United States v. Storer Broadcasting Company

PETITIONER:United States
RESPONDENT:Storer Broadcasting Company
LOCATION:

DOCKET NO.: 94
DECIDED BY: Warren Court (1955-1956)
LOWER COURT: United States Court of Appeals for the District of Columbia Circuit

ARGUED: Feb 28, 1956 / Feb 29, 1956
DECIDED: May 21, 1956

Facts of the case

Question

  • Oral Argument – February 29, 1956
  • Audio Transcription for Oral Argument – February 29, 1956 in United States v. Storer Broadcasting Company

    Audio Transcription for Oral Argument – February 28, 1956 in United States v. Storer Broadcasting Company

    Earl Warren:

    Number 94, United States of America and Federal Communications Commission versus Storer Broadcasting Company.

    Mr. Baker.

    Warren Baker:

    May it please the Court.

    This case involves the validity of the Federal Commission — Federal Communication Commission rules which placed a limit on the number of radio or television stations in which any one party may have an interest.

    Normally, these are called the Multiple Ownership Rules.

    On appeal, the Court of Appeals for the District of Columbia decided that the Communications Commission lack the power to adopt such rules because the hearing requirements of Section 309 (b) of the Communications Act prevented the adoption of any rule which would require the rejection without hearing of an application by a citizen for a lawful use of an available frequency.

    Now, we sought certiorari in this Court because in our opinion, the principle of law annunciated below would prevent any meaningful utilization of the Commission’s rule-making power even where Congress has specifically directed the Commission to deal with specific subjects.

    In the first part of my argument, I shall attempt to demonstrate that this broad and newly formulated principle of law, which is found in the decision of the court below, is inconsistent with the Communications Act and not reconcilable with decisions of this Court and in fact the court below.

    Secondly, I will attempt to demonstrate that contrary to the reasoning of the court below, the subject of limiting the Multiple Ownership of stations is an appropriate exercise of the rule-making powers of this agency and they are entirely consistent with the basic purposes and objectives of the Communications Act.

    But before beginning my argument, however, I’d like to give a brief recital of the facts and the history of this case.

    Multiple Ownership has always been of concern to the Federal Communications Commission.

    Since its inception, it has dealt with the question of whether or not it was in the public interest for additional facilities to be made available to parties who already have one or more stations.

    It handled AM or standard radio broadcasting for a long period of time on an ad hoc basis.

    For a long period of time, I say, prior to the adoption of the present rules.

    Nevertheless, it handled the question of Multiple Ownership of FM radio broadcasting stations by a rule since 1940 and television stations by a rule since 1941.

    The original rule with respect to television permitted a maximum of three television stations.

    Later, they were amended to five.

    This was reaffirmed in the particular rule-making, although since that time, with respect to a certain kind of television station, it has been expanded to seven.

    These rules, which are here before the Court, stem from a notice of proposed rule-making which was issued by the Federal Communications Commission in 1948.

    This notice of proposed rule-making was to amend existing Multiple Ownership Rules.

    It in — contemplated the inclusion of standard radio broadcasting, AM, within the rules.

    It considered the question of different treatment for minority interest and because of various counter proposals there was also, involved in the rule-making, questions as to making the number dependent upon area, geographic area of power or coverage.

    There were also alternative proposals to raise the limit in FM from six to seven and in television from five to seven.

    After receiving comments and hearing oral argument, the Commission issued a decision and order.

    In substance, that decision brought for the first time standard radio broadcasting within the limits of the rule rather than on an ad hoc basis.

    It raised the limit with respect to FM broadcasting from six to seven and it refused to adopt other alternatives among which were different limits for minority interest, different limits for area and power and the like.

    And it also refused to raise the limit in television from five to seven, but it reserved one specific portion of that.

    And that related to the question of making a different maximum where UHF television was concerned rather than VHF.

    After an appeal in this case, the Commission actually raised the limit to seven providing a maximum of five VHF were permitted.

    Therefore, it does not affect this case because when this decision and order was issued, Storer, the respondent here, was already the owner of five VHF television stations and was applying for a six VHF television station.

    Warren Baker:

    That — that application, being inconsistent with the rule, was dismissed.

    Now, I’d like to point out that in the decision of the Commission adopting these rules in accordance with the Administrative Procedures Act, they specifically set forth the basis and purpose of the rules.

    Yes, they did more than that.

    They discussed extensively all of the alternative proposals and set forth their reasons for either adopting or rejecting those alternative proposals.

    Now, with respect to the purpose of the rules, the Commission said as follows and this is found on page 21 of the record, “The fundamental purpose of the Multiple Ownership Rules is to promote diversification of program and service viewpoints as well as to prevent any undue concentration of economic power contrary to the public interest.”

    The Commission further stated that it is our view that the operation of broadcast stations by a large group of diversified licensees will better serve the public interest than the operation of broadcasting stations by a small and limited group of licensees.

    Now, as I said because an application of respondent was dismissed as inconsistent with the rule, respondent filed an appeal in the Court of Appeals.

    It filed its appeal, however, from the specific rules themselves under Section 402 (a) of the Communications Act and the Judicial Review Act of 1950, in fact, alleging also violation of the Administrative Procedures Act.

    The Court of Appeals in the District of Columbia found that the limitations on Multiple Ownership were invalid because in its view, the rules, however laudable their purpose, conflict with Section 309 (b) of the Communications Act.

    Therefore, it is affirmed that any discussion of the decision of the Court of Appeals must be preceded by an examination of certain other provisions of the Communications Act.

    Now, in Title 3 of the Communications Act, Sections 301 through 319 deal primarily with the licensing functions of the Commission.

