The FCC has voted to deny an appeal of its decision that eight station groups failed to negotiate retransmission consent in good faith and has further decided to propose each of the 18 stations at issue over $500,000 apiece. It is the first time the FCC has ever issued a forfeiture order for a failure to negotiate retransmission consent in good faith, as its rules require.
The vote was unanimous, with one partial concurrence by commissioner Michael O'Rielly.
The complaint was filed by AT&T in June 2019 against Deerfield Media, GoCom Media, Howard Stirk Holdings, HSH, Mercury Broadcasting, MPS Media, KMTR Television, Second Generation of Iowa and Waitt Broadcasting, all of which the FCC says failed to meet its standard for good faith negotiation. All the groups were represented by Duane Lammers of Max Retrans. AT&T sued Lammers, though that suit was thrown out.
In December 2019, the FCC's Media Bureau found that the stations had failed to negotiate in good faith with DirecTV and U-Verse (AT&T). The FCC said in granting the complaint that the stations had unreasonably delayed negotiations, including by not responding to AT&T proposals.
AT&T pointed out in its complaint that all the stations involved were "managed and controlled by Sinclair Broadcast Group through some type of shared services agreement." AT&T asked the FCC to 1) find that each station had violated the good faith negotiation requirement, 2) compel the stations still not negotiating in good faith to do so, and fine them.
The FCC this week denied the station challenge and granted the AT&T complaint in full, which included the proposed fines of $512,228 apiece for each station, the "statutory maximum for a single act or failure to act."
"The Bureau made factual findings that Defendants failed to negotiate carriage, unreasonably delayed negotiations, and refused to respond to proposals. Upon review of the record, we affirm these findings...The Bureau made factual findings that Defendants failed to negotiate carriage, unreasonably delayed negotiations, and refused to respond to proposals. Upon review of the record, we affirm these findings."
Rather than fine Lammers or the station groups, the FCC said it was appropriate to fine each station, saying " the harm to viewers is multiplied with each station that goes dark, regardless of the number of corporate parents involved in a carriage dispute, underscoring the importance of our focus on individual stations."
Good faith negotiation complaints are not unusual, but the FCC granting them is. They are generally dismissed for lack of a showing that the negotiations were not in good faith, or dropped after the two sides reach an agreement.
Commissioner O'Rielly only concurred in the amount of the fine, which is short of outright approval, saying: "Even during better days, when our country is not facing the challenges of a global pandemic, imposing the statutory maximum on individual stations by way of a novel, first-time application of the rules could be disproportionately punitive and significantly threaten the operations of these stations."
Commissioner Geoffrey Starks said he fully supported the maximum fine, saying: "Going forward, Negotiating Entities should be on notice that similar instances of apparent failure to negotiate for retransmission in good faith, especially when resulting in blackouts and other harms to consumers, could result in similar proposed penalties."
“ATVA applauds the FCC’s recognition of the need for serious reform regarding the retransmission negotiations process," said the American Television Alliance, which comprises cable and satellite operators and others seeking retrans reform. "We are pleased to see retransmission consent taken seriously in this case,” said ATVA spokesperson Jessica Kendust. “The flagrant abuse and misconduct described in this order are not only typical, but unfortunately, increasingly common by broadcasters during retrans negotiations. Broadcasters’ weaponization of station blackouts during negotiations is costing consumers billions every year. We hope that this decision and these fines totaling more than $9 million represent the first step of a broader reexamination of the broken retransmission consent marketplace.”
"Retrans negotiations are a give-and-take proposition and have been that way for a long time," said Adonis Hoffman, CEO of The Advisory Council and former chief of staff to then FCC commissioners Mignon Clyburn. "The FCC's maximum fine in this instance seems heavy-handed, especially at a time when the media economy is in flux and the rules are not well-established."
