In Re Applications of RKO GENERAL, INC. (KHJ-TV), LOS ANGELES, CALIF. For Renewal of Broadcast License;
For
Construction Permit for New Television Broadcast Station
Docket No. 16679 File No. BRCT-58;
Docket No. 16680 File No. BPCT-3655
FEDERAL COMMUNICATIONS COMMISSION
44 F.C.C.2d 123
RELEASE-NUMBER: FCC 73-1263
December 6, 1973 Released
Adopted November 30, 1973
JUDGES:
BY COMMISSIONER ROBERT E. LEE FOR
THE COMMISSION: N1 CHAIRMAN BURCH CONCURRING IN THE
RESULT; COMMISSIONERS JOHNSON AND H. REX LEE
DISSENTING AND ISSUING STATEMENTS; COMMISSIONERS
n1 Commissioner Reid, who did not
hear oral argument, has read the transcript of the oral argument and is
participating in this Decision pursuant to Section 1.277(f) of the Rules. WILEY
AND HOOKS NOT PARTICIPATING.
OPINION:
[*123] BACKGROUND
1. On August 31, 1965, RKO
filed an application for renewal of license covering its station KHJ-TV on
Channel 9 in Los Angeles. On October 25, 1965, Fidelity filed an
application for a construction permit for a new television station to operate
on Channel 9 in Norwalk, California. On June 8, 1966, the Commission
issued an order (FCC 66-503) finding both the RKO and Fidelity applications
qualified for grant and also finding them mutually exclusive. Hearing was
directed on these issues:
1. To determine which of the
proposals would better serve the public interest.
[*124] 2. To
determine, in light of the evidence adduced pursuant to the foregoing issue,
which of the applications should be granted. The order carried the
following footnote to the designation clause:
"2 The Commission in its Policy
Statement on Comparative Broadcast Hearings, (FCC 65-689, released July 28,
1965, 30 F.R. 9660, 5 RR 2d 1901), indicated that it did not therein attempt to
deal with '... the somewhat different problems raised where an applicant is
contesting with a licensee seeking renewal of license.' That remains our
position. However, we have also, subsequently indicated ( Seven (7)
League Productions, Inc., et al., 1 FCC 2d 1597-9) that the Policy Statement
will govern the introduction of evidence where a renewal application is being
contested. For example, as in regular comparative hearings, evidence
relating to programming proposals and to character will not be entertained in
the contested renewal proceeding unless first specifically put in issue by the
Hearing Order or on subsequent enlargement of issues upon a threshold factual
showing that a distinctive difference or deficiency exists and is worth
exploring. We have not, however, reached any determinations as to weight
to be accorded various factors of difference between the renewal applicant and
the competing applicant, preferring instead to do so later upon the full,
factual hearing record that is developed by competent evidence under the
designated issues. [Accordingly], parties in a contested renewal
proceeding are free to urge any arguments they may deem applicable concerning
the relative weight to be afforded the evidence bearing on the various
comparative factors developed at hearing."
2. The history of this
proceeding until September 9, 1968, is set forth in paragraphs 3-19 of the
Initial Decision (FCC 69D-43, released August 13, 1969) of Hearing Examiner
Thomas H. Donahue, n2 which paragraphs we adopt and
incorporate by reference as fully as if set forth at length herein. Of
particular note is the attempt of Fidelity to include, in the issues and the
record, material pertaining to a civil anti-trust suit n3 against General Tire and Rubber Company (the
corporate parent of RKO General, Inc.), filed March 2, 1967, which dealt
generally with the matter of reciprocal dealing allegedly engaged in by General
Tire and its subsidiaries. Fidelity, on March 8, 1967, petitioned to
enlarge the issues to explore the subject matter of the civil suit. While
denying the specific request to enlarge the issues, on June 9, 1967, 8 FCC 2d
632, the Review Board amended the order of designation to include a provision
that the outcome of the comparative proceeding in Los Angeles (KHJ-TV) would be
"without prejudice to whatever action, if any," the Commission might
deem appropriate as a result of the Ohio civil action and held that the
relevant facts and circumstances could be adduced by Fidelity under the
standard comparative issue. The Hearing Examiner reopened the proceeding
on March 11, 1968, to receive evidence on reciprocal dealing which had been
developing in the civil antitrust action, "with the caveat that such
evidence must be patently germane to RKO's stewardship of KHJ-TV * * *."
The Commission later sustained the Board's refusal to add a specific
evidentiary issue, FCC 68-892, 14 RR 2d 90, stating that the Examiner's action
had afforded Fidelity essentially the relief it sought. However, on its
own motion, the Commission added a potential disqualification issue, to wit:
n2 Now known as Administrative Law
Judges, Mr. Donahue retired before the change of nomenclature, and he will be
referred to as Hearing Examiner.
n3 U.S. v. The General Tire and
Rubber Company, et al., Civil Action No. C-67-155, U.S. D.C., Northern District
of Ohio, Eastern Division (erroneously cited in the Initial Decision as
6-67-155).
To determine, in light of the
evidence adduced with respect to the preceding issues, whether RKO General,
Inc. should be disqualified or, if not, whether a comparative demerit should be
assessed against it in this proceeding.
3. On August 13, 1969, the
Initial Decision was released in this proceeding. The Hearing Examiner
recommended granting Fidelity [*125] and denying RKO. n4 Exceptions and a brief were filed by Fidelity on
December 12, 1969. Exceptions and a request to file a brief in excess of
the page length permitted by Commission rules and the brief were filed and
lodged n5 respectively by RKO on December 12,
1969. Reply briefs were filed June 5, 1970, by both Fidelity and RKO, and
an erratum was filed by RKO on June 23, 1970. The Department of Justice
lodged a brief, amicus curiae, on June 10, 1970, pertinent to the
qualifications of RKO only insofar as they might be affected by the "reciprocal
dealings" matter, together with a corrected page submitted June 11, 1970;
a reply brief was filed by RKO on July 20, 1970; and a memorandum in response
was filed by the Department of Justice on August 10, 1970. n6
n4 Except as modified herein and by
the rulings on exemptions which are attached as an appendix, the findings of
fact set forth by the Examiner in his Initial Decision are adopted.
However, since we do not agree with his ultimate determination, the conclusions
set forth herein will be substituted for those of the Examiner.
n5 The brief of excess page length
was accepted for filing by the Commission's Memorandum Opinion and Order, 31
FCC 2d 70 (1971).
n6 The brief, amicus curiae, and the
pleadings responsive thereto were also accepted for filing, ibid.
4. Meanwhile, on December 3,
1969, the Commission designated the renewal application of RKO General, Inc.
for Channel 7, Boston, Massachusetts (WNAC-TV), for hearing with two competing
applications. n7 The issues included, inter alia:
n7 20 FCC 2d 846 (1969).
3. To determine with respect
to the application of RKO General, Inc., whether in view of the evidence
concerning alleged anticompetitive practices by RKO General, Inc., or its
parent corporation, General Tire and Rubber Co., RKO General, Inc., should be
disqualified to remain a licensee of the Commission or if not so disqualified,
whether a comparative demerit should be assessed against it in this [Boston]
proceeding.
The order provided that official notice might be taken of
the record in the Los Angeles KHJ-TV proceeding and that only new or additional
evidence not adduced in this proceeding might be adduced in the Boston
proceeding. It also included provisions that, in the event of a grant for
WNAC-TV, the grant would be subject to whatever action the Commission deemed
appropriate as a result of the pending civil antitrust suit and the
developments and findings in the proceeding before the Commission involving the
renewal of KHJ-TV's license.
5. The antitrust action in the
United States District Court was, however, terminated on October 22, 1970, by a
consent judgment. Consequently, the Commission does not have the benefit
of any findings therefrom, and the reservation by the Commission of the right
to predicate action in the RKO renewal proceedings on the outcome of the civil
suit has become a nullity. Thereafter, on September 10, 1971, Fidelity
petitioned the Commission to take official notice of the consent
judgment. The Commission did so, n8 noting
that, while this matter had previously been subject to any action the
Commission might deem appropriate as a result of a final adjudication in the
civil suit, this proviso no longer obtained and that the resolution of this
case would be based on the record developed in the proceedings before the
Commission.
n8 FCC 71-970, released September
20, 1971.
[*126] 6. During
the same period, the Broadcast Bureau also sought to reopen the KHJ-TV record
for the introduction of additional evidence. It alleged that there was
then available considerably more evidence bearing on the anticompetitive
activities of General Tire, RKO General, Inc., and their subsidiaries and
affiliates than was available when the anticompetitive phase of the Los Angeles
hearing was in progress. While the Broadcast Bureau indicated a
preference for reopening the Los Angeles record with an issue identical to that
in the Boston proceeding, it suggested, as a possible alternative, that the
outcome of the Los Angeles proceeding could be made dependent upon the final
result of the anticompetitive issue in the Boston proceeding in a manner
similar to that in which the ultimate result of the civil antitrust suit might
have been used. The Broadcast Bureau's petition further referred to another
petition pending before the Review Board to add issues in the Boston proceeding
to determine whether certain officers, employees and former employees of
General Tire and RKO had misrepresented or concealed facts, or been lacking in
candor in their testimony concerning reciprocal trade practices when testifying
in the Los Angeles proceeding and, if so, whether RKO should be disqualified as
a licensee in Boston or assessed a comparative demerit. The Bureau
requested that the Commission either direct the Review Board to add such issues
to the Los Angeles proceeding or add them itself.
