A federal court has allowed the FCC's reinstatement of the UHF discount to take effect, paving the way for deals like Sinclair/Tribune.
The U.S. Court of Appeals for the D.C. Circuit Thursday rejected the request for an emergency stay pending review of the underlying case and dissolved the June 1 administrative stay of the June 5 effective date of the discount's return.
The discount means that UHF TV station ownership only counts for half of the audience reach toward the 39% national ownership cap.
Free Press and others had argued that allowing the discount to go into effect before the court ruled on the underlying challenge would cause irreparable harm because deals like the Sinclair-Tribune merger—and others in the wings—would be allowed to proceed, though Sinclair had argued that it would only proceed to an FCC review, not guarantee the deal would be granted.
There is a high bar for granting such a stay, and the court said the petitioners had not cleared it.
Related: FCC to Court: UHF Stay Request Flunks Tests
"This is not very surprising, since stays are rarely granted," said Andrew Schwartzman, an attorney for the petitioners. "However, it is extremely disappointing. But the case is far from over, and we feel that we have a strong case once it is fully briefed and argued."
Sinclair, which not surprisingly weighed in supporting the FCC, has said that if a stay is granted while the case is argued and decided—which usually takes many months—it could jeopardize the deal no matter the outcome of the UHF appeal.
In opposing the emergency stay, the FCC said the commission simply concluded the agency had erred in a previous order—under then-chairman Tom Wheeler—that repealed the discount without also adjusting the cap. It did grandfather ownership groups for which the change would have pushed them over the 39% limit, though that grandfathering would not extend to sales of those stations.
"We are doubly pleased that -- after the FCC already saw the merits of our arguments -- the Court agreed that changing the long-standing running rules through a stay is unwarranted, given the harm on independent broadcasters like ION Media," said Brandon Burgess, chief executive of ION Media, which backed the FCC decision to restore the discount.
“A stay would actually alter a status quo that has been in effect for 32 years,” Ion, Tribune, Fox and Trinity told the court in a filing backing the discount's return.
Ion said that eliminating the cap immediately decreases its market value, including by forcing the group to be broken up under certain refinancing scenarios. That’s because the discount, grandfathered for existing groups under the Wheeler decision, would not survive a change in control.
(Photo via Tori Rector's Flickr. Image taken on July 21, 2016 and used per Creative Commons 2.0 license. The photo was cropped to fit 3x4 aspect ratio.)
