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Wednesday, May 25, 2005

Have a Contractual Dispute? Run to the FCC!
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There's a nasty spat taking place between broadcast giants Paxson and NBC Universal over the PAX television network. Back in the late 1990s, NBC invested over $400 million in PAX to help the new network grow. As part of the deal, Paxson and NBC struck a complicated Joint Sales Agreement (JSA) that imposed responsibilities on each party.

For whatever reason, things haven't worked out as planned and earlier this year Paxson announced that they intended to drop all the original programming from the PAX lineup (much of which was NBC-produced) and instead rely on paid programming and info-mercials. For this and other reasons, the Paxson-NBC relationship has soured quickly. In fact, it's gotten downright ugly with both sides calling the other names in the press and pursuing legal action.

Frustrated that it has lost some of these initial legal fights, Paxson has decided to take this fight to another level: The FCC. According to a report in this week's Broadcasting & Cable magazine, Paxson has filed a complaint with the Federal Communications Commission claiming that NBC is trying to take "illegal control" of its group of television stations. Moreover, Paxson is seeking a declaratory ruling from the FCC's Enforcement Bureau against NBC. Specifically, Paxson wants the agency to impose "whatever additional monetary forfeitures it deems appropriate." In other words, Paxson wants to FCC to intervene on their behalf and even fine NBC to get them to buckle to their demands.

I'm not going to beat around the bush here: I find this sort of behavior absolutely despicable. Don't get me wrong, it may very well be the case that Paxson is right on the merits of their contractual dispute with NBC. Without examining all the paperwork surrounding these deals, I have no way of knowing who is right here.

But I do know that taking this dispute to the FCC is the wrong move. A regulatory agency is not the place to be deciding matters such as this. This is a fight that belongs in the courts, or better yet, in private dispute resolution. If this was a fight between GM and one of its parts suppliers, we wouldn't expect that either party could take their case to a regulatory agency and get that agency to wield the club of Big Government on their behalf. But that's exactly what Paxson is attempting here.

Regulatory agencies are hardly the neutral arbitrators of disputes some might think. They have a vested interest, at times, in tilting the balance in one party's favor to accomplish other political goals. That's what makes a situation like this so dangerous. If the FCC did intervene, it could end up doing a lot more than just settling the dispute. It could impose indirect regulation on the entities in question.

Regardless, even if you don't accept this argument, I would hope most people would understand that routine contractual disputes belong in court, not in a politicized regulatory agency.

posted by Adam Thierer @ 10:56 AM | Mass Media

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