7. In the interval after the
Bureau's filing, the Review Board acted upon the pleadings before it and added
the following issues to the Boston proceeding: n9
n9 30 FCC 2d 138 (1971).
(a) To determine whether in sworn
testimony given in the course of the KHJ-TV proceeding, Docket Nos.
16679-16680, officers, employees, and/or former employees of General Tire and
Rubber Company, or of RKO General, Inc., misrepresented facts, concealed facts,
or were lacking in candor with regard to the existence, nature, and extent of
reciprocal trade practices engaged in by General Tire and Rubber Company and
RKO General, Inc.; and
(b) To determine in light of the
evidence adduced pursuant to the aforementioned issue whether RKO General, Inc.
should be disqualified as licensee of WNAC-TV or, alternatively, assessed a
comparative demerit.
After
consideration of all of the circumstances, the Commission concluded n10 that no useful purpose would be served by reopening
the record in this proceeding. Rather, the Commission modified the second
issue added by the Board, supra, in the Boston proceeding to determine whether
RKO should be disqualified as a licensee, made Fidelity a party to the Boston
proceeding insofar as the issues therein pertained to RKO's licensee
qualification, and stated that, in the event RKO was found on a comparative
basis to be the preferable applicant herein, the issuance of a final decision
would be deferred until the conclusion of the Boston proceeding when such
action as then appeared appropriate would be taken. Oral argument was
scheduled and held before the Commission, en banc, on October 12, 1971.
n10 31 FCC 2d 70 (1971), paras. 8
and 17.
[*127] 8. On June
11, 1973, the United States Court of Appeals for the District of Columbia
Circuit issued an Order n11 reciting that Fidelity Television,
Inc. had petitioned the court for a writ of mandamus to compel the Commission
to issue a decision in this proceeding. The Court, while declining to
issue such a writ, stated that the Commission's decision appeared to have been
unreasonably delayed, that the Commission would likely act in accordance with
the views expressed without issuance of a writ, and that a report of the
Commission's action should be filed with the Court within thirty days. On
July 2, 1973, the Commission held a special meeting and determined that a
decision herein would be prepared as expeditiously as possible. This
action was duly reported to the Court on July 6, 1973.
n11 Case No. 73-1313.
PRELIMINARY MATTERS
9. On August 16, 1971, RKO
filed a petition to dismiss Fidelity's application or, alternatively, to
enlarge the issues and reopen the record for further hearing. n12 RKO's petition is founded upon a petition for leave
to amend which Fidelity filed on August 5, 1971, and which was granted by the
Commission's Memorandum Opinion and Order, 31 FCC 2d 919 (1971). In substance,
RKO asserts that Fidelity's amendment reflects a fundamental change in its
corporate structure which had been in effect for at least 17 months and that
Fidelity had thus been in gross dereliction of its duty to inform the
Commission within 30 days of any substantial and significant changes involving
its application, as required by Section 1.65 of the Commission's Rules.
Subsequently, RKO filed a motion to supplement its petition against Fidelity, n13 urging that, in a petition for leave to amend filed
by Fidelity on April 6, 1973, Fidelity finally informed the Commission of the
acquisition by one of its stockholders of certain newspaper interests in May,
1972.
n12 RKO filed a supplement to its
petition on August 23, 1971; Fidelity filed an opposition on August 26, 1971,
which was supplemented by a letter filed November 4, 1971; the Chief, Broadcast
Bureau, filed comments on August 31, 1971; RKO filed a reply on September 8,
1971; Fidelity filed a supplement to its opposition on September 13, 1971; and
RKO filed both a motion for leave to file a response and a response to
Fidelity's supplement on September 21, 1971. In view of the disposition
of RKO's underlying petition, its request for leave to file a response will be
dismissed as moot.
n13 RKO's supplement was filed on
April 25, 1973; Fidelity filed an opposition on May 7, 1973; and the Chief,
Broadcast Bureau, filed comments on May 8, 1973.
10. Without further discussion
of the parties' extensive pleading, we are convinced that Fidelity's failure to
report changes in its corporate structure and acquisition of newspaper
interests by one of its stockholders within the 30-day period provided by
Section 1.65 raises very serious questions. Since our disposition of a
case of this nature is based on the record compiled by the parties, all
applicants have a continuing obligation to report any changes bearing on their
comparative qualifications, and any failure to do so reflects adversely upon
that applicant. Here, based on Fidelity's repeated inability to keep the
Commission informed of the changes concerning its proposal, we would ordinarily
enlarge the issues and remand for a further hearing to determine all of the
facts surrounding these incidents and their impact upon both the basic and
comparative qualifications of Fidelity before considering a [*128]
grant of its application. Cf Folkways Broadcasting Co., Inc., 26 FCC 2d
175 (Rev. Bd. 1970).
11. However, it now appears
that any further delay in the resolution of this case would be
inappropriate. Thus, while we might have preferred to base our Decision
on a more complete record in an ordinary case, we believe the circumstances
here require us to go forward on the present record. When this fact is
considered in the light of the ultimate conclusions to be drawn from the
existing record, we are convinced that no useful purpose would be served by any
further consideration of the Section 1.65 questions and that RKO's pleadings
should be dismissed as moot. In order for the record to reflect the facts
as they actually exist, however, we shall grant the petition for leave to amend
filed by Fidelity on April 6, 1973.
12. On November 16, 1971,
Fidelity filed a request for official notice. n14 urging the Commission, without reopening the record,
to take account of the facts that an RKO subsidiary was granted a CATV system
franchise for Inglewood, California, which is within the predicted Grade B
contour of KHJ-TV. In response, RKO points out that the CATV system never
became operational and that it has been assigned to a third party.
Subsequently, RKO filed a petition for leave to amend on December 14, 1972, to
provide a current compilation of its media interests, including CATV
properties. n15 As we stated in TV Signal Company
of Aberdeen, 23 FCC 2d 603 (1970), renewal applicants should report their
interests in both operating and non-operating CATV systems. Thus, we
shall grant RKO's petition for leave to amend and Fidelity's request for
official notice so that the record will reflect the relevant facts as
accurately as possible. n16
n14 In connection with this request,
Fidelity filed a letter on October 19, 1971; RKO filed a letter in response on
November 1, 1971; RKO filed an opposition to the request for official notice on
December 1, 1971; Fidelity filed both a request to file additional pleading and
a reply on December 6, 1971; RKO filed an opposition to Fidelity's request to
file additional pleading; and Fidelity filed a supplement to its request for
official notice on January 19, 1972. We shall grant Fidelity's request to
file an additional pleading so that the record will fully reflect its position
on this question.
n15 In an opposition filed December
22, 1972, Fidelity objects that RKO may have improperly delayed in reporting
its CATV interests. However, Fidelity, providing no factual support for
its contention, relies on mere speculation which requires no further
consideration at this time.
n16 Other petitions for leave to
amend were filed by Fidelity on July 18, 1972; and by RKO on January 27, March
9, June 23, July 7, July 17, and September 5, 1972, and on February 8, March
15, April 19, May 1, May 10, June 29 July 30. September 4, September 21,
and November 14, 1973. Fidelity filed comments on RKO's March 9, 1972
petition, urging that the proposed amendment should not be allowed to improve RKO's
status in this proceeding. Since no applicant in a comparative hearing is
allowed to gain a comparative advantage by relying upon an amendment submitted
after the hearing has begun, see Flower City Television Corp., 14 FCC 2d 384
(1966), and since the record should fully reflect the actual facts, we shall
grant all of the petitions listed above.
TRADE PRACTICES INVOLVING KHJ-TV
13. This matter originally
arose out of the civil action filed by the Department of Justice against
General Tire and three of its subsidiaries, including RKO, alleging that they
had violated the Sherman Antitrust Act by conspiring to force their suppliers
to purchase products and services from them. However, that action was
ultimately terminated by the issuance of a consent decree which precludes
General Tire and its subsidiaries from taking certain actions in the future
without finding that they had engaged in such conduct at any time in
[*129] the past. In spite of this circumstance, evidence bearing on
the question was adduced during the course of this proceeding. As noted
above, the impact of this and other evidence on RKO's general licensee
qualifications is at issue in the Boston, WNAC-TV renewal proceeding which is
not yet before us, and, thus, our present consideration will be limited solely
to those matters involving RKO's operation of KHJ-TV. n17
n17 While we would have preferred
and had intended to wait for the completion of the Boston proceeding before
acting on KHJ-TV's renewal so that all of the questions about RKO's qualifications
could be resolved at one time, we believe, for the reasons stated in paragraph
11, above, that this proceeding must now be decided without further delay.
14. During the early 1960's,
both General Tire and RKO established employee positions to carry out trade
relations activities to improve customer and supplier relationships. The
functions of these positions included seeking new markets and customers for
their products and new sources of supply for goods which they purchased,
gathering and analyzing information of commercial and trade developments, and
facilitating intercorporate communications. On occasion, these employees
also contacted counterpart personnel of other companies to provide an entry for
their own salesmen or to obtain review of an earlier refusal to do business,
which might lead to institution of or an increase in the companies' mutual
patronage. Because each party to such an arrangement is both a supplier
and a purchaser of goods or services, it is often described as a reciprocal
trade practice or reciprocal dealing, without regard to the nature of the
factors which prompted the parties to enter into the agreement.
