Murdoch too powerful for government regulators

Thu Apr 24, 2008 10:42pm EDT

News Corp Chairman and CEO Rupert Murdoch listens to a question during a news conference before the 2008 Atlantic Council Awards Dinner in Washington April 21, 2008. REUTERS/Kevin Lamarque

News Corp Chairman and CEO Rupert Murdoch listens to a question during a news conference before the 2008 Atlantic Council Awards Dinner in Washington April 21, 2008.

Credit: Reuters/Kevin Lamarque

WASHINGTON (Hollywood Reporter) - The dirty little secret about Rupert Murdoch's plan to add Newsday to his stable of New York media properties is that there's little anybody can do to stop him.

In the topsy-turvy world of media regulation, Murdoch or any other media baron can own a TV station and then buy a newspaper in the same market, and there's not much federal regulators can do about it directly.

Debt-laded media firm Tribune Co. is close to a deal to sell Newsday to Murdoch's News Corp. for about $580 million and put Newsday into a joint venture with his New York Post, sources familiar with the matter said this week.

The Federal Communications Commission doesn't have the power to review Murdoch's bid to purchase the Long Island-based newspaper in advance. But when Murdoch's TV stations in the area come up for license renewal, the panel will be able to consider whether his purchase of Newsday is in the public interest.

The forces that oppose Murdoch -- because he's Murdoch or because they fear an increasingly consolidated media market -- are in luck. News Corp. last year asked the FCC to renew its licenses to operate TV outlets WNEW and WWOR.

Murdoch already has managed a number of waivers in the area.

Ownership of WNEW and the New York Post is allowed under a permanent waiver. His waiver to own WWOR and the New York Post and, in effect, WNEW, expires at the end of the year. (Murdoch is allowed to own the Wall Street Journal because it's a "national" newspaper and the broadcast ownership rules deal with local markets.)

That waiver may have to be renewed. Or, it may not, depending on the legal status of the new ownership rules the FCC approved last year, which allow one person or company to own both a newspaper and a TV station in the top 20 markets.

News Corp. likely would need a waiver or may have to sell something to purchase Newsday since the new rule specifically said it allows the ownership of one station and one newspaper, not two stations.

Then again, maybe not. The way the rule is written, a broadcast baron can buy a newspaper. There's also a question about just what market is served by the different media properties.

There are a number of legal challenges to the new rule, including ones from Tribune Co. and News Corp.

As for the case at hand: Say News Corp. and Tribune cut a deal for Murdoch to get Newsday.

The purchase would get challenged during the license renewal. Let's just say the FCC determines that it's bad for the public. Murdoch can then ask for a hearing before an administrative law judge.

If News Corp. asks for an administrative hearing -- which it would -- and loses, the deal then would get a review by the full commission. If News Corp. loses at the commission and the FCC says it has to sell some property, then the company would go straight to the D.C. Circuit Court of Appeals, which has been hankering for a media-ownership case.

Whoever loses there would take the case to the Supreme Court.

Meanwhile, the media-ownership regulations that the FCC approved last year, which were rewritten because of a court challenge of the rules the panel rewrote in 2003, face a number of new challenges, particularly in the 9th Circuit in California and the 3rd Circuit in Philadelphia -- the jurisdiction that threw out the 2003 decision.

According to court watchers, the D.C. Circuit was angered when the appeal landed in Philadelphia because the D.C. Circuit always has considered itself the First Amendment circuit.

The Philadelphia court is considered the most liberal in the nation. Over the years of conservative administrations, the D.C. Circuit has been packed with like-minded individuals, so that now it's one of the most conservative.

What this all means is that Murdoch ultimately could get his challenge before the court of his liking, making it more likely that he gets what he wants.

There are a couple more delicious little wrinkles in this whole imbroglio. The Justice Department will have to decide whether the deal is anti-competitive.

News Corp. likely will argue that the two markets are different. Newsday and the New York Post serve different boroughs with different readers and advertisers. It's hard to predict Justice, but it went through hoops to approve the XM-Sirius satellite-radio merger and could do the same with this deal.

The other wrinkle? Politics.

On Thursday, the Senate Commerce Committee approved a "legislative veto" that seeks to overturn the FCC's media-ownership policies. The House might very well pass the same legislation, and the Bush administration plans to veto the "resolution of disapproval."

The two Democratic presidential candidates, Sen. Barack Obama and Sen. Hillary Clinton, have condemned media concentration. Republican candidate Sen. John McCain doesn't particularly care for the broadcast industry.

This whole thing is likely to drag on past the election. The FCC under Clinton or Obama would look very different from the Bush FCC. And a McCain FCC would look very different from the others. That could mean more trouble for Murdoch. An Obama or Clinton administration probably wouldn't veto the Senate resolution of disapproval -- unless, of course, either actually is concerned with its questionable constitutionality.

The true meaning to all this? Murdoch can keep the whole thing tangled up in court and at the FCC for years. During this time, he gets to keep all his toys. By the time the decisions are final, the whole point might be moot because there might not be a newspaper industry left.

Reuters/Hollywood Reporter

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