[Federal Register Volume 63, Number 68 (Thursday, April 9, 1998)]
[Notices]
[Pages 17446-17454]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 98-9373]
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DEPARTMENT OF JUSTICE
Antitrust Division
United States of America v. Chancellor Media Company, Inc. and
SFX Broadcasting, Inc.; Proposed Final Judgment and Competitive Impact
Statement
Notice is hereby given pursuant to the Antitrust Procedures and
Penalties Act, 15 U.S.C. 16(b)-(h), that a proposed Final Judgment,
Stipulation and Order, and Competitive Impact Statement have been filed
with the United States District Court for the Eastern District of New
York in United States v. Chancellor Media Company, Inc. and SFX
Broadcasting, Inc. Civil Action No. CV97-6497. The proposed Final
Judgment is subject to approval by the Court after the expiration of
the statutory 60-day public comment period and compliance with the
Antitrust Procedures and Penalties Act, 15 U.S.C. 16(b)-(h).
Plaintiff filed a civil antitrust Complaint on November 6, 1997,
alleging that Chancellor Media Corporation's (successor in interest to
Chancellor Media Company, Inc.) (``Chancellor'') proposed acquisition
of four radio stations in Suffolk County, Long Island, New York owned
by SFX Broadcasting, Inc. (``SFX'') would violate Section 7 of the
Clayton Act, 15 U.S.C. 18 and Section 1 of the Sherman Act, 15 U.S.C.
1. The Complaint alleges, among other things, that Chancellor and SFX
are the number one and number two radio companies on Long Island and
that they each own radio stations in Suffolk County, New York. The
Complaint also alleges that the proposed acquisition would increase
Chancellor's share of the radio advertising market in Suffolk County,
New York from 33 percent to over 65 percent. It further alleges that
prices for radio advertising for coverage of Suffolk County would
likely increase and the quality of promotional services would likely
decline--especially to regional and local customers.
The prayer for relief seeks: (a) Adjudication that Chancellor's
proposed acquisition would violate Section 7 of the Clayton Act and
Section 1 of the Sherman Act; (b) permanent injunctive relief
preventing the consummation of the proposed acquisition; (c) a finding
that the Local Marketing Agreement (LMA) between Chancellor and SFX
regarding SFX's Suffolk County radio stations violates Section 1 of the
Sherman Act and an Order terminating the LMA; (d) an award to the
United
[[Page 17447]]
States of the costs of this action; and (e) such other relief as is
proper.
The United States and the defendants in this action have reached a
proposed settlement in this proceeding, and a Stipulation and Order,
and a proposed Final Judgment embodying the settlement have been filed
with the Court. The proposed Final Judgment prohibits Chancellor and
SFX from consummating their acquisition and orders them to terminate
the LMA as soon as possible, but no later than August 1, 1998. In
addition, the proposed Final Judgment would prevent Chancellor, SFX,
and any of their successor companies from combining WALK-FM/AM with
WBLI-FM and WBAB-FM. The proposed Final Judgment also requires
Chancellor to ensure that, until termination of the LMA mandated by the
Final Judgment has been accomplished, Chancellor will maintain the SFX
radio stations as viable entities, including the obligation that
Chancellor work to increase the sale of advertising and maintain
promotional and marketing levels for the SFX stations. Further, the
proposed Final Judgment requires defendants to give plaintiff prior
notice regarding future radio station acquisitions or certain
agreements pertaining to the sale of radio advertising time in Suffolk
County, New York.
A Competitive Impact Statement filed by the United States describes
the Complaint, the proposed Final Judgment, and remedies available to
private litigants.
Public comment is invited within the statutory 60-day comment
period. Such comments, and the responses thereto, will be published in
the Federal Register and filed with the Court. Written comments should
be directed to Craig W. Conrath, Chief, Merger Task Force, Antitrust
Division, 1401 H Street, N.W., Suite 4000, Washington, D.C. 20530
(telephone: (202) 307-0001). Copies of the Complaint, Stipulation and
Order, proposed Final Judgment and Competitive Impact Statement are
available for inspection in Room 215 of the U.S. Department of Justice,
Antitrust Division, 325 7th Street, N.W., Washington, D.C. 20530
(telephone: (202) 514-2481) and at the office of the Clerk of the
United States District Court for the Eastern District of New York,
United States Courthouse, 2 Uniondale Avenue, Uniondale, New York
11553.
