignment of license of station WDSU-TV, New Orleans, La., from WDSU-TV, Inc. to Cosmos Broadcasting of Louisiana, Inc., has been granted by the Commission. Total consideration for the assignment is $16,000,000.
Cosmos Broadcasting of Louisiana, Inc., is 100 percent owned by Cosmos Broadcasting Corp., licensee of WIS-AM-TV, Columbia, S.C., WSFA-TV, Montgomery, Ala., and WTOL-TV, Toledo, Ohio.
DISSENTING OPINION OF COMMISSIONER NICHOLAS JOHNSON
In an effort to ward off the rise of monolithic control over the nation's broadcast stations, the Federal Communication Commission promulgated rules against multiple ownership of television stations. Those rules -- which limit the maximum number of VHF stations which may be controlled by a single institution or individual -- sought to ensure that the benefits of diversity of ownership would not be curtailed.
Today the majority -- with a logic conspicuous by its absence -- makes a mockery of its own rules and the public interest.
At issue is the question whether Cosmos Broadcasting of Louisiana should be allowed to purchase, for a whopping $16 million, television station WDSU-TV in New Orleans.
Cosmos is the wholly owned subsidiary of Cosmos Broadcasting Corporation which, in turn, is owned by the Liberty Corporation. Fourteen per cent of Liberty is held in trust by the South Carolina National Bank of Charleston (SCN). Through its subsidiary -- Cosmos [*535] Broadcasting Corp. -- Liberty already owns three VHF stations, one in Columbia, South Carolina, one in Montgomery, Alabama, and one in Toledo, Ohio. SCN, along with its 14% share of Liberty, also holds, in trust, 3.2% of Multimedia, Inc., which is the licensee of three VHF stations, one in Greenville, South Carolina, one in Knoxville, Tennessee, and one in Macon, Georgia. SCN also holds, in trust, 4% of Sparten Radio Casting Co., licensee of a VHF station in Spartanburg, South Carolina.
In other words, the South Carolina National Bank of Charleston has substantial financial interests in seven VHF broadcast stations. With today's transfer, it will acquire an interest in an eighth VHF station.
The Citizens and Southern National Bank of Charleston also owns a piece of Liberty, holding in trust a 1.3% voting interest. Citizens also owns 2.2% of the State Record Co., which controls two VHF stations -- one in Charleston and the other in Lubbock, Texas. With today's transfer, the Citizens Bank will win a substantial financial interest in a sixth VHF station.
Today's assignment does not merely reward these two banks with another in their expanding line of VHF interests. It also rewards Mr. John I. Smith with an interest in a seventh such station. Mr. Smith is a director and 1.319% owner of Liberty. He is also a director of the People's National Bank of Greenville, South Carolina which holds a 6.4% voting interest in Multimedia, Inc.
Given the majority's blithe approval of today's transfer, one would never suspect that the FCC has actually promulgated rules (45 CFR § 72.636(a)(2)) which preclude one institution or individual from owning interests in more than one VHF station if the resulting concentration of media control violates the public's interest in a diversity of broadcast views. Nor could one imagine that those same rules define ownership of more than five VHF stations as a per se violation of the public interest.
And the reason a casual observer of the FCC would never be award of these rules is that the FCC has, through this and other decisions, robbed those rules of their vitality, ignored their commands, pretended that both the rules and their underlying justifications do not exist.
Today's acquisition will give the assignee's parent, Cosmos Broadcasting Corporation, the license to its fourth VHF station. Yet, the majority does not even bother to ask whether such multiple ownership of four VHF stations -- three of which are in the same geographic region of the country -- poses public interest problems. Instead, the majority has apparently decided that, absent ownership of more than five VHF stations, there is no need to inquire into whether an acquisition could violate our policy favoring a multiplicity of broadcast views. This holding has the obvious effect of converting our definition of what constitutes a per se violation of the public interest into the only possible violation.
Such as amendment to our multiple ownership rules in the absence of a formal rulemaking proceeding is, of course, lawless. It is also blatantly contrary to the public interest. Our rules demand that, in cases such as this, we examine the extent of the assignee's concentration [*536] of media control, and that we do so through a hearing wherein the facts might be forthcoming.
Nor does the majority stop there in its attempts to emasculate our multiple ownership rules. Aware of the fact that, as the result of this acquisition, two banks will win substantial interests in more than five VHF stations, the majority must find some way to ignore its own definition of what sort of ownership constitutes a per se violation of the public interest. This is does through reference to a prior -- and equally horrendous -- ruling.