    Section 309 (b), the particular section which the court below rested its decision, provides in substance that where the Commission is unable to make — to make a finding that it is in the public interest to grant an application without a hearing, it shall so notify the applicant and after an opportunity to reply if it is still unable to make it, it will set the matter for hearing.

    On the other hand, other provisions of the Communications Act deal with rule-making power of the Commission.

    Specifically, Section 4 (i), 303 (f), and 303 (r) authorize the Commission to adopt rules and regulations to carry out the provisions of the Act.

    Thus, the court below was dealing with the scope of the rule-making power.

    The scope of the rule-making power granted to the Communications Commission to set forth policies and standards of general applicability and the scope of the hearing requirements on a particular application.

    A purely literal reading of Section 309 (b) would of course to stop the Federal Communication Commission from adopting any binding rules.

    The court below, however, aware of numerous decisions upholding the Commission’s power to adopt rules, stated they were a few exceptions and it stated the very few, three in number.

    First, it said because Congress itself had required that only citizens maybe licensed.

    An application of an alien need not be given a hearing unless, of course, there is a factual dispute as to whether someone is or is not a citizen.

    Similarly, largely based on this Court’s decision in the lottery rules, A.B.C. versus U.S. which is sighted in our brief, the Court held that the Commission did not need to give a hearing when the application was for an unlawful use.

    It also stated that the Commission did not have to give a hearing when the frequency applied for by an applicant was unavailable because the Commission had adopted rules which placed it in allocation table so it was not available in the community for which it was sought.

    Specifically, the Court of Appeals stated it’s formulation of the law in reference to Section 309 (b) of the Act as follows and this is found in the record on page 50, “The statutory provision means that any citizen who seeks a license for the lawful use of an available frequency as the undoubted right to a hearing before his application maybe rejected.”

    Now, respondent did not choose to defend the Court’s statement of the law, instead respondents formulates a different one.

    Respondent says that Section 309 (b) requires a hearing on an application whenever Congress itself has not so defined the public interest as to preclude the grant.

    We think both of these formulations are incorrect.

    But certainly under either statement of the law, the Commission’s rule-making power is rendered largely meaningless.

    We believe rather that the rule-making power extends generally to the establishment of criteria for the exercise of the licensing function committed by Congress to the Commission.

    Subject of course to the condition that the particular exercise of the rule-making function be consistent with the standards and objectives of the Communications Act and that the Commission is not required by Section 309 (b) to reopen on a case to case basis the policy judgments which are embodied in the rules.

    We think the Commission may establish by appropriate rules the standards it will apply in passing on applications for broadcast licenses and limit the hearing to determining whether those standards are met.

    Warren Baker:

    In this case, even respondents admit that if the rules themselves are valid, there is no necessity for a factual hearing to determine whether or not they comply with the standards because there is no question to what the application itself showed that they have the maximum the rule specifically permits.

    We think that the Court of Appeals, therefore, misinterpreted the import of the decisions which sustained the Commission’s exercise of its rule-making power and the present decision is just not reconcilable to those previous decisions both in this Court and in the court below.

    Now, the leading case on the rule-making power as the F.C.C. is one with respect to the chain broadcasting regulations.

    This is N.B.C. versus U.S. found in 319 U.S. on page 190.

    It’s not without significance but although this case was argued extensively and briefed by both sides in the court below, the Court does not even refer to its meaning in reaching its conclusion.

    In the N.B.C. case, this Commission sustained rules of the Federal Communications Commission which are similar in form to the Multiple Ownership Rules, since they state that no license will be issued in certain conditions under certain circumstances.

    There as here in the case before the Court, there were allegations that the Federal Communication Commission had exceeded its rule-making power.

    There as here, the Commission set forth criteria and factors deemed to be contrary to the public interest which warranted in and of themselves a denial of a license or renewal of a license.

    There as here, the standards did not involve unlawful uses or unavailability of frequencies.

    The standards instead, as this Court said, were the Commission’s particularization of its conception of the public interest and the basic purpose was to encourage a larger and more effective use of radio in the public interest.

    Felix Frankfurter:

    I’ve assumed in saying that this rule and the — the broadcasting rules (Inaudible)

    Warren Baker:

    We think they are similar in form dealing with different particular criteria.

    Felix Frankfurter:

    Any difference between the — the Board?

    Warren Baker:

    Certain aspects of the Chain Broadcasting Rules are almost identical.

    For example, in the Chain Broadcasting Rules, there is one provision which says that the Commission will deem it is contrary to the public interest for a network to own two stations in a single community or serving substantially the same area.

    That happens to be the first section of the Multiple Ownership Rules which relate to people other than the networks.

    That perhaps is the reason that that particular section was not appealed by respondents.

    But it, in a sense, is the same, is a mathematical limitation on the number of stations in which a party may have an interest.

    It happens to be confined to a community rather than the entire United States.

    Felix Frankfurter:

    But under the Chain Broadcasting Rules, the petition on applicants are being foreclosed, which were being thrown out (Inaudible)

    Warren Baker:

    Under the Chain Broadcasting Rules since some of the particular rules were more comprehensive and involves such matters as indirect or by any means certain relationships.

    A great portion of the time, there would be factual matters which needed to be disposed of.

    But this Court in its original decision with respect to the Chain Broadcasting Rules specifically stated that these were not matters which would be raised and were subject to determination in the future.

    They were matters which if there was to be a hearing, the hearing would be on whether or not they complied with the rules, not on the policy judgments which justified the rules.

    Felix Frankfurter:

    What do you mean?

    316?

    Warren Baker:

    Yes.

    In 316, the decision of this Court finding that —

    Felix Frankfurter:

    What the 319 means?

    You said precisely what you said to be applicable.