Copies of any of these materials may be obtained upon request and
payment of a copying fee.
Constance K. Robinson,
Director of Operations & Merger Enforcement, Antitrust Division.
Stipulation and Order
Whereas, plaintiff, the United States of America, and defendants,
Chancellor Media Corporation (successor in interest to Chancellor Media
Company, Inc.) (``Chancellor'') and SFX Boardcasting, Inc. (``SFX''),
acknowledge that this stipulation and order, wherein defendants consent
to the entry of a Final Judgment trial, (i): Is made without there
having been a trail or adjudication of any issue of fact or law and
without the Final Judgment constituting any evidence against or an
admission by any party with respect to any issue of law or fact, and
(ii) is not intended to expand the effect of the Final Judgment before
or after its entry,
Now, Therefore, it is stipulated by and between plaintiff and
defendants, Chancellor and SFX, as follows:
(1) The Court has jurisdiction over the subject matter of this
action and over each of the parties hereto, and venue of this action is
proper in the United States District Court for the Eastern District of
New York.
(2) Plaintiff and defendants stipulate that a Final Judgment in the
form hereto attached may be filed and entered by the Court, upon the
motion of plaintiff or upon the Court's own motion, at any time after
compliance with the requirements of the Antitrust Procedures and
Penalties Act (15 U.S.C 16), and without further notice to any party or
other proceedings, provided that plaintiff has not withdrawn its
consent, which it may do at any time before the entry of the proposed
Final Judgment by serving notice thereof on defendant and by filing
that notice with the Court.
(3) Each defendant shall abide by and comply with the provisions of
the proposed Final Judgment pending entry of the Final Judgment by the
Court, or until expiration of time for all appeals of any Court ruling
declining entry of the proposed Final Judgment, and shall, from the
date of the signing of this Stipulation by plaintiff and defendants,
comply with all the terms and provisions of the proposed Final Judgment
as though the same were in full force and effect as an Order of the
Court.
(4) This Stipulation shall apply with equal force and effect to any
amended proposed Final Judgment agreed upon in writing by plaintiff and
defendants and submitted to the Court.
(5) In the event plaintiff withdraws its consent, as provided in
paragraph 2 above, or in the event the proposed Final Judgment is not
entered pursuant to this Stipulation, the time has expired for all
appeals of any Court ruling declining entry of the proposed Final
Judgment, and the Court has not otherwise ordered continued compliance
with the terms and provisions of the proposed Final Judgment, then
plaintiff and defendants are released from all further obligations
under this Stipulation, and the making of this Stipulation shall be
without prejudice to any party in this or any other proceeding.
(6) Each defendant represents that the obligations ordered in the
proposed Final Judgment can and will be fulfilled, and that defendants
will later raise no claim of hardship or difficulty as grounds for
asking the Court to modify any of the obligations contained therein.
Dated: March 30, 1998.
For Plaintiff United States of America:
Allee A. Ramadhan, Esq., (AR-0142).
Theresa H. Cooney, (TC-4933).
U.S. Department of Justice, Antitrust Division, Merger Task Force,
1401 H Street, NW., Suite 4000, Washington, D.C. 20530, (202) 307-0001.
For Defendant Chancellor Media Corporation:
Edward P. Henneberry, Esq.,
(EP-9043).
Howrey & Simon, 1299 Pennsylvania Avenue, NW., Washington, D.C. 20004,
(202) 783-0800.
For Defendant SFX Broadcasting, Inc.:
David A. Clanton,
(DC-2683).
Howard Adler, Jr.,
(HA-0425).
David J. Laing,
(DL-2400).
Baker & McKenzie, 815 Connecticut Avenue, NW., Washington, D.C. 20006,
(202) 452-7000
and
Michael Burrows,
(MB-2863).
Vincent A. Sama,
(VS-9027).
Baker & McKenzie, 805 Third Avenue, New York, New York 10022, (212)
751-5700.
SO ORDERED.
Dated, ________________, New York, 1998.
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United States District Judge
Certificate of Service
I hereby certify that, on March 31, 1998, I caused the foregoing
Stipulation and Order to be served by having a copy hand delivered to:
Edward P. Henneberry, Esq., Howrey & Simon, 1299 Pennsylvania Avenue,
[[Page 17448]]
N.W., Washington, D.C. 20004, Counsel for Defendant, Chancellor Media
Corporation
and
Howard Adler, Jr., Baker & McKenzie, 815 Connecticut Avenue, N.W.,
Washington, D.C. 20006, Counsel for Defendant, SFX Broadcasting, Inc.