In May of this year, the majority raised from 1% to 5% the amount of stock in diverse broadcast stations which banks may hold in trust without being attributed with "ownership" of those stations. Multiple Ownership Rules, 34 F.C.C. 2d 889 (1972). While individuals are attributed with ownership if they own more than 1% of such stations, mutual funds may, oddly enough, escape scrutiny and still own up to 3%.
And, inexplicably, America's most powerful financial institutions -- the bankers -- are now permitted to own up to 5% of an ever-increasing number of broadcast interests, so long as they assure the Commission that they will not exercise control over those interests. In reaching this peculiar result, the majority solicited neither the views of the Justice Department's antitrust division, nor the views of the House Banking Committee. It chose instead to operate in the intellectual vacuum of political expediency. As I suggested in my dissenting statement, the single unifying thread of the majority's opinion appeared to be a search for the most efficient means of avoiding substantial divestiture.
By today's action, the majority has enlarged upon its favored treatment afforded to banks. So subtle is the enlargement, in fact, that the majority does not even bother to allude to it. In its May rulemaking the majority obviously was concerned about the economic effects of divestiture. Today's action not merely insulates the two banks from this remedy, but permits them to expand upon their acquisitions! And this in spite of the fact that the transfer of WDSU-TV will enable these banks to increase their domination over the airwaves in one region of the country -- the South. As I noted in my prior dissent:
Surely substantial bank ownership, even of less than five per cent, of several close competitors, in [one]... region should be viewed differently from bank holdings of five per cent in widely-scattered licensees.
But the majority did not agree then, and it clearly does not agree now.
The South Carolina National Bank, in fact, already has sizable interests in three VHF stations in the same state -- South Carolina. Through its 14% share of Liberty, SNC has an interest in WIS-AM-TV in Columbia. Through its 3.2% share of Multimedia, Inc., SNC owns an interest in WFBC-AM-FM-TV in Greenville. And through its 4% share of Sparten Radio Casting, SNC controls an interest in WSPA-AM-FM-TV in Spartenburg. A casual glance at Television Factbook reveals that both the grade A and grade B contours of all of three stations overlap substantially, thus giving SNC considerable [*537] control over three VHF stations in the same market -- something which our rules are supposed to prohibit, 47 CFR § 73.636(a)(1).
Today's assignment may not enlarge SNC's control of broadcasting in South Carolina, but it certainly enlarges SNC's control over the airwaves throughout the southern part of America. The majority -- which often appears oblivious to the problems inherent in massive cross and multiple ownership of broadcast interests -- is not impressed. The banks own less than 5% of these VHF stations, so that's the end of the inquiry.
Perhaps realizing the dangers in affording such favored treatment only to banks, the majority also decides -- in the total absence of a formal rulemaking -- to extend such protection to individuals. Though this may solve the problem of inequitable treatment inherent in the majority's May Report and Order, it completely vitiates our cross and multiple ownership rules.
By today's acquisition, Mr. John I. Smith will possess a greater than 1% interest in seven VHF stations. Because Mr. Smith has promised that he will not participate in any activities of the Peoples National Bank of Greenville with respect to that bank's broadcast interests, Mr. Smith's additional broadcast acquisition does not offend the majority. Yet, Mr. Smith cannot be serious when he vows to exclude himself from the people's Bank's actions with respect to its interests in Multimedia, Inc. For, Mr. Smith is a director of that bank, and to exclude himself from the bank's investment policies would almost certainly expose this director to serious legal actions for breach of his fiduciary duty to the bank's investors.
It is noteworthy -- but not surprising -- that the majority does not even mention the concept of "fiduciary duty."
I dissent. *
* Subsequent to the Broadcast Bureau's preparation of the majority's opinion, the Bureau advised the Commission that Multimedia, Inc. currently owns not three VHF stations, but four -- the fourth being WSTS in Winston-Salem, North Carolina. Thus, through today's transfer, the South Carolina National Bank of Charleston will acquire a sizable interest in its ninth VHF stations, and Mr. Smith will receive an interest in his eighth such station. By now, of course, it is obvious that the majority is not troubled by mere numbers. And so, aside from a few typographical corrections, its opinion and result remain unchanged. Our multiple ownership rules, however, do not.