15. While it has clearly been
established that mutual patronage resulting from either coercion or threats of
reprisal is an unfair trade practice, n18
neither the Department of Justice nor the Broadcast Bureau n19 claims that such conduct occurred here, and, on the
basis of our own review of this record, we are convinced the there is no
significant evidence establishing that KHJ-TV either engaged in or was the
beneficiary of any unfair trade practice of that sort. On the other hand,
we do recognize that KHJ-TV was involved in a number of mutual patronage
situations during this period, as would be normal for any separate entity of a
large conglomerate such as General Tire. Thus, the question here is not
whether reciprocal dealing was practiced with respect to KHJ-TV, n20 but whether this conduct should reflect adversely
upon the operation of the station.
n18 See, for example, Waugh
Equipment Company, 15 FTC 232 (1931).
n19 Broadcast Bureau's proposed
findings of fact and conclusions of law on reopened record, filed on January
31, 1969.
n20 Although a distinction can be
drawn between mutual patronage which results from genuine, independent
determinations that the other party offers the "best buy" and that
which results from a voluntary agreement of the parties to do business with
each other without regard to the advantages offered by other suppliers, we are not
persuaded that the evidence in the present record is adequate to determine the
intent of the parties as to the limited amount of KHJ-TV's advertising in
question.
16. For the reasons set forth
below, we do not believe that such a conclusion is warranted in this
case. As the Review Board previously noted, 8 FCC 2d 632 (1967), note 4,
the civil suit against General Tire and RKO was the first case to raise the
question of whether reciprocal dealing, standing alone, violates the antitrust
laws. Since that suit was ultimately dismissed without any determination
that improprieties had occurred, the legal questions therein were never
resolved. In view of the circumstances that the relevant legal and
economic concepts [*130] were in a state of flux at the time
covered by this record, that neither responsible officials nor the courts had
given any clear explanation of the applicability of the broadly drawn statutes,
and that there was accordingly no certainty that trade relations practices were
improper, we find no present basis for charging RKO with knowing and willful
misconduct.
17. In this connection, while
we do not wish to suggest that evidence hereafter of reciprocal dealing
intended to gain an anticompetitive advantage would be condoned or excused, it
is important to note that many other corporations engaged in similar trade
relations practices during this period and that the Department of Justice
terminated its civil antitrust suit on the basis of injunctive provisions which
are essentially prospective in nature. When these facts are considered in
the light of RKO's unblemished record as a broadcaster covering more than 25
years, we are not persuaded that the record in this case is sufficient to raise
any meaningful question about RKO's willingness and ability to act in a
responsible manner in performing its obligations as a licensee in the
future. Thus, we are convinced that there is no reason, on the limited
record of the trade relations practices involving KHJ-TV now before us, n21 either to disqualify RKO as the licensee of KHJ-TV
or to assess a comparative demerit against its proposal in this
proceeding.
n21 In our view, the mutual
patronage advertising carried on KHJ-TV was not sufficient, in any event, to
fall within the "not insubstantial amount" of affected commerce test
as discussed in United States v. General Dynamics Corporation, 258 F. Supp. 36,
66 (1966).
KHJ-TV'S PAST BROADCAST RECORD
18. In the 1965 Policy
Statement on Comparative Broadcast Hearings, 1 FCC 2d 393, the Commission stated
that no preference would be given for a past broadcast record within the bounds
of average performance, since average future performance is expected of all
licensees. The Commission also noted that an unusually good record could
be shown by special attention for the public's needs and interests reflected by
changing programming to meet the area's evolving needs, but that an unusually
poor record may be established where there has been a failure to meet the
public's needs and interests. Thereafter, the Court of Appeals held in
Citizens Communications Center v. FCC, 447 F.2d 1201, 22 RR 2d 2001 (1971),
that incumbent licensees should be judged primarily on their records of past
performance, that insubstantial past performance should preclude renewal of a
license, but that superior performance should be a plus of major significance
in renewal proceedings.
19. In this proceeding, KHJ-TV
operates without a network affiliation in a market with seven commercial VHF
television stations. Analysis of KHJ-TV's composite week for the license
period, December 1, 1962, to November 30, 1965, shows that the station carried
86.5% entertainment programming; 3.375% news; 3.75% educational; 3% talks;
3.375% religious, agricultural, and discussion; and 7.13% live programming,
with 5% in prime time, n22 and that it broadcast 1,132
[*131] commercial spot announcements, averaging slightly more than 8 per
hour.
n22 In comparison with the three
other independent, VHF television stations in the market, KHJ-TV during this period
had the highest percentage of entertainment programming, the lowest percentages
in the news and discussion categories, and the lowest percentages of live
programming, for both the total day and prime time.
20. The record in this
proceeding establishes that RKO was the first licensee to use a motion picture
studio's film library as a regular source of entertainment programming on a
daily basis, that KHJ-TV pioneered in the implementation of this innovation in
its market, and that the presentation of these feature films on a continuing
basis fulfilled a genuine need in the Los Angeles area during the license
period. Among the films carried by KHJ-TV in response to this need were a
series of Spanish language movies, several operas, and a variety of highly
acclaimed motion pictures. The station also carried a number of plays
produced by the British Broadcasting Corporation, a series called "Play of
the Week," and several other cultural programs. In addition, KHJ-TV
produced and broadcast programs involving Hollywood Bowl concerts, the Los
Angeles Symphony Orchestra, the Los Angeles Art Museum, the UCLA Art Center,
and other artistic presentations. Other programs were devoted to popular
music and personalities, local parade highlights, beauty pageants, and similar
events.
21. In this connection, KHJ-TV
has received various awards and commendations for its programming during the
license period from the Hollywood Chapter of the Academy of Television Arts and
Sciences, the National Association for Better Broadcasting, the Los Angeles
City Council, and other groups and community leaders. A number of
individuals also expressed favorable comments about the operation of the
station. However, among the many films presented by KHJ-TV, n23 the movies, "Jack the Ripper,"
"Pretty Boy Floyd" and "House of Wax," were shown numerous
times during children's viewing hours in July and September, 1964. Each
of these films included scenes of crime and violence, generating a series of
public complaints by the National Association for Better Radio and Television,
the Los Angeles Council of United Church Women, Congressman Lionel Van Deerlin,
and several other persons.
n23 Various syndicated programs and
48 feature films took up 113 hours and 41 minutes of the 133 hours and 40
minutes of the station's programming during the composite week. For the
entire license period, a total of 1,454 movies, not including ones listed as
"to be announced" or Spanish films shown on Saturdays, were carried
at least 6,534 times. Of those movies, 66 were shown from 12 to 21 times.
22. Turning to the other
aspects of KHJ-TV's performance, its record of public affairs programming
included a series of programs on selected Greater Los Angeles cities with
problems common to much or all of the area, on the scene reports and interviews
from ten Western Hemisphere nations, a regular weekday discussion program
presented in mid-afternoon and edited for repetition in prime time, and a wide
range of documentaries and public service programs produced by other
stations. A series of taped educational programs produced by local
educators was also broadcast five days a week at 11:30 a.m. and sometimes
repeated late at night. KHJ-TV's agricultural programming, however,
consisted of a 30-minute film produced by the Department of Agriculture, which
was shown on Saturday mornings. The religious programming included a
number of filmed programs and short taped inspirational messages which were
presented at the beginning and end of each broadcast day. A large portion
of KHJ-TV's [*132] talk programs was devoted to interviews in
conjunction with its feature films and sports events.
23. The station also has a
well equipped newsroom and mobile facilities which have been used in its
coverage of news conferences and governmental meetings, and KHJ-TV has availed
itself of the service from the Washington News Bureau operated by RKO, which is
one of the few licensees -- aside from the national networks -- to maintain
such a national news office. n24
The station has preempted its regular programming to provide live coverage of
both local and national emergency situations, and it initiated television
coverage of many sports events in the Los Angeles area. Finally, it
should be noted that the programming discussed above was reported without any
significant inaccuracy, that KHJ-TV's performance during the license period was
entirely consistent with the representations made in its 1962 renewal
application as to categories, amounts, and kinds of programming and the number
of commercial announcements, and that the promises made in 1962 were deemed
sufficient at that time to satisfy the public interest requirement of the
Communications Act.
n24 KHJ-TV's news programming, which
varied in length and frequency from time to time during the license period and
which did not include any editorial commentary, generally consisted of one
minute capsules in the morning and early afternoon, a five minute newscast in
mid-afternoon, a fifteen minute newscast in the evening, and about fifteen
minutes of news late at night.
24. In assessing KHJ-TV's past
broadcast record, we are initially convinced that it would be neither proper
nor feasible for us to attempt to evaluate the quality of individual
programs. The function of the Federal Communications Commission is not to
sit as a critic or censor dictating what viewers across the country see, but
rather to encourage licensees to ascertain the needs and interests of their
audiences and to offer those audiences an opportunity to enjoy a broad variety
of programming, with the market place serving as the final arbiter as to the
value of a specific broadcast. By the same token, since every program
will not be received with the same degree of approval by the public, we
recognize that it is not uncommon for licensees to receive complaints from time
to time. Indeed, it is clear that this is the unavoidable result of the
freedom given to licensees to present programming recognizing the many
different tastes of their audiences, and thus the mere fact that complaints
have been filed is not necessarily significant.