Seth E. Bloom.
United States District Court for the Eastern District of New York
Whereas, plaintiff, the United States of America, filed its
Complaint in this action on November 6, 1997, and plaintiff and
defendants, Chancellor Media Corporation (successor in interest to
Chancellor Media Company, Inc.) (``Chancellor'') and SFX Broadcasting,
Inc. (``SFX'') by their respective attorneys, having consented to the
entry of this Final Judgment without trial or adjudication of any issue
of fact or law herein, and without this Final Judgment constituting any
evidence against or an admission by any party with respect to any issue
of law or fact herein;
And Whereas, defendants have agreed to be bound by the provisions
of this Final Judgment pending its approval by the Court;
And Whereas, defendants have represented that the obligations
ordered in this Final Judgment can and will be fulfilled, and that
defendants will later raise no claim of hardship or difficulty as
grounds for asking the Court to modify any of the obligations contained
herein;
Now, Therefore, before the taking of any testimony, and without
trial or adjudication of any issue of fact or law herein, and upon
consent of the parties hereto, it is hereby Ordered, Adjudged, and
Decreed as follows:
I. Jurisdiction
This Court has jurisdiction over each of the parties hereto and
over the subject matter of this action. The Complaint states a claim
upon which relief may be granted against defendants, as hereinafter
defined, under Section 7 of the Clayton Act, as amended (15 U.S.C. 18)
and Section 1 of the Sherman Act, 15 U.S.C. 1.
II. Definitions
As used in this Final Judgment:
A. ``Chancellor'' means defendant Chancellor Media Corporation
(successor in interest to Chancellor Media Company, Inc.), a Delaware
corporation with its headquarters in Irving, Texas, and includes its
predecessors, successors and assigns, divisions, subsidiaries,
companies, groups, partnerships and joint ventures that Chancellor
controls, directly or indirectly, and their directors, officers,
managers, agents and representatives, and their respective successors
and assigns.
B. ``SFX'' means defendant SFX Broadcasting, Inc., a Delaware
corporation with its headquarters in New York, New York, and includes
its predecessors, successors and assigns, divisions, subsidiaries,
companies, groups, partnerships and joint ventures that SFX controls,
directly or indirectly, and their directors, officers, managers, agents
and representatives, and their respective successors and assigns.
C. ``SFX Long Island Assets'' means all of the assets, tangible or
intangible, used in the operations of the WBLI 106.1 FM radio station
in Patchogue, Long Island, New York, the WBAB 102.3 FM radio station in
Babylon, Long Island, New York, the WHFM 95.3 FM radio station in
Southampton, New York, and the WGBB 1240 AM radio station in Freeport,
New York including but not limited to: all real property (owned or
leased) used in the operation of these stations; all broadcast
equipment, personal property, inventory, office furniture, fixed assets
and fixtures, materials, supplies and other tangible property used in
the operations of these stations; all licenses, permits,
authorizations, and applications therefor issued by the Federal
Communications Commission (``FCC'') and other governmental agencies
related to these stations; all contracts, agreements, leases and
commitments of defendants pertaining to these stations and their
operation; all trademarks, service marks, trade names, copyrights,
patents, slogans, programming material and promotional materials
relating to these stations; and all logs and other records maintained
by defendants or these stations in connection with their business.
D. ``WALK Assets'' means all of the assets, tangible or intangible,
used in the operation of the WALK 97.5 FM and WALK 1370 AM radio
stations in Patchogue, New York, including but not limited to: all real
property (owned or leased) used in the operation of these stations; all
broadcast equipment, personal property, inventory, office furniture,
fixed assets and fixtures, materials, supplies and other tangible
property used in the operation of these stations; all licenses,
permits, authorizations, and applications therefor issued by the FCC
and other governmental agencies related to these stations; all
contracts, agreements, leases and commitments of defendant pertaining
to these station and their operation; all trademarks, service marks,
trade names, copyrights, patents, slogans, programming materials and
promotional materials relating to these stations; and all logs and
other records maintained by defendant Chancellor or these stations in
connection with their business.
E. ``Nassau-Suffolk Area'' means Nassau and Suffolk Counties, New
York.
F. ``Chancellor Radio Station'' means any radio station owned,
operated, or controlled by Chancellor and broadcasting from a
transmitter site located in the Nassau-Suffolk Area.
