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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.


DISSENTBY: JOHNSON; LEE

 

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.

 


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