25. This is not to say,
however, that evidence of public dissatisfaction can be ignored. If a
licensee continually disregards a significant trend of public opinion expressed
over a substantial period of time and a growing number of viewers raise
substantial objections to a licensee's programming practices without any change
resulting from the reaction in the market place, we would of course be
concerned about the licensee's failure to be responsive to his audience's
expressed needs and interests. But where the licensee has made a good
faith effort to satisfy various segments of the public, we are not persuaded
that significant weight should be placed on the fact that not all members of the
public were equally pleased with every program broadcast by the licensee.
n25 To hold otherwise, we are
convinced, could only generate [*133] pressures upon licensees,
contrary to the public interest, to present a bland, uniform type of
programming which would be inoffensive to all, but neither stimulating nor
fulfilling for any. Indeed, in our view, such a development, diminishing
rather than enhancing the freedom of our society, would be a tragic
result.
n25 In this connection, Fidelity's efforts
to find fault with KHJ's programming must also be considered and evaluated in
the perspective of the facts that an incumbent licensee is always subject to
criticism and that its weak points, no matter how insignificant, will be
highlighted by a challenger in this type of proceeding.
26. In this case, although the
record contains evidence of dissatisfaction, concerning KHJ-TV's feature film
programming practices, there were also significant expressions of support for
its policies from the public, and thus we do not believe that there is any
present basis for drawing a conclusion adverse to KHJ-TV in this respect.
As for the other aspects of its record, while we recognize that there are some
aspects of its performance which may not warrant favorable consideration, the
station should be given credit for its locally produced cultural and artistic
programs and other entertainment specials which were broadcast in prime
time. Furthermore, it must be noted that KHJ-TV's commercial policies
conformed with the Television Code of the National Association of Broadcasters
and that its actual broadcast performance met or exceeded in all respects the
promises which it made in its 1962 renewal application. In this
connection, it must also be remembered that KHJ-TV is not affiliated with any
television network, that the station is competing in a market with six other
commercial VHF facilities, and that its programming was supported by a
significant segment of the public. Under these circumstances, we are persuaded
that there are sufficient good points to offset the less favorable aspects of
KHJ-TV's performance and that, on balance, its record must be deemed to be
within the bounds of average performance expected of all licensees, thus
warranting neither a preference nor a demerit.
DIVERSIFICATION
27. The record to be
considered in making the comparison under this criterion reflects that RKO, in
addition to KHJ-TV, owns and operates AM and FM broadcast stations in Los
Angeles and AM, FM, and TV stations in other cities across the country and that
it has interests in numerous CATV systems and other media related enterprises
in various parts of the nation. Although neither Fidelity nor its
stockholders has any interest in an existing broadcast facility, one stockholder
does have a 10% interest in a CATV system, and another stockholder has a 26%
interest in a corporation publishing newspapers in several suburbs in the Los
Angeles area. n26 Within KHJ-TV's Grade B contour,
there are two daily newspapers of general circulation, 69 other daily
newspapers, and 281 newspapers published one or more times each week; a total
of 15 commercial television stations have been assigned to the Los Angeles
market; and there are 62 AM and 6 FM stations serving areas within or near KHJ-TV's
Grade B contour.
28. In addition to these
matters, we believe that consideration must also be given the facts that there
is no evidence in this proceeding of any attempt by RKO to influence the
operation of KHJ-TV in such a way as to promote any national or other uniform
expression of political, [*134] economic, or social opinion; that
there has been no pattern in the public affiairs programming of RKO's stations
which would justify the assessment of any kind of a demerit; and, indeed, that
KHJ-TV's access to RKO's Washington News Bureau and public affairs programming
has actually increased the sources of information available to Los Angeles
viewers. Thus, although RKO clearly has more media interests than
Fidelity, we are not persuaded that the nature of RKO's interests is such as to
have any adverse effect on the flow of information for the audience to be
served here.
n26 See paragraphs 9-11, above.
29. At the same time, while
the full impact of Fidelity's recently acquired newspaper interest on this
proceeding could not be finally determined without a further hearing, it is now
apparent that Fidelity is no longer free of any connection with the publication
of local newspapers and that this development diminishes to some extent the
attractiveness of its proposal in this comparative analysis. Finally, it
must be noted that there is a plethora of outlets for diverse and antagonistic
views already in existence in this area, that RKO's ownership of KHJ-TV has
been in compliance with the Commission's regulations and consistent with the
public interest at all times since the station was acquired, and that the
renewal of the license will not increase the concentration of media ownership
in any way. In this connection, we also believe, as we have noted previously,
that any attempt to restructure ownership patterns in the broadcast industry
should be done by rule making, with general applicability, protection of all
parties, and appropriate arrangements for divestment, rather than by an ad hoc
interpretation of the diversification, or any other, criterion in a comparative
renewal proceeding. See Formulation of Policies Relating to the Broadcast
Renewal Applicant, Stemming from the Comparative Hearing Process, 31 FCC 2d 443
(1971). Under these circumstances, we are convinced that neither applicant has
made a sufficient showing to warrant the award of any preference under the
diversification criterion. Cf. Farragut Television Corporation, 8
FCC 2d 279 (1967).
PARTICIPATION IN STATION OPERATION
30. Fidelity proposes that
William G. Simon, President, General Manager and 20.6% stockholder, and Nello
C. Di Corpo, Director of Public Service Programming and 2.06% stockholder, will
devote full time to the operation of its planned television station. n27 Simon has lived in the Los Angeles area since 1960,
and Di Corpo has resided in that area all of his life. Both men have been
active in local civic activities, but neither has any significant amount of
broadcast experience. While Simon, who began the practice of law after
his retirement from the FBI in 1964, will, as General Manager, oversee the
operations of the station, a professional broadcaster, serving as the station
manager, will be responsible for the daily activities at the station.
Other professionals [*135] will be hired to fill the day-to-day
positions of program manager, sales manager, news director and chief
engineer. Di Corpo's efforts as Director of Public Service Programming
will be under the supervision of the professional program manager.
n27 Although Fidelity asserts that
other stockholders will spend varying amounts of time, ranging from five to
twenty hours a week, on station activities, the 1965 Policy Statement clearly
holds that no credit will be given for the participation of any person who will
not devote substantial amounts of time on a daily basis to the station. 1
FCC 2d at 395. Since Fidelity has made no showing that any of these other
stockholders would participate on a daily basis, further consideration of their
participation is not required.
31. Although Fidelity has no
record of previous operation to be considered in making a qualitative
evaluation of its proposal, it has, in the prosecution of its application
before this Commission, engaged in certain activities which may give some
indication of its future behavior if it were to become a licensee. In
this connection, on December 24, 1969, the Broadcast Bureau filed a petition
questioning the preparation, signing, and filing by Fidelity of stock
subscription agreements, amendments of its application, and affidavits.
While the Bureau's petition was denied on April 22, 1970, the Commission
stated, 22 FCC 2d 737, at 740:
... that Fidelity was remiss in its
representations to the Commission in failing to indicate that purported
signatures were actually signed by agents, failing to secure ratification of
so-signed documents without delay or withdrawing them, and otherwise failing to
keep its house in order,...
thus clearly putting Fidelity on notice that its efforts to
carry out its responsibilities as an applicant had been inadequate.
32. Nevertheless, on August 5,
1971, Fidelity filed a petition for leave to amend, reflecting significant
changes in its corporate structure, without in any way suggesting that they had
been in effect for at least 17 months. When challenged by RKO, see
paragraph 9, above, Fidelity offered no excuse whatsoever for having filed its
petition as if it were reporting contemporaneous events, simply asserting that
the changes were not thought to be significant enough to require reporting, in
spite of the fact that it had previously filed amendments reflecting similar
changes. n28 Thereafter, on April 6, 1973,
Fidelity filed another petition for leave to amend, this time reporting that
one of its stockholders had acquired certain newspaper interests nearly one
year earlier and claiming that it would not have any significance in the
disposition of this proceeding, despite the paramount importance attributed to
the diversification criterion under the 1965 Policy Statement and despite its
previous assertion of a preference based on the absence of any such
connection. n29
n28 Although Fidelity's counsel
subsequently attempted to assume responsibility for the delay in reporting the
changes in Fidelity's proposal, there is no escaping the fact that Fidelity's
earlier pleadings did not provide an open and candid explanation of the
circumstances. In this respect, it should also be noted that one of
Fidelity's stockholders, Louis J. Cella, Jr., testified during the hearing in a
manner which, at the very least, must be described as evasive when questioned
about the circumstances which resulted in the termination of his role as Vice
President and Director of the applicant. See Transcript pages 1684-1695.
n29 Fidelity's inability or
unwillingness to report developments in its proposal continues even to the
present time. Thus, even though RKO, in a pleading filed September 8,
1971, pointed out significant changes in the percentages of stock held by each
of Fidelity's stockholders, Fidelity has not made any attempt to submit the
correct information in the form of an amendment to its application.