    Felix Frankfurter:

    It isn’t here, namely, that this doesn’t deal grounded and flexible whereas not — prohibit whether to say, an applicant to say, consisted it for embracing the provisions of the Act in this particular thing.

    Warren Baker:

    It —

    Felix Frankfurter:

    Public interest would defer to address them as (Inaudible) and a part of deny by acquiring the general rule.

    Isn’t that true?

    Warren Baker:

    It is true, respondent argues that this Court in the decision in 319 U.S. did have some language which indicated that these were not iron bound but were flexible.

    However, we think that a reading of that decision —

    Felix Frankfurter:

    The Commission itself — the Commission itself say that representation to the Court at the trial.

    Warren Baker:

    The Commission was overruled by the Supreme Court initially on that ruling.

    The Commission contended that these rules were not appealable because of that matter.

    This Court in the first case held that they were appealable.

    Felix Frankfurter:

    That’s exactly not the first thing under jurisdiction rather that was a reviewable order, I mean such as on the controlling, the Commission contended that the rules were — and so reported, subsequently that the rules were not trying to apply the rules but it merely tried (Inaudible) for its own determination.

    Warren Baker:

    The Commission did say that in its first position.

    It did have some language in its second brief on the merits to this Court.

    I think, however, that the question —

    Felix Frankfurter:

    But it’s reflected in — in that opinion.

    Warren Baker:

    I think that the question of what the decision means is largely a matter of the Supreme Court language.

    I think, however, even in the language of the brief —

    Felix Frankfurter:

    That’s a decision (Voice Overlap) —

    Warren Baker:

    — it is clear.

    I think even in the language of the brief, Justice Frankfurter, it’s clear.

    But when the Commission was referring to the flexibility, it was not referring to the question of always having a hearing in which the basic policy of the rule would be an issue but instead if you read the specific citation it was referring to two things.

    One, the right later or if it felt that it is a general matter, these rules should not be applied to seek by a petition of rule-making to change the rules or two to seek a waiver if there were specific extraordinary circumstances which would justify it.

    We think that a clear — a complete reading of the language in your decision indicates that the flexibility you are talking about is not the flexibility which means that the rule means nothing but the flexibility if you can show extraordinary circumstances justifying a waiver or if you can show that as a matter of general exception there should be a different modification of the rule.

    Felix Frankfurter:

    I don’t think the alternatives are — wanted that in these result.

    I don’t think the alternatives are the rules being nothing as you have indicated.

    Those aren’t the alternatives.

    Warren Baker:

    Oh, I think that basically the rules are questions of whether or not after lawfully adopted rules are in effect, whether those rules require at every instance a reopening of the policy questions embodied in the rules to satisfy Section 309 (b).

    We think that the only thing that is necessary is that there’d be a hearing to determine whether or not the specifically laid down standards, the standards which have been adopted through the lawful exercise of the quasi legislative powers which had been given to the Commission can or cannot be met.

    And it is only if there is a factual dispute that a hearing need be held with respect to that.

    Felix Frankfurter:

    As I understand the — the decision of the Court of Appeals, it doesn’t deny — obviously, it doesn’t deny a rule-making power.

    Felix Frankfurter:

    It doesn’t deny — doesn’t require that in each case, we have to rejustify the old rules.

    As I understand the Court of Appeals itself that since the rules themselves are the province derived from the statutory criteria of public interest, the rule cannot conclusively bar an applicant from saying whatever power in respect to the validity — validity of the matter of public interest or the problems.

    The rules we may have — we would like to show to the Commissioner in the State that public interest is to depart from the rules in this case.

    That doesn’t mean in every case, (Inaudible) as dealing.

    In every case, you have to have a submersion and a nullification of the rules because you have ample power and I suppose would rather summarily on claims that they have no merit.

    Warren Baker:

    Well, yes.

    And the —

    Felix Frankfurter:

    (Voice Overlap) —

    Warren Baker:

    And the way that those claims should be exercised is by seeking to show that there are extraordinary circumstances in this case to justify a waiver.

    Otherwise, if you must have a hearing in each case, you have to go through the hearing before you decide that question.

    Felix Frankfurter:

    Well, would you — would it have made a difference with these parties and labor there — what do they call it, an application?

    If they call it an application for a waiver of a rule (Inaudible)0, does that make a difference?

    Warren Baker:

    Well, in that case we would have been faced with a question of what they alleged for those extraordinary circumstances.

    They didn’t allege extraordinary circumstances here.

    They just said we don’t have to allege anything, we want a hearing.

    Felix Frankfurter:

    Well, I’m suggesting merely that it doesn’t follow that because on a showing made, you can say the showing is so pointing in view of the general policy that was laid down, that we don’t give you plenary hearing.

    It doesn’t follow that therefore, you can lay down rules that are so definitive and comprehensive that nobody can say, “I’d like to show in this case the public interest is against what your rules would require in some of the employer.”

    I don’t see much difference.

    That seems merely a formality to say, “Why don’t they apply for a waiver?”

    Warren Baker:

    Well, we think there’s a difference because we think that when someone — someone says we have a right to a hearing before you can deny it.

    We don’t have to allege anything.

    Felix Frankfurter:

    Well, what kind of a hearing?

    Warren Baker:

    That is a different problem from saying, we think there are certain circumstances that justify a waiver.

    We think that with respect to the matter of our waiver provisions, you come to the question of a discretionary power to grant a hearing and of course that is not an absolute one but it would be necessary to allege matters which on their face would make a prima facie showing of extraordinary circumstances which will justify a grant in contravention of the rule and exception to the rule, mind you.

    And then if there were factual disputes with respect to the facts you have alleged, there might be a necessity for a hearing otherwise it wouldn’t be granted.

