NOTICE ********************************************************* NOTICE ********************************************************* This document was originally prepared in Word Perfect. If the original document contained-- * Footnotes * Boldface & Italics --this information is missing in this version The document format (spacing, margins, tabs, etc.) is changed too. If you need the complete document, download the Word Perfect version. For information about downloading documents (FTP) see file pnmc5021. File pnmc5021 (.txt & .wp) is in directory \pub\Public_Notices\Miscellaneous. ***************************************************************** ******** $// Letter, Station KTVK(TV), Phoenix, Arizona, DA 95-855 //$ $/ 073.658(b) Network Affiliation Agreements /$ ///newjob/// $///DA 95-855 4-17-95///$ FEDERAL COMMUNICATIONS COMMISSION WASHINGTON, D.C. 20554 April 17, 1995 Released: April 20, 1995 IN REPLY REFER TO: 1800C1-CMW 94080532 Eugene F. Mullin, Esq. and Nathaniel F. Emmons, Esq. Mullin, Rhyne, Emmons and Topel, P.C. 1225 Connecticut Avenue Suite 300 Washington, D.C. 20036-2604 Dear Messrs. Mullin and Emmons: This letter responds to the August 22, 1994, Petition for Revocation of License (the "Petition"), filed on behalf of Media America Corporation ("MAC"), against Station WXYZ-TV, Detroit, Michigan, Station WEWS(TV), Cleveland, Ohio, and Station KNXV-TV, Phoenix, Arizona, all of which are licensed to Scripps Howard Broadcasting Company ("Scripps"). In its Petition, MAC alleges that Scripps entered into a multi-market network affiliation agreement with American Broadcasting Companies, Inc., a wholly owned subsidiary of Capital Cities/ABC, Inc. ("ABC"), which violates the Commission's territorial exclusivity rule. 47 C.F.R.  73.658(b). Section 73.658(b) of the Commission's Rules prohibits a station from entering into any contract, arrangement, or understanding, express or implied, with a network organization which prevents or hinders the ability of a station in a different community of license to broadcast a network's programming. MAC contends that in order to retain its affiliation with Scripps' Detroit and Cleveland stations, Scripps forced ABC to drop its current affiliation with MAC's Phoenix station, KTVK(TV), and enter into an affiliation agreement with Scripps' Phoenix station instead. MAC asserts that this agreement violates Section 73.658(b) of the Commission's Rules because ABC's decision was based on its desire to retain its affiliation with Scripps' stations in Detroit and Cleveland, and not on the merits of affiliating with Scripps' Phoenix station and disaffiliating with Station KTVK. MAC further asserts that, even apart from the rule violation, revocation of Scripps' licenses is warranted because of its anticompetitive behavior in forcing ABC to change Phoenix affiliates. ABC and Scripps do not deny that a multi-market agreement was reached; nor do they deny that ABC's decision to disaffiliate with Station KTVK(TV) was premised on the agreement as a whole, and not just the merits of affiliating with Scripps' Phoenix station. However, ABC contends that it was not "forced" to change Phoenix affiliates, as MAC alleges, but that its decision was based on sound business judgment as a result of mutual business negotiations. According to Scripps and ABC, the negotiations arose as a result of Fox's recent disaffiliation with Scripps' Phoenix station and CBS' search for station affiliations in Cleveland and Detroit. ABC asserts that it was aware that CBS had offered Scripps a network affiliation in Phoenix if Scripps changed affiliations in Cleveland and Detroit to CBS. Accordingly, in order to retain its Cleveland and Detroit affiliations with Scripps, ABC countered with a proposal which included the switch in Phoenix affiliates. The parties are in agreement as to the basic facts, although they characterize the negotiations between Scripps and ABC differently. Thus, the issue in this case is whether a multi-market agreement, which results in the shift of affiliates in a community of license because of concerns with other markets, also part of that agreement, violates our territorial exclusivity rule. MAC argues that the rule applies to the situation at issue, since Scripps and ABC entered into an agreement which prevents ABC from continuing its affiliation with Station KTVK, a station in a different community of license, in order to retain its affiliations with Scripps' Detroit and Cleveland stations. Scripps and ABC contend that the territorial exclusivity rule prohibits only agreements which hinder or prevent a station in an overlapping or neighboring area from