The Supreme Court yesterday refused to disturb one of the harshest rulings ever handed down by the Federal Communications Commission--the decision to strip RKO General Inc. of its Boston television station, WNAC-TV, because of corrupt practices by RKO's parent company.
The decision ultimately could cost RKO and its parent company, General Tire & Rubber Co., $500 million, according to industry analysts.
RKO's 15 other radio and television stations, including WGMS-AM-FM, the Washington area's only commercial classical-music station, may also be in jeopardy because the FCC will now consider whether its finding in the Boston case should apply to all of RKO's broadcasting properties.
The Supreme Court's decision--declining to hear an appeal by RKO and the National Association of Broadcasters--now means that RKO will have to give up its lucrative Boston station, which last year earned nearly $5 million in profits.
Broadcasting industry officials estimate the station has at least $150 million in assets. But unless RKO can successfully negotiate the sale of the station's equipment to the company that eventually takes over Channel 7, RKO could lose much, if not all, of its investment.
RKO said it was "extremely disappointed" with the Supreme Court's decision but would cooperate with the company the FCC chooses to operate the station in order to guarantee a smooth transfer of ownership.
Under a conditional order approved by the FCC last February, RKO's longtime rivals, which have since merged into one company--New England Television Corp.--were given conditional permission to operate on Channel 7 if RKO lost its appeal. That order is being appealed by Atlantic Television Corp., which has since challenged NETV for the station. NETV officials said yesterday that they hoped to begin operations within 60 to 90 days.
The change in ownership stems from the FCC's January, 1980, decision in which the agency ordered RKO to relinquish its Boston, New York and Los Angeles television stations after the FCC concluded that illegal overseas payments and improper domestic political contributions by General Tire during the early 1970s made RKO unfit to hold a broadcasting license.
RKO challenged the decision, arguing that it did not have an adequate hearing to rebut the FCC's findings that it deliberately withheld information from the agency.
However, late last year, the U.S. Court of Appeals upheld the FCC's decision in the Boston case, concluding that RKO displayed an "egregious lack of candor" in its dealings with the FCC. The court ruled, however, that the FCC needed to hold further hearings on the New York and Los Angeles stations to determine whether such drastic action was justified.
The FCC decision represented a turning point in the agency's history because up to then the commission had been reluctant to take away TV licenses from major broadcasting companies.
Despite yesterday's court action, broadcasting industry officials did not appear concerned that the FCC would now move to revoke other licenses. As one lawyer noted, RKO's corporate activities were unusual, and the FCC has changed so substantially under the Reagan administration that the agency has indicated it may soon stop considering a station owner's character when considering whether to renew a broadcasting license.
Under an FCC ruling earlier this year, RKO has had to keep the profits of the Boston station in escrow since early March. RKO said yesterday that half of the profits the station received will go to National Public Radio; 25 percent will go to a Boston noncommerical television station, and the rest to other Boston nonprofit educational institutions yet to be determined.
In other business cases yesterday, the court:
* Agreed to review a case to define the requirement in setting postage rates that each class of mail or type of mail service bear the direct and indirect costs attibuted to it.
The U.S. Court of Appeals for the District of Columbia has said the language means the cost of mail service for each type of mail must be assessed to the maximum extent possible. The appeals court for the 2nd Circuit rejected that definition, saying the Postal Service has more discretion in allocating costs.
* Agreed to decide what records the government must require a business to disclose on demand. The case involves Merck & Co. and five other pharmaceutical firms required by the General Accounting Office eight years ago to disclose certain records for a study. Last year the justices heard a similar case involving Bristol-Myers Co., but split 4 to 4, automatically upholding the lower court's ruling barring government access to the records.