Published on:

By and

On July 24, 2024, an en banc panel of the U.S. Court of Appeals for the Fifth Circuit released a decision in Consumers’ Research et al. v. FCC holding that the Federal Communications Commission’s Universal Service Fund (“USF”) contribution mechanism violates Article I, Section 1 of the Constitution and remanded the issue to the FCC for further proceedings.  The case stems from petitioner’s constitutional challenge of the First Quarter 2022 USF contribution amount.  The court explained that (1) USF contributions are a tax; (2) Congress may have improperly delegated the legislative power to tax to the FCC without any intelligible guiding principles; (3) the FCC, in turn, may have impermissibly delegated taxing power to private entities; and (4) even absent a definitive answer on these delegation questions, the combination of Congress’s broad delegation and the FCC’s sub-delegation to private entities “certainly amounts to a constitutional violation.”  The 9-7 decision reverses a March 2023 three-judge panel decision and creates a circuit split with the DC, Sixth, and Eleventh Circuits, which rejected similar arguments in July 2012, May 2023, December 2024, respectively. Continue reading →

Published on:

By

While the FCC gets to have a say in nearly every sale or merger in the communications industry, no matter how small, the Department of Justice and the Federal Trade Commission will also be called upon if a transaction is large enough. The test for when a transaction is large enough to require a filing with the DOJ or the FTC is whether it exceeds the minimum financial thresholds of the Hart-Scott-Rodino (“HSR”) Act.

Because of inflation and other factors, however, the HSR thresholds must be annually adjusted to accurately separate small deals from big deals. This separation is critical because the DOJ and the FTC have limited resources to investigate transactions, and therefore only require advance notification of transactions that involve companies or transactions above a certain minimum size. Transactions that fall below the HSR reporting thresholds, however, are not immune from antitrust scrutiny even after they are consummated if they are likely to have an anticompetitive effect in any relevant market.

On February 27, 2012, the HSR thresholds will increase significantly, with the “minimum size-of-transaction test” threshold increasing from $50 million to $68.2 million. If the value of the proposed transaction is above $68.2 million but below $272.8 million (up from $200 million), reporting is required only if the ultimate parents of the acquiring and acquired entities meet certain “size-of-person” tests, the thresholds for which will also increase on February 27, 2012. Subject to a myriad of exemptions, transactions valued at over $272.8 million under the HSR regulations must generally be reported. If that sounds complicated (and it can be), Pillsbury’s Antitrust lawyers recently published an Advisory with more details on these changes.
While transactions that meet these thresholds must be reported whether or not they are communications-related, the thresholds can be particularly relevant to large broadcasters, since broadcasters that enter into a transaction requiring an HSR filing need to be aware that they may not be able to implement a local marketing agreement or similar cooperative arrangement in conjunction with an anticipated acquisition until the HSR filing has been made and the mandatory post-filing waiting period has either passed without action by the DOJ/FTC, or the DOJ/FTC have agreed to terminate the HSR waiting period early.

With communications transactions starting to heat up again, the increase in the HSR thresholds is welcome, and may simplify transactions that fall above the current HSR thresholds, but below the new ones.

Published on:

By

In an uncertain economy, obtaining financing for business transactions can be a challenge. It can be even more challenging for FCC licensees, since FCC rules prohibit granting a security interest in an FCC license. Because lenders want an enforceable lien on all of a borrower’s assets, when those assets include FCC licenses, agreements must be structured carefully to give a lender all of the economic benefits of holding a security interest in the FCC license, without taking a security interest in the license itself.

The standard approach has been to provide the lender with a security interest in the “proceeds” of a license sale. That approach was called into question last October after a decision by the Colorado Bankruptcy Court (In re Tracy), which held that a security interest in the proceeds of an FCC license does not survive bankruptcy. While many communications lawyers saw this decision as an aberration, and the New York Bankruptcy Court (In re Terrestar Networks) rejected it outright in reaching an opposite conclusion last month, just a few days after that New York decision, on appeal, the Colorado U.S. District Court affirmed the reasoning in Tracy, once again opening the issue to debate.

Continue reading →