33. While a single failure to
report a change in an application might not necessarily be of decisional
significance, it is clear that every applicant has a continuing obligation to
disclose to the Commission all pertinent facts and circumstances concerning the
prosecution of its proposal. Thus, where there is a repeated failure to
make timely and necessary reports of new developments affecting a proposal, a
serious [*136] question arises as to whether the applicant
comprehends the duties of a licensee and whether it can be expected to assume
and discharge the responsibilities connected with the implementation of its
proposal. Since it appears that Fidelity has on several occasions
neglected to report such changes in a timely and open manner, and particularly
since this practice continued even after its attention was directed to the need
to keep its house in order, we believe that the record here gives little
promise that Fidelity will effectively implement its paper integration promises
and that this circumstances significantly reduces the weight which can be
accorded to its quantitative integration proposal.
34. Turning to KHJ-TV, none of
its management personnel has any significant ownership interest in the
licensee. RKO has, however, within the supervisory policies and practices
established for all of its stations, afforded considerable autonomy to the local
staff in the operation of KHJ-TV. At the same time, RKO requires the
management of its stations to involve themselves in a wide range of community
and civic organizations and to use the information gained from such contacts to
help determine the direction and programming of the station. During RKO's
operation of KHJ-TV since 1951, station personnel living in the Los Angeles
area have participated in community activities and acquired broad knowledge of
local needs. In this way, the operation of KHJ-TV has combined the
experience and stability of RKO's national organization with the independence
and sensitivity to community needs of its local management to serve the entire
area. n30
n30 In contrast to KHJ-TV's area
wide service, it should be noted that Fidelity proposes to emphasize the needs
and interests of a portion of the entire area in its programming, to the
detriment of the public in the remaining areas. Cf., Petersburg
Television Corp., 19 FCC 451, at 474-476 (1954).
35. While Fidelity enjoys an obvious
quantitative advantage, it is important to note in evaluating the proposals in
this comparative renewal proceeding that we are necessarily comparing an
untested promise of future performance with a record of actual experience based
on continuing contracts with the community, and, thus, Fidelity's proposal must
be considered with care to determine whether any preference is realistically
warranted. In this connection, the record shows that Fidelity will rely
in many respects on a professional staff similar to that employed by RKO, that
Fidelity's principals lack the broadcast experience which KHJ-TV's management
has acquired in the operation of the station, and that RKO gives the station's
staff autonomy to use their familiarity with the area's needs to develop
appropriate programming. When these factors are considered in the light
of Fidelity's demonstrated inability or unwillingness to carry out its
responsibilities as an applicant, it is clear that Fidelity's quantitative
advantage has been neutralized by the qualitative characteristics of its
proposal and that, on balance, the differences in these two proposals are not
so significant as to warrant a preference for either applicant under the
integration criterion.
OTHER FACTORS
36. From our consideration of
these proposals up to this point, we have established that each applicant is
basically qualified to be a [*137] licensee, that the
characteristics of the proposals differ in certain respects, but that none of
those differences provides a basis for making a choice between the two
applicants in this proceeding. Nonetheless, a selection must be made and
so we shall look to other aspects of the record affecting the public
interest. In this connection, we believe that recognition must be given
to the rights and expectancies of an ordinary renewal applicant. As
stated by the Court in Greater Boston Television Corporation v. F.C.C., 143
U.S. App. D.C. 383, at 400, 444 F. 2d 841, at 858, 20 RR 2d 2052, at 2073-2074
(1970), "... such expectancies are provided in order to promote security
of tenure and to induce efforts and investments, furthering the public
interest, that may not be devoted by a licensee without reasonable
security."
37. Here, RKO's financial
stability has provided an experienced and competent staff for KHJ-TV and
afforded the station an opportunity to develop and strengthen its programming
and community involvement in spite of financial losses. Since the station
was acquired in 1951, RKO's investment of money and other resources has
successfully made KHJ-TV a viable operation in a highly competitive
market. Under these circumstances, and in keeping with the views
expressed in Greater Boston, supra, we believe that there is a public interest,
both in the Los Angeles area and the nation at large, in insuring the
predictability and stability of broadcast service. If there is no such
security for applicants seeking facilities with the intention of providing good
service for the public, the overall development and motivation of the industry
will suffer. While we recognize the need to avoid any burden upon an
applicant for a new facility seeking to show that it will better serve the
public interest, we are persuaded that credit must be given in a comparative
renewal proceeding, when the applicants are otherwise equal, for the value to
the public in the continuation of the existig service. n31 Since Fidelity has had a full opportunity to
demonstrate that its proposal will better serve the public interest, and since
the record is clear that Fidelity has not demonstrated that it will in fact
provide a better service than RKO, we are convinced, for the reasons set forth
above, that RKO's renewal application for KHJ-TV must be preferred.
n31 The Commission has already
indicated that the holding of WHDH, Inc., which involved an existing operation
conducted under various temporary authorizations and where a determination had
been made that new applications would be accepted upon the expiration of the
licensee's four month license, was restricted to the facts of that proceeding
and that it does not apply to the situation of a conventional applicant for
renewal of license, 17 FCC 2d 856, at 872-873 (1969). Nonetheless, since
earlier language in the Commission's Decision in that proceeding, 16 FCC 2d 1
(1969), has been construed by some commentator to place an insuperable burden
on a renewal applicant in a proceeding such as this one, we wish to take this
opportunity to emphasize that such is not our intention and that the renewal applicant's
ability to continue an existing service without disruption will be given weight
in the future on a record like this one.
38. However, the Commission's
Memorandum Opinion and Order, 31 FCC 2d 70, released in this proceeding on
August 2, 1971, stated that, in the event KHJ-TV is the preferable applicant on
a comparative basis, final action would be held in abeyance pending the
conclusion of the adjudicatory proceeding involving WNAC-TV Boston, Docket No.
18759, and that thereafter such action would be taken as appears to be
necessary and appropriate in light of the evidence introduced in, and the
outcome of, the Boston proceeding concerning the qualifications of RKO to be or
to continue to be a licensee. Inasmuch as the questions [*138]
bearing on RKO's qualifications in the Boston proceeding have not yet been
resolved, we shall, consistent with views expressed above, condition our
present action in this case on the outcome of the Boston proceeding.
39. Accordingly, IT IS
ORDERED:
(a) That the RKO General, Inc.
petition to dismiss application of Fidelity Television, Inc., or,
alternatively, to enlarge issues and reopen record for further hearing, filed
August 16, 1971; the motion of RKO General, Inc. for leave to file response to
supplement of Fidelity Television, Inc., filed on September 21, 1971; and the
motion of RKO General, Inc. to supplement petition against Fidelity Television,
Inc., filed April 25, 1973, ARE DISMISSED as moot.
(b) That the request for official
notice filed by Fidelity Television, Inc. on November 16, 1971, and the request
to file additional pleading filed by Fidelity Television, Inc. on December 6,
1971, ARE GRANTED.
(c) That the petitions for leave to
amend filed by Fidelity Television, Inc. on July 18, 1972, and April 6, 1973;
and by RKO General, Inc. on January 27, March 9, May 9, June 23, July 7, July
17, September 5, and December 14, 1972, and on February 8, March 15, April 19,
May 1, May 10, June 29, July 30, September 4, September 21, and November 14,
1973, ARE GRANTED and the respective amendments ARE ACCEPTED.
(d) That the application of RKO
General, Inc. for renewal of license for station KHJ-TV, Los Angeles,
California, File No. BRCT-58, IS DEEMED TO BE GRANTED, and that the application
of Fidelity Television, Inc. for a new television broadcast station at Norwalk,
California, File No. BPCT-3655 IS DEEMED TO BE DENIED, subject to whatever
action may be deemed appropriate following resolution of the matters in Docket
No. 18759.
FEDERAL
COMMUNICATIONS COMMISSION, VINCENT J. MULLINS, Secretary.
DISSENT:
[*140] DISSENTING
OPINION OF COMMISSIONER NICHOLAS JOHNSON
Today's decision, granting RKO's
renewal application for KHJ-TV in Los Angeles, may very well be the worst
decision of this Commission during may term of seven years and five months.
(1) This proceeding began in 1965
when, on August 31, RKO filed an application for renewal for its station KHJ-TV
in Los Angeles. Two months later, on October 25, Fidelity Television,
Inc. -- a newly-formed group -- filed for a new television station on the same
channel as KHJ-TV -- Channel 9. Accordingly -- after the Commission found
both applicants fully qualified -- the two applications were found to be
mutually exclusive and a hearing was ordered.
Four years later Hearing Examiner
Donahue issued his initial decision recommending that the license be granted to
Fidelity, and that RKO's application for renewal be denied.
For reasons that have never been
fully explained, the Commission majority waited for over two years before
holding oral argument in this case on October 12, 1971.
It then waited an additional two
years before rendering a decision in the case.
This delay has required the
successful applicant, Fidelity, to go to the U.S. Court of Appeals for a writ
of mandamus on not one, but two occasions. Today's decision is rendered
only in the face of the threat of such a writ of mandamus.
(2) RKO has engaged in some of the
most classic anticompetitive behavior imaginable in the use of its
station. For example, the Pepsi-Cola Company was told that Pepsi-Cola
would not be sold in the RKO General Tire plants unless Pepsi-Cola would
advertise on KHJ-TV. Subsequently, Pepsi's advertising budget on KHJ-TV
was increased, and the soft drink dispensers were installed. The record
is replete with examples of this kind. It was the position of the
Department of Justice [*141] in its amicus brief filed with this
Commission that if these findings of the Hearing Examiner are correct, RKO
should be absolutely disqualified from continuing as a licensee of this
Commission.