carrying a network's programming. Further, Scripps and ABC argue that the rule is applicable only where a community of license is being deprived of its own network affiliate -- not where there is a shift of network affiliation in the same community of license. As originally adopted, the Commission's territorial exclusivity rule permitted a station to contract with a network for the exclusive right to broadcast programming within its service contour. The Commission amended the rule in 1955 to "limit the geographic bounds wherein a television broadcast station may contract for territorial exclusivity." Amendment of Section 3.658(b) of the Commission's Rules and Regulations, 12 R.R. 1537 (1955). The Commission found that the original rule, which allowed stations to contract for exclusivity beyond their communities of license and to preclude stations in nearby communities with overlapping coverage from receiving programming, was not "conducive to the rapid and effective development of television service to the public." 12 R.R. at 1542. Accordingly, the Commission ruled that a station's exclusive right to carry a network's programming should be limited to the area of its community of license. The clear intent of this amendment was to ensure that stations in communities nearby those with network affiliates were able to compete for programming. Cases applying this rule have reflected this intent. See, for example, American Broadcasting Co., 17 R.R. 458 (1958) and Columbia Broadcasting System, Inc., 17 R.R. 439 (1958). In both of these cases allegations were made that, as a result of a station's desire for exclusivity, a station and network entered into an agreement which prevented the carriage of network programming in a nearby area or community. Neither of these cases involved a switch of affiliations in the same community and MAC has cited no such decisions. Unlike the cases interpreting this rule, no attempt has been made in this case to prevent or limit a community from having its own network programming because of a nearby station's desire for territorial exclusivity. Rather, as a result of a multi-market agreement with Scripps, ABC is merely switching affiliations from one station to another in the same community of license. The Commission's territorial exclusivity rule was not adopted to guarantee a station the right to carry network programming. Rather, in adopting this rule, the Commission was aware of the economic factors that play a role in network affiliation decisions. The territorial exclusivity rule was adopted only to give stations the "maximum opportunity" to "compete for network programming." 12 R.R. 2d at 1542. In adopting this rule, the Commission recognized that "the important part that economics play in network-station contractual relationships will continue to function." 12 R.R. 2d at 1542. In cases applying this rule, the Commission reaffirmed that networks have no obligation to affiliate with a particular station and that the Commission will not ordinarily interfere with the business judgments of networks. See The Helen Broadcasting Company Limited Partnership, 5 FCC Rcd 2829 (1990) and RCA Corp. (G.E. Merger), 60 R.R. 2d 563 (1986). Based upon our review of the pleadings before us, and the administrative history of the Commission's territorial exclusivity rule, we do not find MAC's arguments persuasive. The territorial exclusivity rule has not been applied in the past to protect distant market stations' affiliations and we see no reason under the circumstances presented in this case to alter that approach now. A network's decision to switch affiliates in a community of license, even if such a change arises as a result of a multi-market agreement, does not threaten the public's interest in market-based network service and is not the kind of agreement or understanding that falls within the intended scope of the rule. Further, in the absence of a rule violation, we need not consider MAC's allegations of anticompetitive misconduct. In accordance with established policy, where no violation of Commission Rules or policies is found, such allegations are properly addressed by a court of competent jurisdiction, the Federal Trade Commission, or other governmental units responsible for policing such activity, before being considered by the FCC. See The Helen Broadcasting Company Limited Partnership, 5 FCC Rcd at 2831-2832; Stockholders of Viacom International, Inc., 2 FCC Rcd 6713 (1987). Accordingly, in light of the foregoing, we hereby deny MAC's Petition. Sincerely, Roy J. Stewart Chief, Mass Media Bureau cc: Donald Zeifang, Esq. Joel Rosenbloom, Esq. Alan Braverman, Esq.