Supreme Court Holds that an FCC Rule Change Was Not “Arbitrary and Capricious” Under the Administrative Procedure Act

April 02, 2021

Yesterday, the U.S. Supreme Court issued a significant decision regarding the Administrative Procedure Act’s (“APA”) arbitrary-and-capricious standard. In FCC v. Prometheus Radio Project, the Court upheld a decision by the Federal Communications Commission (“FCC”) to repeal or modify three rules governing the ownership of broadcast media. The three rules had limited the number of radio stations, television stations, and newspapers that a single entity could own in a given market. Under the Federal Communications Act, the FCC had to consider the public interest before changing its rules. The FCC considered the effects of its rules on competition, localism, and viewpoint diversity before changing the rules in 2017. And the FCC found that changing the rules was not likely to harm minority and female ownership of media sources.

A non-profit organization, Prometheus Radio Project, challenged the FCC’s rule change. Under § 706 of the APA, courts must reverse any agency decision or rule change that is “arbitrary and capricious”—a standard that has long generated litigation and debate. Here, Prometheus Radio Project argued that the FCC’s rule changes were arbitrary and capricious because the evidence before the FCC did not support its findings regarding minority and female ownership. In particular, Prometheus argued that the FCC relied on flawed data and ignored superior data when assessing the impact of the rule changes on female and minority ownership. And the U.S. Court of Appeals for the Third Circuit agreed, vacating the FCC’s rule change.

The Supreme Court disagreed and upheld the FCC’s rule change. According to the Court, the FCC had considered all the relevant data sets and “simply interpreted them differently,” and its analysis was “reasonable and reasonably explained.” Notably, the Court acknowledged that the FCC’s data sets and statistics were not perfect. And it recognized that the FCC had not conducted its own empirical studies. In fact, the FCC had recognized gaps in its data, had asked for further data from commentators, but had not received any. But, as the Court explained, neither the APA nor the Telecommunications Act require agencies to conduct their own studies, and the FCC had reasonably asked commentators for input and studies before making its decision. That decision was reasonable, the Court held, because the FCC had considered all the evidence and reached a reasonable conclusion from that evidence.

While the Court’s decision in this case was relatively straight-forward, it provides a few key takeaways for future regulatory challenges: The Court held that the APA does not require administrative agencies to perform their own empirical studies. Nor does it require that their data be perfect. And the Court is reluctant to re-weigh data sets that an agency has interpreted. Where an agency has considered the relevant issues and reasonably explained its decision, that decision likely will be upheld. As the Court put it: “The APA requires no more.”

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