The Examiner did not take such a
stern view of the matter. He did, however, find RKO to suffer a significant
demerit as a result of its abuse of its monopoly power.
The Commission majority today finds
RKO neither disqualified nor suffering a demerit for this behavior.
(3) The past programming of KHJ-TV
was qualitatively somewhat less than mediocre. Fidelity made no effort to
disguise the fact that it had deliberately sought to challenge the absolutely
worst station in the Los Angeles area. It wished to be a successful
challenger. There is nothing in the record of this case to suggest that
it made an erroneous choice or that it should not be successful. The
Hearing Examiner's description of the programming is as persuasive as it is
colorful on this score.
In the Moline n1 case, this Commission found that the incumbent would
be renewed even though it had not met its promised levels of programming,
because the programming that it did in fact provide was not the most wretched
imaginable. Now, in this case, confronted with such programming, the
Commission finds it acceptable on the grounds that the incumbent never promised
to do any more.
n1 Moline Television Corp., 31 FCC
2d 263 (1971).
One is left with no other possible
conclusion than that no programming -- regardless of how bad it is or what was
in fact promised -- will ever be found to constitute a demerit against an incumbent
licensee.
(4) There is simply no way that the
record in this case can be read without concluding that Fidelity is the
superior applicant under not just some, but all of the comparative criteria
this Commission has conventionally used.
As for diversity of ownership,
Fidelity is a new applicant which owns no other media in the area. (A 1%
shareholder does have some interest in some suburban newspapers.) RKO, by
contrast, owns an AM and an FM radio station in the market, as well as the
television station, as well as numerous other broadcast properties in other
markets throughout the United States. Clearly Fidelity is the superior
applicant with regard to this comparative criterion.
As for local ownership, all of
Fidelity's owners live in the Los Angeles area. None of RKO's owners
lives in the Los Angeles area. Thus, once again, Fidelity must be found
the superior applicant as to this comparative criterion.
The Commission has often emphasized
the desirability of an integration of ownership and management -- that is, that
those who own the broadcasting facility actually participate in the management
of it. Of Fidelity's ownership, a full 23% represents owners who will be
involved full time in the operation of the station. None of the owners or
rko/ is involved in any way in the operation of KHJ-TV. Once again,
Fidelity must be found the superior applicant.
Anticompetitive behavior was used by
the Hearing Examiner as a comparative criterion, rather than disqualifying --
as the Department [*142] of Justice urged. I believe, with
the Department of Justice, that KHJ-TV should be disqualified under the set of
facts before us. But treating it as a comparative criterion, once again,
Fidelity is found to be the superior applicant.
The Examiner also awarded
comparative demerits to KHJ-TV for its excessive commercialization and its
failure to editorialize. Although there would be circumstances under
which I might find a failure to editorialize fully explicable, I do not believe
those circumstances exist here. And I agree with the Hearing Examiner as
to excessive commercialization. Thus, once again, Fidelity must be found
to be the superior applicant.
Only as to past broadcast experience
can RKO be said to have any advantage whatsoever and, given the nature of its
performance, it is not clear how that can count much in its favor.
(5) Finally, I believe that Fidelity
was deprived of the opportunity to which it is entitled in law to show what its
proposed programming would be. See Chapman Radio & Television Co., 5
F.C.C. 2d 416 (1966).
The majority cites no precedents for
its holding in this case simply because there is none.
I may issue a more detailed
discussion of this case at some future date, but this discussion is enough to
highlight my despair over the Commission's abuse of statutes, past Court of
Appeals decisions, and its own precedents in its strained effort to protect
RKO's investment in KHJ-TV.
I dissent.
DISSENTING STATEMENT OF COMMISSIONER H. REX LEE
I must dissent to the majority's
decision to grant the application of RKO General, Inc. for renewal of license
for Station KHJ-TV, Los Angeles, California, and to deny the competing
application of Fidelity Television, Inc. for a new television station at
Norwalk, California. The decision effectively ignores the impact of
record evidence compiled with regard to reciprocal trade practices of General
Tire and Rubber Company and its subsidiaries, including RKO, on the latter's
qualifications to remain licensee of KHJ-TV, carefully avoids any attempt to consider
the effect of serious issues specified against RKO in a comparative proceeding
involving its Boston television station, WNAC-TV, n1 incorrectly assesses KHJ-TV's past broadcast
[*143] record and distorts the relevance of traditional comparative criteria
in an attempt to favor an existing licensee.
n1 On December 3, 1969, the
Commission designated the renewal application for WNAC-TV for hearing with two
competing applications. See 20 FCC 2d 846 (1969). The hearing issues
included a determination of whether RKO should be disqualified as a broadcast
licensee or issued a comparative demerit in view of alleged anticompetitive
trade practices directly related to the operation of WNAC-TV and therefore, was
much broader than the issue tried in the KHJ-TV cases. Subsequently, the
Review Board enlarged the issues in the Boston proceeding to determine whether,
in sworn testimony given during the course of the KHJ-TV proceeding, officers,
employees and/or former employees of RKO or General Tire had misrepresented or
concealed facts or had been lacking in candor in regard to the existence,
nature and extent of reciprocal trade practices. Upon petition by the
Broadcast Bureau, the Commission declined to reopen the KHJ-TV hearing record
for the purpose of specifying issues similar to those in the Boston
proceeding. However, it stated that, in the event RKO was found to be the
preferred applicant on a comparative basis in the Los Angeles proceeding, the
issuance of a final decision would be deferred until conclusion of the Boston
case.
Contrary to the majority's position,
I believe that evidence of reciprocal trade practices by General Tire and RKO
reflects adversely on RKO's licensee qualifications. The hearing record
in this proceeding provides ample support for the proposition that General Tire
and its subsidiaries engaged in substantial efforts to use corporate purchasing
power to improve the profitability of KHJ-TV through the mechanism of
reciprocal trade agreements, without regard to the quality of the station's
programming. The record illustrates numerous instances where General Tire
utilized reciprocal trade agreements to obtain advertising business for its
radio and television stations, including KHJ-TV. In fact, the evidence
shows that General Tire attempted to bring pressure on advertisers to buy time
over RKO stations, often for reasons completely unconnected with the quality of
programming being produced by the stations. For instance, as the result
of extensive negotiations in 1962, General Tire and Pepsi-Cola concluded a
"mutually beneficial association" whereby more Pepsi-Cola would be
placed in General Tire plants in return for increased Pepsi-Cola radio and
television advertising. As a result, Pepsi-Cola's advertising on KHJ-TV
went from $3,500 in 1964 to $40,000 in 1965. Similarly, negotiations with
Olin-Mathieson, which concerned the award of a fixed percentage of General
Tire's needs for polyol for the synthetic rubber process, resulted in
Olin-Mathieson advertising on KHJ-TV jumping from nothing in 1962 and 1963 to
$12,350 in 1964.
Correspondence and other evidence of
the relationship between Aluminum Company of America (Alcoa) and General Tire
also indicated that the former's advertising on KHJ-TV resulted from the
mutually-beneficial trade arrangement rather than from any particular desire to
advertise on the station. Although Alcoa placed no advertising on KHJ-TV
during 1962, 1963 or 1964, it spent $8,069 with the station in 1965. In a
1962 Trade Relations and Customer Activity Report of General Tire, it was noted
that American Airlines' advertising agencies would drop RKO in 1963 and that,
therefore, the company, where feasible, should refrain from using the
airline. Although no money was spent on KHJ-TV advertising by American
Airlines in 1962 or 1963, the airline did spend $14,500 and $9,650 in 1964 and
1965, respectively. Similar trade relations efforts with the Hertz
Corporation resulted in that company's making the following expenditures on
KHJ-TV: 1962-$63,550; 1963-$90,025; 1964-$20,400; 1965-$9,350.
These reciprocal trade practices
obviously placed KHJ-TV's competitors at a disadvantage for reasons often
unconnected with the quality of the station's programming or the size of the
audience involved. Moreover, the existence of the corporate parent's
economic pressure effectively destroyed any incentive for KHJ-TV to provide
improved programming since the station had advertiser support available in any
event. As the Department of Justice noted in its amicus curiae brief, filed
in this proceeding on June 10, 1970, General Tire and RKO practiced overt
reciprocity involving explicit agreements, which is destructive of competition
and is inconsistent with the public [*144] interest since, to the
extent that a broadcast licensee can rely on reciprocal purchasing power to
obtain advertising; it may cease to provide the quality of service which would
have been necessary in a competitive atmosphere. In effect, Justice would
find that reciprocal trading practices are per se violations of the antitrust
laws and are anticompetitive in nature. Nevertheless, the majority
stresses the fact that the civil antitrust action brought against General Tire
and three of its subsidiaries, including RKO, on the basis of reciprocal trade
practices was eventually terminated with the issuance of a consent decree and
that, therefore, no determination was made that improprieties had occurred or
that such practices, standing alone, violate the antitrust laws. The
majority also points out that the "relevant legal and economic concepts
were in a state of flux at the time" and that "many other
corporations engaged in similar trade relations practices during this
period."