G. ``SFX Radio Station'' means any radio station owned, operated,
or controlled by SFX and broadcasting from a transmitter site located
in the Nassau-Suffolk Area.
H. ``Non-Chancellor Radio Station'' means any radio station
broadcasting from a transmitter site located in the Nassau-Suffolk Area
that is not a Chancellor Radio Station.
I. ``Non-SFX Radio Station'' means any radio station broadcasting
from a transmitter site located in the Nassau-Suffolk Area that is not
an SFX Radio Station.
J. ``LMA'' means the Local Marketing Agreement that Chancellor and
SFX entered into on or about July 1, 1996, as part of their July 1,
1996, asset exchange agreement whereby SFX agreed to exchange its four
Long Island-based radio stations for Chancellor's two Jacksonville,
Florida radio stations and an additional $11 million.
III. Applicability
A. The provisions of this Final Judgment apply to each of the
defendants, their successors and assigns, subsidiaries, affiliates,
companies, groups, partnerships, and joint venturers, their directors,
officers, managers, agents and employees, and all other persons in
active concert or participation with any of them who shall have
received actual notice of this Final Judgment by personal service or
otherwise.
B. Each defendant shall require, as a condition of the sale or
other disposition of all or substantially all of the assets used in its
businesses of owning and operating the WALK Assets (in the case of
Chancellor) of the SFX Long Island Assets (in the case of SFX), that
the acquiring party agrees to be bound, as a successor or assign, by
the provisions of this Final Judgment.
IV. Prohibition of Acquisition
Defendants shall not directly or indirectly consummate the
acquisition contract that is a subject of the complaint in this action.
Defendant Chancellor shall not acquire, directly or
[[Page 17449]]
indirectly, the SFX Long Island Assets that encompasses WBLI-FM and
WBAB-FM (hereinafter the ``SFX Long Island WBAB/WBLI Assets'') or any
interest in the SFX Long Island WBAB/WBLI Assets. Defendant Chancellor
shall not sell or otherwise convey, directly or indirectly, the WALK
Assets or any interest in the WALK Assets to SFX or to any future owner
or operator of the SFX WBAB/WBLI Long Island Assets. Defendant SFX
shall not acquire, directly or indirectly, the WALK Assets or any
interest in the WALK Assets. Defendant SFX shall not sell or otherwise
convey, directly or indirectly, the SFX Long Island WBAB/WBLI Assets or
any interest in the SFX Long Island WBAB/WBLI Assets to Chancellor or
to any future owner or operator of the WALK Assets.
V. Termination of LMA
Defendants shall terminate the LMA as soon as possible, but no
later than August 1, 1998. Defendants shall not enter into any
agreement or understanding (including a Local Marketing Agreement or
similar agreement (such as a joint sales agreement (JSA))) that would
allow joint marketing or sale of advertising time or joint
establishment of advertising prices, with respect to the WALK Assets
and the SFX Long Island Assets.
VI. Preservation of Assets
Until the termination of the LMA, as required by Section V of this
Final Judgment, has been accomplished:
A. Defendant Chancellor shall take all steps necessary to operate
the SFX Long Island Assets as ongoing, economically viable radio
stations.
B. Defendant Chancellor shall use all reasonable efforts to
maintain and increase sales of advertising time by the SFX Long Island
Assets and shall maintain at 1997 or previously approved levels for
1998, whichever are higher, promotional advertising, sales, marketing
and merchandising support for the SFX Long Island Assets.
C. Defendant Chancellor shall take all steps necessary to ensure
that the assets used in the operation of the SFX Long Island Assets are
fully maintained. WBLI-FM, WBAB-FM, WHFM-FM, and WGBB-AM sales and
marketing employees shall not be transferred or reassigned to any other
station, except for transfer bids initiated by employees pursuant to
defendant's regular, established job posting policies, provided that
defendant Chancellor gives plaintiff ten (10) days' notice of any such
transfer.
D. Defendant Chancellor shall appoint a person or persons to be
responsible for defendant Chancellor's compliance with this Section VI.
VII. Affidavits
A. Within twenty (20) calendar days of the filing of this Final
Judgment, defendant Chancellor shall deliver to plaintiff an affidavit
which describes in reasonable detail all actions defendant Chancellor
has taken and all steps defendant Chancellor has implemented on an on-
going basis to preserve the SFX Long Island Assets, pursuant to Section
VI of this Final Judgment. Defendant Chancellor shall deliver to
plaintiff an affidavit describing any changes to the efforts and
actions outlined in its earlier affidavit(s) filed pursuant to this
Section VII within fifteen (15) calendar days after such change is
implemented.
