M & A Roundup – Washington Update: FCC May Relax Cross-Media Barrier

The Federal Communications Commission (FCC), in a step that could produce more cross-media acquisitions, said it may loosen a virtual hard-and-fast ban on one firm’s ownership of newspaper and broadcast businesses in the same market. In a carefully worded announcement, the agency said that it would retain the cross-ownership restriction “as a general matter” but would consider exceptions when the rule “might not be necessary to protect the public interest in diversity and competition.” It noted, for example, that diversity and competition might remain in the market because of its size or the types of newspapers and radio and TV stations involved in a deal. The FCC currently may allow a waiver for cross-media ownership in a single market. But the altered rule would provide a more open invitation to skirt the ban if the merging companies can make the case. If adopted, the new rule could allow the merging Tribune Co. and Times Mirror Co. to keep newspaper and TV properties in New York, Los Angeles, and Hartford, Conn., without the waivers. The cross-ownership proposal was one of three merger-related rule changes put up for public comment by the FCC with the intent of formally adopting them within several months. The others: * Allowing owners of the four major TV networks (ABC, NBC, CBS, and Fox) to also own an emerging network (e.g., WB or UPN) and presumably allowing Viacom Inc. to keep both CBS and UPN. * Determining whether radio station markets should be redefined based on size, the number of stations located within them, and the ownership concentration, i.e., the number of stations owned by a single entity. The changes could stimulate more acquisitions in some markets but require divestitures in others. Meanwhile, the agency’s decision to stand pat on its limitation of TV station ownership proved to be more controversial, with a lawsuit in the offing. The FCC said that it would keep its rule that restricts a single owner to 35% of the national audience – a cap in effect since 1996. Fox Entertain-ment Group Inc., currently at the 35% limit, said that it would challenge the rule in court, claiming an infringement of First Amendment rights and that the rise of new media has made the restriction obsolete.