    I think there is quite a difference between the necessity to seek for a waiver than to say as a matter of right, 309 (b) says even if we don’t allege anything, you have to set us for hearing.

    That is essentially what the court below held.

    Because in the Court’s decision, they held that we could not so elevate this particular portion, this particular objective which we believe is part and a very important part of the public interest to have such importance that is of controlling decisional fact here.

    We think another case —

    Felix Frankfurter:

    We’ve heard that this theory is — without meaning to argue the (Inaudible) but you must carve out most of the field by generality to include personal application — individual application.

    Warren Baker:

    Well, first of all, it would be necessary as the test that I suggested that we establish, that the policy decision we make relates to an objective which is clearly consistent with the Communications Act, then it — it is reasonable.

    Felix Frankfurter:

    Well, this Court in 319 has given you a very properly (Inaudible)

    Has been the very broad leeway as to your judgment of what the public interest was in laying down the general consideration born of your experience et cetera, et cetera, et cetera.

    And we have to be very obvious with that for you to say, this wasn’t susceptible of the formulation with generality, (Inaudible) as a matter of the law, each thing is being tried all over again whether criteria are relevant to the general policy of the statute.

    Warren Baker:

    It may very well be that your decision is that in most instances you would want to be very careful in interfering in what the Commission might conclude in expertness was a valid portion of the public interest.

    We think, however, that you would exercise that judgment.

    We think the court below would.

    We think that, however, Congress has specifically given us the authority to do so.

    Otherwise, you reach a situation where rule-making itself becomes meaningless because if as a matter of right without any request or any showing of any specific reason, a party may say you cannot deny an application no matter how inconsistent it is with any rule, then the rule-making is meaningless.

    Felix Frankfurter:

    The Commission hasn’t yet laid down a general rule — promulgated general rules regarding consummated ownership of the newspapers and none — (Inaudible)

    Warren Baker:

    No, it has not, sir.

    Felix Frankfurter:

    Well, those (Inaudible) and specifically is a very serious question.

    I should think they could lay down some general rules.

    That’s clearly whether you could to lay down an absolute exclusion of the rule, exclusionary to the extent that nobody can say, “Look, in this case, decided as a public interest to have a license between (Inaudible)

    Warren Baker:

    We have not met that question because —

    Felix Frankfurter:

    (Voice Overlap) did not answer that.

    I’d like the very — present this question (Voice Overlap) —

    Warren Baker:

    And it certainly does —

    Felix Frankfurter:

    — appeal to what you can take over by a general rule that leaves no opportunity of conflict, doesn’t give you a continuation, the public interest out of all the (Inaudible) was against the application, wouldn’t it?

    Warren Baker:

    I recognize that that is a question.

    On the other hand, this Court has already decided many cases — I mean several cases in which the Commission has laid down general rules in particular areas and this Court has them that the Commission had the right to exercise that discretion in a — putting it in a rule.

    Now, if the rule-making power is to have any validity —

    Felix Frankfurter:

    Which case — which case, other than the broadcasting case, as the Court made — as the Board comes here with a rule which of course completely excluded as of its notion of the public interest and preclude a particular applicant from saying, “I come within the public interest and outside of the considerations of the general rule.”

    Which case other than —

    Warren Baker:

    The next case I would like to cite is the Felman case.

    Now, the Felman case, which is cited in our brief, was a rule-making proceeding of the Commission in which the Commission concluded —

    Felix Frankfurter:

    (Voice Overlap) —

    Warren Baker:

    — the form of a rule — what?

    It was —

    Felix Frankfurter:

    (Voice Overlap) —

    Warren Baker:

    Yes.

    It was affirmed in this case on a per curiam decision.

    These rules provided that no license would be granted or renewed where a transferor had reserved the right to — to reassignment in the license or had reserved the right to use a certain — retain certain amount of time in the use of the station.

    The Commission’s rules provided that it would not grant a renewal or it would not grant a license to someone who had entered into such a contract where this was reserved to the original transferor.

    Those rules were sustained where there was an allegation that this was beyond the power of the Commission by a three-judge statutory court.

    And it was appealed as a matter of right to this Court and this Court affirmed those on a per curiam decision.

    An examination of the briefs to this Court in that case will show that the question of exceeding the power, the rule-making power of the Commission was directly an issue and this Court sustained the rules.

    Now, respondent suggested that in Felman, it was merely a codification of what Section 301 required, control in the licensee rather than someone other than the licensee.

    This was not a mere codification.

    It was a new policy implementing congressional objectives which prior to this time the F.C.C. had permitted.

    Prior to this time the Commission had permitted that degree of retention and control and it concluded this was inconsistent with the public interest and laid down the rule.

    There is another rule and this was not in this Court but in the court below, the Logansport case which deals with the question of the Commission’s power by rule-making to handle the questions of fair and equitable distribution of facilities amongst the various states and communities which is one of the specific provisions of the Act referred to under public interest.

    We see no rational difference between our right to say that there will only be the following frequencies in this community and anyone who files an application for a frequency, which is not in our rules in this community, is not permitted the opportunity to — by a hearing, establish that we should put one there.

    That was what those rules do.

    Those were an exercise of our rule-making power which the court below found were sustained.

    Turning once more to the respondent’s formulation of the law, that is that Section 309 (b) requires a hearing unless Congress itself has so defined the public interest so as to preclude the grant.

    Respondent supports the Logansport decision as a rule prohibiting the licensing of an applicant who proposes to disrupt “the equitable distribution of radio facilities.”

    Congress did not preclude a grant contrary to the specific rules anymore than in the present case.

    Those rules were merely the Commission’s interpretation of fair and equitable distribution of facilities as part of what Congress specified as public interest just as the present rules are the Commission’s specification and particularization of the public interest.