B. Defendant Chancellor shall preserve all records of efforts made
to maintain or preserve the SFX Long Island Assets.
VIII. Notice
A. Unless such transaction is otherwise subject to the reporting
and waiting period requirements of the Hart-Scott-Rodino Antitrust
Improvements Act of 1976, as amended, 15 U.S.C. 18a (the ``HSR Act''),
defendants, without providing advance notification to the plaintiff,
shall not directly or indirectly acquire any assets of or any interest,
including any financial, security, loan, equity or management interest,
in any Non-Chancellor Radio Station (in the case of an acquisition by
Chancellor) or in any Non-SFX Radio Station (in the case of an
acquisition by SFX).
B. Defendants, without providing advance notification to the
plaintiff, shall not directly or indirectly enter into any agreement or
understanding (including a Local Marketing Agreement or similar
agreement (such as a joint sales agreement (JSA)) that would allow
either defendant to market or sell advertising time or to establish
advertising prices for any Non-Chancellor Radio Station (in the case of
Chancellor) or any Non-SFX Radio Station (in the case of SFX).
C. The notification obligations required by paragraphs (A) or (B)
of this Section VIII shall not apply to defendant Chancellor following
its sale of all of the WALK Assets to a third party that is in no way
affiliated with defendant Chancellor, provided that the provisions of
Section III have been complied with. The notification obligations
required by paragraphs (A) or (B) of this Section VIII shall not apply
to defendant SFX following its sale of the SFX Long Island Assets to a
third party that is in no way affiliated with SFX, provided that the
provisions of Section III have been complied with.
D. Notification described in (A) and (B) of this Section VIII shall
be provided to the United States Department of Justice (``the
Department'') in the same format as, and per the instructions relating
to the Notification and Report Form set forth in the Appendix to Part
803 of Title 16 of the Code of Federal Regulations as amended, except
that the information requested in Items 5-9 of the instructions must be
provided, in the case of Chancellor, only with respect to any
Chancellor Radio Station, and in the case of SFX, only with respect to
any SFX Radio Station. Notification shall be provided at least thirty
(30) days prior to acquiring any such interest covered in (A) or (B)
above, and shall include, beyond what may be required by the applicable
instructions, the names of the principal representatives of the parties
to the agreement who negotiated the agreement, and any management or
strategic plans discussing the proposed transaction. If within the 30-
day period after notification, representatives of the Department make a
written request for additional information, defendants shall not
consummate the proposed transaction or agreement until twenty (20) days
after submitting all such additional information. Early termination of
the waiting periods in this paragraph (C) may be requested and, where
appropriate, granted in the same manner as is applicable under the
requirements and provisions of the HSR Act and rules promulgated
thereunder.
E. This Section shall be broadly construed and any ambiguity or
uncertainty regarding the filing of notice under this Section shall be
resolved in favor of filing notice.
IX. Compliance Inspection
For the purpose of determining or securing compliance with this
Final Judgment and subject to any legally recognized privilege, from
time to time:
A. Duly authorized representatives of the United States Department
of Justice, including consultants and other persons retained by the
plaintiff, upon written request of the Attorney General, or of the
Assistant Attorney General in charge of the Antitrust Division, and on
reasonable notice to each defendant made to their principal offices,
shall be permitted:
(1) Access during office hours of each defendant to inspect and
copy all books, ledgers, accounts, correspondence, memoranda and other
records and documents in the possession or under the control of each
defendant, who may have counsel present, relating to the
[[Page 17450]]
matters contained in this Final Judgment; and
(2) Subject to the reasonable convenience of each defendant and
without restraint or interference from it, to interview, either
informally or on the record, directors, officers, employees and agents
of each defendant, who may have counsel present, regarding any such
matters.
B. Upon the written request of the Attorney General, or of the
Assistant Attorney General in charge of the Antitrust Division, made to
defendants' principal offices, each defendant shall submit such written
reports, under oath if requested, with respect to any of the matters
contained in this Final Judgment as may be requested.
C. No information or documents obtained by the means provided in
Section VII or this Section IX shall be divulged by any representative
of plaintiff to any person other than a duly authorized representative
of the Executive Branch of the United States, except in the course of
legal proceedings to which plaintiff is a party (including grand jury
proceedings), or for the purpose of securing compliance with this Final
Judgment, or as otherwise required by law.
