Restrictions on Television Joint Sales Agreements
Beginning June 19, 2014, joint sales agreements that allow one television station to sell more than 15% of the advertising time of another television station in the same market will be deemed an “attributable” ownership interest for the station (and its principals) selling the advertising time. In many instances, such joint sales agreements will be prohibited under the FCC’s ownership rules. National advertising sales rep agreements are not affected by this decision.
Transition Period for Existing Joint Sales Agreements
The FCC expressly refused to grandfather all existing television joint sales agreements. Instead, the FCC provided for a two-year transition period for all television joint sales agreements entered into prior to April 15, 2014. Affected television stations may continue to operate under such agreements until June 19, 2016, when the agreement must be terminated or amended to come into compliance with the ownership rules then in effect unless an explicit waiver is issued by the FCC.
The FCC has established a waiver process for television stations to continue to operate under the terms of existing joint sales agreements after the two-year transition period or to enter into new agreements that would violate the ownership limitations. To obtain a waiver, a station must demonstrate that the joint sales agreement – including any related sharing agreements or arrangements – does not enable the station providing sales and other services with the opportunity, ability, and incentive to exert significant influence over the programming or operations of the other station. The FCC indicated that waivers which are limited in scope (for example, only for a certain percentage of advertising time) and duration are more likely to be successful. The FCC has committed to reviewing waivers on an expedited basis within 90 days, but this 90-day review period is not set in stone; the FCC staff may delay the review process if it determines that it needs additional information or if there are circumstances that require additional consideration and review.
Filing of Joint Sales Agreements
Before the FCC can enforce its new rule requiring the filing with the FCC of a copy of all existing television joint sales agreements, it must first obtain and announce approval from the Office of Management and Budget. We will send an update when the effective date for the filing requirement is established.
FCC Processing Guidance for Broadcast Transactions
The FCC’s television joint sales agreement rule does not affect the processing guidance for broadcast transactions announced last March by the FCC’s Media Bureau, available here. That guidance states that transactions involving: (i) sharing agreements (whether joint sales agreements, facility or employee leasing, services agreements, or otherwise); and (ii) contain a contingent financial arrangement (for example, an option to purchase, a right of first refusal, a put/call arrangement, or a loan guarantee) will trigger closer scrutiny and review by the FCC. On May 12, 2014, the National Association of Broadcasters filed a Petition for Review against the FCC in the U. S. Court of Appeals for the District of Columbia Circuit challenging the processing guidance as unlawful and requesting that it be set aside by the court.