    We think that the doctrine of the Chenery case in this Court specifically permits the Commission in its discretion to determine whether or not to make this policy-making determination, this quasi legislative determination by rule-making rather than on an ad hoc basis if the Commission so desires.

    In summary, we believe that the real import of the Court decisions is that where the Commission has adopted a reasonable rule properly related to considerations of public interest, the requirements of Section of 309 (b) are met by a hearing more appropriate on the question of compliance with the rule.

    There was no question here of the ability to comply.

    I would like to go on and discuss the second part of my argument as to the reasonableness of this particular subject matter of these rules.

    The basic purpose, as stated by the Commission, was to promote the diversification of ownership in order to maximize the diversification of program and service viewpoints as well as to prevent any undue concentration of economic power contrary to the public interest.

    In expressing that view, it came to the conclusion that it was better to have a large diversified group of licensees than to permit these limited facilities to gradually come into the hands of a small group of licensees.

    Now, there’s no question to what an important aspect of public interest to be served by the Commission is the maintenance of the field of broadcasting as one of free and extensive competition.

    The Sanders case, cited in our brief, establishes that and we think here that the Commission was concerned with preserving the full measure of competition, competition between program and service viewpoints and competitions in an economic sense.

    The concentration of station ownership in the hands of a relatively small number of licensees would, like the network abuses in which the Chain Broadcasting Rules were designed to eliminate, prevent the maximum utilization of radio facilities in the public interest.

    This is a specific chart found in Section 303 (g), generally to encourage the larger and more effective use of radio in the public interest.

    And we think there is no question for what, as one factor in public interest, the diversification of program and service viewpoints has been held many times to be legitimate.

    Warren Baker:

    It is a matter which is again and again applied in comparative cases.

    As this Court has stated in Associated Press versus United States in 326 U.S., page 1 and I’m quoting from page 20 of that decision, “The widest possible dissemination of information from diverse and antagonistic sources is essential to the general welfare of the public.”

    We think that is essentially what the Commission means in attempting to maintain as great a diversification of program and service viewpoints as possible.

    We also think the other aspect, the other objective which it seeks to obtain through this rule.

    The prevention of undue concentration of economic power has been sustained in many cases, particularly the N.B.C. case and the Mansfield Journal case.

    And we cite this merely to show that this is a factor in public interest which the Commission maybe concerned with.

    The Multiple Ownership Rules do serve this related purpose of effectuating a congressional policy against an undue concentration of economic power in the hands of a few individual members of the broadcast industry.

    For the owner of numerous stations is in a position to utilize the enhanced bargaining power conferred by Multiple Ownership Rules in such ways as obtaining network affiliations over weaker competitors and other matters in this competitive struggle.

    Advantages, mind you, which flow not from quality of service and program but from the pure concentration of economic power.

    Respondent suggest that we cannot prevent this concentration without establishing that in each particular instance, there has been a violation of the antirust laws.

    We submit that has been decided in the Mansfield Journal case that the Commission may take into account practices which in its opinion will be violative of those underlying policies which led to the adoption of the antitrust laws particularly in this field of limited facilities.

    This — these rules are not mere restatements of antitrust laws.

    In the National Broadcasting case, the regulations were not there rested on the conclusion that various practice to which they pertain could be regarded as per se violations of the antitrust law.

    The practice in question were prescribed not because they were found unlawful but because they were deemed, like here, to prevent the maximum utilization of radio facilities in the public interest.

    We think the rules and their objectives are imminently reasonable.

    Both objectives as set forth by the Commission are consistent with the Communications Act and whether these objectives are to be handled by an ad hoc determination, they are policy determinations.

    They’re not matters relating to a particular case to the particular evils of the case.

    These objectives are general objectives and if they’re handled on an ad hoc basis even the considerations still would be, what is the appropriate limitation for a general standard for the evils to be prevented?

    The wider diversifications of interest are not matters relating to a particular case, they are objectives for the entire United States.

    Now, how can you handle this matter except on an individual basis?

    Basically, each time that an additional station comes under the control or influence of any one person, these two objectives are thereby to a degree conflicted with.

    The second station in which a party has an interest diminishes the diversification of persons in broadcasting and it increases the dangers of competitive advantage from economic power.

    The third does more.

    The fourth does more.

    At some place, the Commission should be entitled to draw a line and we think that the only equitable way to treat the problem is to draw a line through rule-making where all of the parties have an opportunity to comment.

    For if these lines are to be drawn in individual cases, only the particular person concerned will comment and have an opportunity to say what should be the particular line.

    The exercise of the rule-making power in this particular case in this kind of situation is exactly what rule-making is for, to establish standards which apply for broad purposes across the board rather than try on an ad hoc basis to reach those conclusions which in any case would be the same kind of policy determination.

    We think that the Commission’s experience and the record of the industry furnish a convincing basis for the agency’s conclusion that there are enough different persons in the United States capable and desirous of serving the needs of the public so that the extremes of Multiple Ownership may be avoided without adversely affecting the public interest in securing qualified licenses.

    If as weird, the Commission may impose some limitation on the Multiple Ownership of broadcasting stations, it seems plain that the selection of a particular sealing is a matter for the Commission’s informed and expert judgment.

    We think therefore that this Court should reject the formulation of law set forth in the decision below.

    Warren Baker:

    We think that it basically is unsound and we think that the — this Court should there also find that the Commission’s rules are inappropriate and reasonable exercise of Commission’s power in this particular subject which is completely consistent with the objectives which the Commission has been charged with carrying out by Congress in the Communications Act.

    Stanley Reed:

    Mr. Baker, what — what about the network rules, they enter in the positions or — by joining this network?