In spite of the majority's attempt to
minimize the impact of the conduct at issue here, the fact remains that General
Tire and RKO engaged in reciprocal trading of a coercive nature which was
intended to benefit the latter's radio and television stations and which did
result in increased advertising revenues for KHJ-TV. Without addressing
the question of whether the trade practices violated the antitrust laws, it is
clear that RKO acted in derogation of the public interest by participating in
anticompetitive conduct and that this Commission has the responsibility to
prevent monopolistic domination in the broadcast field. See F.C.C. v.
Pottsville Broadcasting Co., 309 U.S. 134 (1940). Moreover, the Justice
Department's willingness to settle for injunctive relief of a prospective nature
in its antitrust action against General Tire and its subsidiaries does not
diminish the significance of the past trade practices found in the record of
this proceeding -- practices which were directly related to the operation of
broadcast facilities. As a result, I must conclude that such conduct
effectively precludes a finding that RKO possesses the requisite qualifications
to remain the licensee of KHJ-TV.
Fidelity has claimed that the
limited scope of the anticompetitive practices issue in this proceeding and the
alleged lack of candor by RKO principals during the evidentiary hearing
hampered its efforts to adduce evidence about General Tire's reciprocal trading
activities. As noted previously, the Review Board added issues in the
Boston proceeding concerning the candor of RKO and General Tire witnesses who
had testified in the Los Angeles hearing with regard to the existence, nature
and extent of reciprocal trade practices. While the Commission declined
to reopen the record in this proceeding for the purpose of specifying the
anticompetitive practices and candor issues already included in the Boston
case, it did order that a final decision herein would be held in abeyance
pending conclusion of the Boston case if RKO was held to be the preferred
applicant on a comparative basis. However, on June 11, 1973, the United
States Court of Appeals for the District of Columbia, in response to a petition
for writ of mandamus filed by Fidelity, stated that a decision in this
proceeding appeared to have been unreasonably delayed, and it asked for a
report of the Commission's action within 30 days. On July 6, 1973, the
Commission informed the Court that a decision herein would be prepared as
[*145] expeditiously as possible. Subsequently, Fidelity renewed
its request for a writ of mandamus.
As the majority notes in its
decision, it would be preferable to await the outcome of the Boston proceeding
before acting on KHJ-TV's renewal application so that all questions about RKO's
qualifications to be a broadcast licensee could be resolved at one time.
Such a procedure is especially appropriate since the Boston case involves a
broader issue on reciprocal dealing and an issue concerning the candor of RKO
and General Tire witnesses in testimony during the evidentiary phase of this
proceeding. It is more than obvious that these issues could have a
profound impact on the final disposition of this case since if RKO is found to
be disqualified as a broadcast licensee under either or both of these issues,
it would not be entitled to a comparison with Fidelity. Of course, the
majority attempts to avoid this procedural predicament by conditioning its
grant of RKO's renewal application and its denial of Fidelity's competing
application on whatever action is deemed appropriate following resolution of
the Boston proceeding. However, such a course of action does not
represent a final decision herein, which was promised by the Commission in its
report to the Court of Appeals. I would have preferred to expedite the
resolution of the qualifications issues in the Boston proceeding before
attempting a comparison of the RKO and Fidelity proposals.
Even if I assumed that RKO possessed
the basic qualifications to remain licensee of KHJ-TV, I could not agree with
the majority's analysis of the station's past broadcast record and its
comparative evaluation of the RKO and Fidelity proposals. Initially, it
should be noted that the majority has decided to follow the approach taken in
Moline Television Corp., 31 FCC 2d 263 (1971), by assessing all relevant
comparative criteria, including the past broadcast record of the renewal
applicant. Of course, in relying on the traditional comparative criteria
as articulated in the 1965 Policy Statement on Comparative Broadcast Hearings,
1 FCC 2d 393, the majority's decision squarely conflicts with the Commission's
holding in A. H. Belo Corp., 40 FCC 2d 1131 (1973), appeal pending, U.S. App.
D.C. No. 73-1673. In Belo, the Commission stated that whether a renewal
applicant's past broadcast record warrants a "plus of major
significance" is of crucial importance in the judgmental process and that
there is no need to rely on presumptions concerning integration of ownership
and management, local residence, etc. in determining how the applicant will
respond to community needs and interests.
The approach in Belo is based on the
Court of Appeals' opinion in Citizens Communications Center v. F.C.C., 145 U.S.
App. D.C. 32, 447 (F.2d 1201 (1971), which held that licensees should be judged
primarily on their past performance, that insubstantial past performance should
preclude renewal of license, but that superior performance (as measured by such
factors as the elimination of excessive and loud advertising, the delivery of
quality programming and the reinvestment of profits for the benefit of station
audience) should result in a plus of major significance in renewal-new
applicant proceedings. n2 The Court also stressed that the Commission
should strive to clarify in both quantitative [*146] and
qualitative terms what constitutes superior service. In its general
inquiry in Docket No. 19154, the Commission singled out the areas of local
programming and news and public affairs programming as indicative of
substantial service and although it stated that the proposed standards would
not be applied to any pending renewal proceeding, the Commission suggested that
independent television stations in the top 50 markets with revenues over
$5,000,000 should provide about 15% local programming, including 15% in prime
time; about 5% news programming, including 5% in prime time; and about 5%
public affairs programming, including 3% in prime time. n3
n3 See Notice of Inquiry in Docket
No. 19154, 27 FCC 2d 580, adopted February 17, 1971. On August 4, 1971,
the Commission adopted a Further Notice of Inquiry (31 FCC 2d 443) in light of
the Citizens Communications Center decision and indicated that the Court's
decision reinforces the need to resolve the matters at issue in Docket No.
19154.
Using any test of past performance,
I can only conclude that KHJ-TV's broadcast record must be weighed against it
in the comparative evaluation of the applicant's proposals. While I
recognize, as done the majority, that KHJ-TV has presented a number of
outstanding entertainment specials and has received several awards and
favorable public comment, the record clearly shows that the station placed
greatest emphasis on the presentation of motion pictures and broadcast very
little regularly-scheduled local live or public service programming during
prime time; used news programming to fill in spots between feature movie
presentations; and showed little responsiveness to the serious criticism of its
viewing audience. Analysis of composite week data indicates that the
station carried 86.5% entertainment programming; 3.375% news; 3.75% education;
3% talks; 3.375% religious, agricultural and discussion; and 7.13% live
programming. In comparison with the three other independent VHF stations
in the market, KHJ-TV had the highest percentage of entertainment programming,
the lowest percentages in the news and discussion categories and the lowest
percentages of live programming for both the total day and prime time. n4 Therefore, very serious questions are raised
concerning the licensee's broadcast record in view of the limited news and
public affairs programming on KHJ-TV, the station's failure to editorialize
during the period in question, its stress on heavily-commercialized movie
features and its unwillingness to respond to public complaints, especially
those relating to movie exhibition. To the extent that the hearing record
shows numerous deficiencies in KHJ-TV's broadcast record, it is not entitled to
a plus of major significance as was awarded to the renewal applicant in
Moline. In fact, it could be argued that KHJ-TV's "insubstantial
past performance" precludes license renewal. In any event, the
station's record must be considered as a minus factor in the comparative
evaluation rather than as one within the bounds of average performance as the
majority concludes.
n4 In Moline, the Commission
accorded a network-affiliated, renewal applicant a plus of major significance
for a past broadcast record that included 14.9% local live programming,
including 11.7% in prime time; 4.3% news; the absence of program complaints;
and a favorable showing in comparison with market competitors in local live
programming. KHJ-TV's past broadcast record suffers by comparison.
In regard to the other comparative
factors discussed by the majority, I believe that Fidelity is entitled to
preferences for diversification of the media of mass communications,
integration of ownership with management and local ownership. Under the
diversification factor, I [*147] note that while RKO owns and
operates AM-FM stations in Los Angeles and other stations in other cities
across the country (and numerous cable systems and media-related enterprises),
neither Fidelity nor its stockholders have any interest in an existing
broadcast facility -- although one stockholder has a 10% interest in a cable system
and another stockholder has a 26% interest in a corporation publishing
newspapers in several Los Angeles area suburbs. The majority concludes
that even though RKO clearly has more media interests than Fidelity, the nature
of the interests has no adverse effect on the flow of information to the
audience to be served, especially since there is a plethora of media outlets
already in existence in the area. However, such a position effectively
undercuts the diversification criterion and while I am sympathetic to the
majority's point that any attempt to restructure ownership patterns in the
broadcast industry should be accomplished through the rule making process
rather than on an ad hoc basis, the fact remains that the Commission's 1970
Renewal Policy Statement was rejected by the Court of Appeals; that the inquiry
in Docket No. 19154 has not been concluded; and that the majority professes to
evaluate the applicants on the basis of traditional comparative criteria, one
of which has been diversification.
