In a 2-to-1 decision, the 3rd U.S. Court of Appeals in Philadelphia threw out rules that would have permitted one company to own more television and radio stations in most markets. The FCC's rules also would have eliminated the ban on a corporation owning both a newspaper and television stations or radio outlets in the same city.
The court ordered the FCC to better explain why it decided to ease the ownership regulations, which a divided commission approved last year. At the same time, however, the judges said the commission was within its rights to repeal a blanket prohibition on companies owning both a newspaper and a television station in the same large market.
The court also left in place a stay blocking the new rules from taking effect until the FCC completes its review.
FCC Chairman Michael Powell, who championed the new regulations, criticized the court for trying to substitute its own judgment for that of media regulators.
"This is the second time a court has put aside exhaustive efforts by the expert agency to set numerical limits. This has created a clouded and confused state of media law," he said in a statement. "It sets near impossible standards for justifying bright-line ownership limits."
But, fellow FCC Commissioner Michael Copps, who had voted against the rules, hailed the ruling.
"The rush to media consolidation approved by the FCC last June was wrong as a matter of law and policy," Copps said in a statement. "The commission has a second chance to do the right thing."
Numerous public interest groups, including the Consumers Union, had challenged the FCC's decision, saying the rule changes would further stifle the diversity of voices on the airwaves and other forms of media.
"This is a complete repudiation of rules that would allow one or two media giants to dominate the most important sources of local news and information in almost every community in America," Gene Kimmelman, senior public policy director for Consumers Union, said in a press statement.
The court's ruling represents a setback to the FCC's efforts to relax restrictions on media ownership. Media corporations, such as Viacom Inc. and News Corp., also lobbied for an easing of ownership limits, which they argued were outdated in today's marketplace.
Several media organizations did not welcome the court's decision.
Newspaper Association of America President and CEO John Sturm called the court's decision a disappointment, but said he was pleased that the court found the FCC could repeal "the old 1975 across-the-board ban on newspaper ownership of broadcast stations."
FCC efforts to ease the ownership rules have sparked widespread debate in Congress and in the public over the concentration of media ownership by a handful of large corporations.
Indeed, the Senate earlier this week voted to repeal the FCC ownership rules and restore stricter limits. The legislation still has to be reconciled with a House version before going to the White House.