    Warren Baker:

    One — are you referring —

    Stanley Reed:

    Well — well —

    Warren Baker:

    — to the —

    Stanley Reed:

    — are they — are they rules in regard to how many stations there was (Voice Overlap) —

    Warren Baker:

    One portion — no, sir.

    One portion of the network rules themselves relate to ownership of stations.

    But these rules apply to networks like anyone else in the sense that it creates a maximum number.

    Stanley Reed:

    A network can only own fives stations and the others must be leased, is that it?

    Warren Baker:

    That is correct.

    The rest of them may not be leased.

    They must be affiliations in which someone else owns them and merely under an affiliation contract obtains program from the networks.

    Stanley Reed:

    But suppose the network has only individual station, it’s not (Voice Overlap) —

    Warren Baker:

    The control that — whatever degree of control a network has over the individual station relates to the quality of its programs and the specific contracts which must be in accord with the network rules.

    If they are not in accord with the network rules that we have adopted, if they have provisions which conflict with those, the station’s license itself is in jeopardy.

    Stanley Reed:

    Begin through the local stations rather than (Voice Overlap) —

    Warren Baker:

    That is what the networks do, yes, because that is where we have the power with rules relating to the stations themselves.

    What I do wish to reiterate that one of the rules in the network case which was reaffirmed — I mean which is affirmed by this Court did prohibit a form of Multiple Ownership.

    It merely was confined to a locality as contrasted to the United States.

    And one of the questions which the respondent raises here is that the Commission should have varied its limits within these two limits, it should have had wider geographical areas in which it had a different standard to take into account certain variables.

    We think that the Commission has satisfactorily explained in its decision why it did not choose to adopt all of the variables which might be put into a rule.

    We do not think that just because you can pick out some specific case in which in your opinion there is a lesser evil than the rule prohibited that that thereby renders the rule itself invalid.

    If that were true, wage and hour, maximums for children, speed laws and the like would also be invalid because certainly they do not fit the particular case with respect to all the variable factors which anyone can dream up.

    We think this do carry out a legitimate objective of the Communications Act that they therefore should be sustained.

    Thank you.

    Earl Warren:

    Mr. Connelly.

    Albert R. Connelly:

    Your Honors, the Commission’s argument in this case depends very largely upon it’s assertion that it has been entrusted with the Congress with broad, expansive and substantive rule-making powers.

    Almost as if to say that the Commission is authorized to adopt a rule on any matter affecting communications on which the Congress could itself have legislated.

    That argument completely overlooked the fact that the rule-making power is purely incidental to the substantive provisions of the Act.

    Albert R. Connelly:

    Each of the sections of the Act which confers rule-making power, and they are set forth at page 5 of the respondent’s brief, is itself strictly limited.

    It authorizes the adoption of a rule which first must be not inconsistent with the Communications Act.

    And second, which must be necessary, mind you not necessary or desirable, necessary to prevent interference between stations or otherwise to carry out the provisions of the Act.

    And the question therefore here is whether these numerical prescription rules are consistent with the Act and whether they are necessary to carry out its provisions.

    Now, Section 309 (b) which is the Section dealing with applications for license, provides that if the Commission is unable to find without a hearing that the grant of a license would serve the public interest, then it shall formally designate the application for hearing on the grounds or reasons then obtained.

    That, I submit to Your Honors, is a very vital section of the Act because it is only the physical limitation on the available facilities which provides any justification for impairing the otherwise equal rights of citizens to access to means of communication.

    And this Court has held in the Ashbacker case, the hearing contemplated by 309 (b) is not a matter of discretion, it’s a matter of right and this Court has also held that a denial of a statutory right, the hearing is a denial of due process.

    Now, what do these rules here do?

    Those rules deny a hearing under 309 (b) to anyone holding interests in five TV stations.

    There isn’t any question about the interpretation of that phrase because it has been interpreted by the Commission, as Mr. Baker has pointed out, in the application filed by Storer and indeed in others where applications by persons owning five TV stations are automatically dismissed without a hearing.

    Accordingly, on their face, these rules are inconsistent with Section 309 (b) and there is no showing whatever that they are necessary to carry out any other provision of the Act.

    We conceded in the court below and concede here that that statutory right to hearing is subject to an implied qualification but only where the Congress itself has declared or determined the public interest so as to preclude the possibility of a grant of a license.

    For example, in the case of an application by an alien, they don’t have to have a hearing to determine whether a grant to an alien is in the public interest because Section 310 of the Act says it isn’t.

    Similarly, an application in conflict with the nationwide allocation of frequency because the Commission is required by another section of the Act, 307 (b), “The substitute for the test through the public interest in the individual application, the test of fair, efficient and equitable distribution of frequencies among the several states and communities.”

    And that was the situation which the court below dealt with in the Logansport case referred to by Mr. Baker.

    Similarly, an application by a person on the contract to transfer control of the station to a non-licensee in violation of Section 301 of the Act, that was the situation involved in the Felman case here or an application by someone who proposes to conduct a lottery in violation of the Federal Criminal Code, the situation that Your Honors dealt with in the American Broadcasting case.

    In other words, where a federal statute has determined the public interest, a hearing is not required because the statute bars the finding, prerequisite to the issuance of a license that it would be in the public interest to grant it.

    Is this rule that’s in question again, Mr. Connelly, have provided in this case so that the waiver provisions — so that you could come in and — can come in and show that the rules do not apply them, would agree then that the rule is all right?

    Albert R. Connelly:

    The waiver provision was — presents a separate problem, Mr. Justice Harlan.

    In that the decision to waive or not to waive a rule as interpreted by the Commission does not require a hearing.

    In other words, if it were phrased in terms of waiver, that would be a deprivation of our statutory right to a hearing, not merely to file an application and have the Commission reject it.