In similar fashion, Fidelity should
be awarded a preference for the integration factor since it proposes
substantial integration of ownership with management in the operation of the
Norwalk facility while RKO has had and will have none. Two persons, both
local residents and active in civil affairs, with over 22% of Fidelity's stock
would occupy full-time positions with the proposed station as general manager
and director of public service programming while none of RKO's management
personnel has any significant ownership interest in the licensee. While
the majority concedes the quantitative superiority of Fidelity's integration
proposal, it downgrades the qualitative aspect of the proposal since Fidelity
principals lack broadcast experience and since the applicant's behavior before
the Commission has raised questions about its ability to implement an
integration proposal. n5 However, the
mere absence of broadcast experience is insufficient to raise doubts about the
bona fides of the integration proposal and, as pointed out in the 1965 Policy
Statement on Comparative Broadcast Hearings, an emphasis on such experience
could effectively discourage the entry of qualified newcomers into
broadcasting. See 1 FCC 2d at 396 (1965). In addition, the Broadcast Bureau's
earlier request to reopen the record and to add issues dealing with the
preparation, signing and filing of stock subscription agreements, application
amendments and affidavits by Fidelity was denied by the Commission, and the
majority now dismisses RKO's request for Section 1.65 issues even though it
professes to be disturbed by the questions raised and indicates that ordinarily
a remand for further hearing would be necessary. The majority cannot have
it both ways. It cannot reject or dismiss requests [*148] for
hearing issues and then use the questions raised by the requests against the
applicant in the comparative evaluation. Such an approach seriously
prejudices the rights of an applicant, but it is apparently employed here to
diminish the effect of Fidelity's superior integration proposal and to undercut
the integration factor in renewal-new applicant proceedings.
n5 On December 24, 1969, the
Broadcast Bureau filed a petition to reopen the hearing record and to enlarge
the issues in this proceeding, based on questions concerning the filing by
Fidelity of stock subscription agreements, amendments of its application and
affidavits which indicated the participation of Kenneth E. BeLieu in the
applicant. On August 16, 1971, RKO filed a petition to dismiss Fidelity's
application or, alternatively, to enlarge the issues and to reopen the hearing
record. RKO asserted that an amendment to Fidelity's application reflects
a fundamental change in corporate structure which was not timely reported to
the Commission as required by Section 1.65 of the Rules.
The majority then attempts to
isolate "other factors," which tip the comparative scales in favor of
RKO, after finding that both applicants are basically qualified, but that none
of the differences in the proposals are decisional. These "other
factors" consist primarily of a recitation of the investment made by RKO
in KHJ-TV and of the need for insuring predictability and stability in the
broadcast service. Of course, such "factors" are present in
every renewal-new applicant proceeding, and I question whether they assume any
independent relevance outside of the context of past broadcast record.
While I am most sympathetic with the majority's desire to articulate some
meaningful standards to govern the comparison between renewal and competing
applicants, I cannot agree that an ad hoc approach is desirable. I so
stated in my concurring statement in A. H. Belo, and I continue to adhere to
that position. So that while I may concur with the general statement of policy
that a licensee's actual past performance is of crucial importance in a
comparative proceeding and with the need to clarify the scope of the
comparative issue in a renewal-new applicant proceeding, I cannot agree that an
isolated decision or designation Order is the proper vehicle for the
delineation of major policy by the Commission. The general inquiry raised
in Docket No. 19154 is whether we can formulate some definitive guidelines for
application in a comparative proceeding involving a regular renewal applicant,
and it seems obvious that any major policy pronouncements in this important
area of broadcast regulation should be contained in a report and order in
Docket No. 19154.
In summary, I have dissented to the
majority's decision here because I believe that the anticompetitive practices
engaged in by General Tire and RKO, which inured to the benefit of KHJ-TV,
reflect so adversely on the licensee's qualifications that the renewal
application should be denied. Moreover, the issues specified in the
Boston proceeding concerning trade practices and the candor of General Tire and
RKO witnesses in the Los Angeles hearing should be resolved prior to the
disposition of this case (in spite of the Court of Appeals' apparent
willingness to entertain a writ of mandamus) so that the Commission can
determine whether RKO is entitled to a comparative evaluation with
Fidelity. Even if I assume that RKO is basically qualified to remain a
licensee, it must fail in a comparison with the challenger, whose preferences
include diversification, integration and local ownership, since RKO must be
assessed major comparative demerits for its past broadcast record and for its
reciprocal trade practices. n6
Therefore, I dissent.
n6 The majority decision does not
even mention reciprocal trade practices in the comparative evaluation of the
applicants even though the Trial Judge below found that RKO's participation in
General Tire's reciprocal dealing subverted the public interest and justified a
major discredit.
APPENDIX:
APPENDIX
RULINGS ON EXCEPTIONS TO THE INITIAL
DECISION
|
Exception No. |
Rulings |
|
1, 2, 4,
6-14, 16- |
Denied.
The Examiner's findings adequately and correctly reflect the record. |
|
|
|
|
31,
33-43, 59, |
|
|
61-69,
71, 73, |
|
|
75-80,
82, 85- |
|
|
89, 92,
93, 101- |
|
|
105,
107-112, |
|
|
114, 115,
117, |
|
|
120, 122,
124, |
|
|
127-136,
140- |
|
|
151. |
|
|
3, 5 |
Granted
to the extent that the record reflects RKO's media |
|
|
holdings
as shown in its more recent amendments. |
|
15 |
Denied
for lack of decisional significance. See RKO General |
|
|
Inc.
(WNAC-TV), 35 FCC 2d 100 (1972). |
|
32 |
Granted
to the extent that the words "by the same organization" are
deleted, and denied in all other respects since the Examiner's findings correctly
reflect the record. |
|
|
|
|
|
|
|
|
|
|
44-58,
70, 72, 81, |
Denied.
The Examiner's rulings contain no significant error. |
|
|
|
|
60 |
Denied
for lack of decisional significance. See footnote 27 of our Decision
herein. |
|
|
|
|
74 |
Granted to
the extent reflected in footnote 30 of our Decision herein. |
|
|
|
|
83 |
Granted
to the extent reflected in footnote 28 of our Decision herein, and denied in
all other respects for lack of decisional significance. |
|
|
|
|
|
|
|
90, 91 |
Granted in
substance. See paragraph 27 of our Decision herein. |
|
|
|
|
94-96,
98, 100, |
Denied.
The Examiner's findings contain no significant error. |
|
|
|
|
106, 113,
116, |
|
|
118, 119,
121, |
|
|
123, 125,
126, |
|
|
137-139,
152, |
|
|
153. |
|
|
97 |
Granted
in substance. See paragraph 14 of our Decision herein. |
|
|
|
|
99 |
Granted
in substance. See paragraph 17 of our Decision herein. |
|
|
|
|
154, 156,
158, |
Granted
to the extent reflected in our Decision herein. |
|
166, 168,
175, |
|
|
178. |
|
|
155 |
Denied.
Matters pertaining to proposed programming are not considered in the absence
of a special issue. See 1965 Policy Statement, 1 FCC 2d at 397-398. |
|
|
|
|
|
|
|
157 |
Denied
for lack of decisional significance. |
|
159 |
Granted
to the extent reflected in our Decision herein and otherwise denied for the
reasons set forth in paragraphs 24-26 of our Decision herein. |
|
|
|
|
|
|
|
160-165,
167, 169, |
Granted to
the extent that our conclusions have been substituted for those of the
Examiner. |
|
|
|
|
171-174,
176, |
|
|
180, 181,
170, |
Granted
to the extent reflected in footnote 28 of our Decision herein, and otherwise
denied for lack of decisional significance. |
|
|
|
|
179 |
|
|
|
|
|
177 |
Granted
to the extent reflected in footnote 30 of our Decision herein. |
|
|
|
|
182 |
Granted. |
|
|
EXCEPTIONS
OF FIDELITY TELEVISION, INC. |
|
|
Exception
No. (Findings) |
|
1 |
Granted to
the extent that the record reflects RKO's media |
|
|
holdings
as shown in its more recent amendments. |
|
2-11,
13-15, 17-20, |
Denied.
The Examiner's findings adequately and correctly reflect the record. |
|
|
|
|
22-52. |
|
|
12 |
Granted to
the extent reflected in footnote 23 of our Decision herein, but otherwise
denied since the Examiner's findings adequately and correctly reflect the
record. |
|
|
|
|
|
|
|
16, 21 |
Denied
for lack of decisional significance. See RKO |
|
|
General,
Inc. (WNAC-TV), 35 FCC 2d 100 (1972). |
|
|
Exception
No. (Conclusions) |
|
Exception
No. |
Ruling |
|
1, 2, 10,
11, 13, 14 |
Granted
to the extent that our conclusions have been substituted for those of the
Examiner. |
|
|
|
|
|
|
|
3, 4 |
Granted to
the extent that our conclusions have been substituted for those of the
Examiner, but denied in all respects since the record supports the findings
in question. |
|
|
|
|
|
|
|
5, 7, 8 |
Denied
for the reasons stated in our Decision herein. |
|
6 |
Denied for
lack of decisional significance. |
|
9 |
Granted
to the extent reflected in our Decision herein. |
|
12 |
Granted
to the extent that our conclusions have been substituted for those of the
Examiner, but denied in all other respects for the reasons stated in our
Decision herein. |
|
|
|
|
|
|
|
|
|
|
|
Exception
No. (Rulings) |
|
1-30 |
Denied.
The Examiner's rulings contain no significant |
|
|
error. |
|
|
Exception
No. (Other Matters) |
|
1-10 |
Denied.
The Orders contain no significant error. |
|
Final
unnumbered |
Denied
for the reasons set forth in our Decision herein. |
|
|
|
|
exception. |
|
EXCEPTIONS OF RKO GENERAL, INC.