    But a hearing on which we would have the opportunity to show, but notwithstanding, the policies and rules of the Commission that in this situation it was in fact in the public interest to grant us a license.

    Now, if that objective were accomplished, I wouldn’t care how the — how the rules or how — how the phraseology —

    Would be something less than a full grant hearing?

    Albert R. Connelly:

    Nothing less than a hearing would satisfy the statute.

    (Voice Overlap) —

    Felix Frankfurter:

    That would mean an oral hearing, does it?

    Albert R. Connelly:

    Yes, sir.

    Felix Frankfurter:

    An oral hearing?

    Albert R. Connelly:

    An oral hearing.

    Albert R. Connelly:

    An — an opportunity to submit evidence — an opportunity to submit evidence, not merely an application.

    Felix Frankfurter:

    (Voice Overlap) to submit your claims, you’re out of the rules?

    Albert R. Connelly:

    This Court has determined that in — that where a statute grants the right to a hearing, nothing less than a full hearing will satisfy that requirement.

    That’s in the Federal Radio Commission against Nelson Brothers where the mere opportunity to file briefs and oral arguments was held not to satisfy the statutory requirement of the hearing.

    Felix Frankfurter:

    I understand why administrative agencies do not give hearings if this Court doesn’t see itself with the — obliged to the duties on —

    Albert R. Connelly:

    The —

    Felix Frankfurter:

    — issues involving those very issues.

    Albert R. Connelly:

    Because in this area, the Congress has not, in terms of individual applications, purported to declare the public interest.

    It has said that that must be determined by the Commission and a hearing.

    Felix Frankfurter:

    No.

    I’m just speaking in the part of what a hearing is.

    Albert R. Connelly:

    Yes.

    Felix Frankfurter:

    It doesn’t — a hearing doesn’t mean to me to require all dispositions.

    Albert R. Connelly:

    I would think under the interpretation to which thus far been given that that would be required in this particular case.

    I — I wanted to remind Your Honors of the statement you made in American Broadcasting Company on the subject of this implied qualification.

    You said there that the public interest, convenience or necessity standard for the issuance of licenses would seem to imply a requirement that the applicant be law abiding.

    In that case referring to the lottery that the applicant there propose to conduct.

    Now, there isn’t any such case here, although the Commission has sought to justify these rules on the basis of the antitrust laws.

    It concedes that the acquisition of the ownership, which is proscribed by these rules, is not in violation of the antitrust laws or indeed of any other laws.

    And our position is that where the Congress has not itself determine the public interest factor then the Commission must determine on the basis of all 11 factors.

    I’d like to make it quite clear in view of what Mr. Baker stated that there isn’t any question here of the Commission’s power to consider Multiple Ownership as a factor nor indeed is there any question of its power to adopt policy declarations with reference to Multiple Ownership.

    Indeed, they have done just that in provisions of these Multiple Ownership Rules which are not here under attack.

    And at page 29 of the record, this TV rule appears in the second subdivision, provision that no license shall be granted if the grant of such license would result in a concentration of control of television broadcasting in a manner inconsistent with public interest convenience and necessity.

    There can be no objection to that.

    In the second sentence, this I do ask Your Honors’ particular attention to that these deals with the situation prior to the point at which the magic number has been reached to five.

    In determining whether there is such a concentration of control, consideration will be given to the facts of each case with particular reference to such factors as the size, extent and location of areas served, the number of people served and the extent of other competitive service to the areas to areas in question.

    Those are perfectly proper declarations of policy on the part of the Commission, but the Commission cannot, as it has here, ignore its statutory duty to grant a hearing on all relevant factors and not merely the matter of Multiple Ownership to determine public interest.

    The court below stated, as Mr. Baker has already noted, the statutory provision, that is to say 309 (b), means that any citizen who seeks a license for the lawful use of an available frequency as the undoubted right to a hearing before his application may be rejected.

    And the Commission suggests that our position here in some respects or in some manner differs from that statement of the law by the court below.

    I submit that it does not.

    Albert R. Connelly:

    The court below was merely particularizing the general principle since Congress has determined the public interest with reference to a license to an area, has determined the public interest with reference to other unlawful use, has determined the procedure for determining nationwide allocation of frequencies whether there are other matters that may come within the general principle is not here for consideration, those are the only factors which have been suggested up to this time.

    The Commission’s apparent reliance on the Chain Broadcasting Regulations and the cases thereunder, I find very difficult to understand.

    In the order, as Mr. Justice Frankfurter recalled in the order adopting those regulations.

    Initially, the Commission stated, the quotation is at page 17 of our brief, “The applicant’s right to a hearing on the question whether he does in fact propose to operate in the public interest is fully preserved.

    The regulations we are adopting are nothing more than the expression of the general policy we will follow in exercising our licensing power.

    The formulation of a regulation in general terms is an important aid to consistency and predictability.

    It does not prejudice any rights of the applicant.”

    I think that may be contrasted with the statement Your Honors have just heard that if a hearing is required through regulations or the power to make rules is meaningless.

    Now, in that situation in the Columbia Broadcasting System case, 316 U.S., the Commission opposed judicial review of those regulations because they said they — that they were only announcements of policy.

    This Court granted review not on the ground that the regulations denied a hearing, but that the right to appeal from a denial of an application after a hearing was not an adequate remedy to test the problems created by those rules.

    There wasn’t any question raised by any party for that proceeding as to the applicants right to a hearing under 309 (b), as stated in the dissenting opinion in support of the Commission’s position that Mr. Justice Frankfurter noted that the statute provide an administrative procedure under which the Commission must make a specific determination in each case whether the public interest would be served by granting the particular application.

    And after this Court had granted that review in the C.B.S. case and the Chain Broadcasting Regulations came before you in the N.B.C. case, the Commission submitted in its brief in that case which is quoted at page 18 of our brief said, “In the language of 309 (b), each applicant, unless his application is granted without a hearing, is entitled to a hearing,” now, I mind you, “not only that he may have an opportunity to show that he is entitled to a grant of an application under the established policies of the Commission, but also that he may show if necessary that such policies are not appropriate in his particular situation.”

    And it was against that background that this Court announced in the N.B.C. case itself.

    The Commission did not bind itself inflexibly to the licensing policies.

    In each case that comes before it, the Commission must still exercise an ultimate judgment whether the grant of that license would serve the public interest convenience or necessity.

    A very similar conclusion was reached by the court below in the Stahlman case, a case involving a subpoena issued in a newspaper investigation.

    The Court there said if in this case it had been made to appear as counsel for the Commission — the counsel for appellant insists that the Commission’s investigation was solely for the purpose and the consideration or adoption of a hard or fast rule as the result of which newspaper owners may be placed in a proscribed class and thereby made ineligible to receive or apply — apply or receive a license, we should be obliged to declare that such an investigation would be wholly outside of and beyond any of the powers with which Congress has clothed the Commission.

    The numerical prescription rules here in question place the owners at interests in specified numbers of stations in a proscribed class and make them ineligible to receive licenses.

    Under the Commission’s position in this case, I submit to Your Honors, the Commission could equally adopt rules precluding licenses to newspaper owners without a hearing.

    Because certainly, the ownership of other mass media of communication is at least as much related to the avowed purposes of these rules as is the ownership of other television stations.

    We submit that the court below correctly held that there was no such power conferred upon the Commission to do that in the absence of a hearing.

    The numerical prescription rules here in question are invalid not only because they denied a hearing under 309 (b) but because they are arbitrary, in that, they exclude required consideration of relevant facts and in that, their basis is not adequately disclosed.

    Stanley Reed:

    I take it that there was ample opportunity to reject the rules before (Inaudible)

    Albert R. Connelly:

    Notice of rule-making was announced in 1948.

    Hearings — or there wasn’t any evidence but his oral statements were taken in 1949.

    And then nothing happened until late 1953 when these Multiple Ownership Rules were announced.

    Stanley Reed:

    (Inaudible) suppose grant them an opportunity between the draft and the final adoptions for the rule-making.

    Albert R. Connelly:

    No, sir.

    The notice of rule-making contained proposed rules and the statements were accepted.

    Stanley Reed:

    At this moment, the rule is there?

    Albert R. Connelly:

    It had a version of it.

    It was changed between the proposed and the final.

    Stanley Reed:

    But there was a limitation?

    Albert R. Connelly:

    But there was a limitation so far as the numerical limitation is concerned and indeed as the record shows, the industry generally was represented in protest of the proposed rules at this time.

    Could you have reviewed the propriety in the rule at that time, Mr. Connelly?

    Albert R. Connelly:

    The — the review proceeding was taken directly after the final promulgation of the rule.

    The hearing —

    I see.

    Albert R. Connelly:

    — took place back at 1949, but the rule itself was not promulgated until 1953, effective 1954 and the review proceeding started immediately thereafter.

    Stanley Reed:

    Just how did this come up, was there objection to — through a motion for a hearing?

    Albert R. Connelly:

    No, sir.

    Our application for a — a sixth television station —

    Stanley Reed:

    Was denied.

    Albert R. Connelly:

    — was denied simultaneously with the promulgation of these rules.

    And then —

    Stanley Reed:

    Well, they must have been in different orders because they —

    Albert R. Connelly:

    They’re in different orders.

    That’s correct.

    But the — the second order which is in the record.

    Stanley Reed:

    And then your objection was the denial of your sixth — application for the sixth without a hearing?

    Albert R. Connelly:

    We — yes.

    We did not take any appeal from that.

    Stanley Reed:

    Objection with the rules?

    Albert R. Connelly:

    Within that — yes, sir.

    The other way around.

    We’re taking our — our objection under 302 to the rules themselves because so long as the rule stand — stands then the disposition of our application for the sixth television station is automatic.

    Because the Commission says, “The rule disposes of it.

    You’re not entitled to a hearing.”

    So, we are directly attacking the rule itself because the consequences that flow from the rule.

    Stanley Reed:

    And you made no effort to get a hearing after the rule is adopted?

    Albert R. Connelly:

    I don’t quite understand Your Honor’s question.

    Stanley Reed:

    You have an application —

    Albert R. Connelly:

    Yes, sir.

    Stanley Reed:

    — for a sixth station —

    Albert R. Connelly:

    Yes, sir.

    Stanley Reed:

    — and the rule was adopted at the same time your application was refused.

    Albert R. Connelly:

    It was denied without a hearing because of the rules.

    Stanley Reed:

    But you had no special motion that you filed in your application for a relief of the rules?

    Albert R. Connelly:

    Well, sir, in — I don’t know about the — the procedure about a special motion.

    But in its decision denying the application of Storer for the sixth station, the Commission stated in so many words that it would treat that application as an application for a waiver of the rules and notwithstanding that, denied it without a hearing.

    Does Your Honor desire me to suspend at that point?

    Earl Warren:

    Until the red light comes on.

    Albert R. Connelly:

    The — the rules that are here in question was promulgated under an order which recites that they are designed to implement the congressional policy against monopoly, enunciated specifically in Sections 311 and 313 of the Communications Act.

    And the Commission suggests that there are two aspects to that policy, first, diversification of program and service viewpoint, and secondly, prevention of undue concentration of economic power.

    Earl Warren:

    Well, recess now.