D. If at the time information or documents are furnished by
defendants to plaintiff, and defendants represent and identify in
writing the material in any such information or documents to which a
claim of protection may be asserted under Rule 26(c)(7) of the Federal
Rules of Civil Procedure, and defendants marks each pertinent page of
such material, ``Subject to claim of protection under Rule 26(c)(7) of
the Federal Rules of Civil Procedure,'' then ten (10) calendar days
notice shall be given by plaintiff to defendants prior to divulging
such material in any legal proceeding (other than a grand jury
proceeding) to which defendants are not a party.
X. Retention of Jurisdiction
Jurisdiction is retained by this Court for the purpose of enabling
any of the parties to this Final Judgment to apply to this Court at any
time for such further orders and directions as may be necessary or
appropriate for the construction or carrying out of this Final
Judgment, for the modification of any of the provisions hereof, for the
enforcement of compliance herewith, and for the punishment of any
violations hereof.
XI. Termination
Unless this Court grants an extension, this Final Judgment will
expire upon the tenth anniversary of the date of its entry.
XII. Public Interest
Entry of this Final Judgment is in the public interest.
Dated: ________________.
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United States District Judge
Competitive Impact Statement
The United States, pursuant to Section 2(b) of the Antitrust
Procedures and Penalties Act (``APPA''), 15 U.S.C. 16(b)-(h), files
this Competitive Impact Statement relating to the proposed Final
Judgment submitted for entry in this civil antitrust proceeding.
I. Nature and Purpose of the Proceeding
The plaintiff filed a civil antitrust Complaint on November 6,
1997, alleging that Chancellor Media Corporation (successor in interest
to Chancellor Media Company, Inc.) (``Chancellor'') proposed
acquisition of four radio stations in Suffolk County, N.Y. owned by SFX
Broadcasting, Inc. (``SFX'') would violate Section 7 of the Clayton
Act, 15 U.S.C. 18 and Section 1 of the Sherman Act, 15 U.S.C. 1. The
Complaint alleges, among other things, that Chancellor and SFX are the
number one and number two radio companies on Long Island and that they
each own radio stations is Suffolk County, N.Y. The Complaint also
alleges that WALK-FM (Chancellor) and WBLI-FM/WBAB-FM (SFX) have been
locked in a daily battle against each other for radio advertising
revenues in Suffolk County, N.Y. The Complaint further alleges that the
proposed acquisition would substantially lessen competition in the sale
of radio advertising time in Suffolk County, N.Y. Specifically, the
Complaint alleges that the proposed acquisition would increase
Chancellor's share of the radio advertising market in Suffolk County,
N.Y. from 33 percent to over 65 percent, and would give to Chancellor
the ability to raise prices to many advertisers, and to reduce
promotional services to regional and local customers. Finally, the
Complaint alleges that meaningful entry into the market is blockaded
and entry would not undermine an anticompetitive price increase imposed
by the Chancellor/SFX radio stations.
The prayer for relief seeks: (a) Adjudication that Chancellor's
proposed acquisition of WBLI-FM and WBAB-FM from SFX would violate
Section 7 of the Clayton Act and Section 1 of the Sherman Act; (b)
permanent injunctive relief preventing the consummation of the proposed
acquisition; (c) a finding that the Local Marketing Agreement (LMA)
between Chancellor and SFX regarding SFX's Suffolk County radio
stations violates Section 1 of the Sherman Act and an Order terminating
the LMA \1\; (d) an award to the United States of the costs of this
action; and (e) such other relief as is proper.
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\1\ The LMA is an agreement between Chancellor and SFX which
permits Chancellor to take operating control of the SFX stations
before taking ownership. Under the LMA Chancellor is permitted to
program the SFX stations and to sell advertising time on them.
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The United States has reached a proposed settlement with Chancellor
and SFX which is memorialized in the proposed Final Judgment which has
been filed with the Court. Under the terms of the proposed Final
Judgment, defendants Chancellor and SFX will terminate the LMA as soon
as possible, but not later than August 1, 1998. Chancellor will thus
cease operating the four stations it sought to acquire from SFX in
Suffolk County--WBLI-FM, WBAB-FM, WGBB-AM, and WHFM-FM--by August 1,
1998 and the market will return to its pre-LMA structure.\2\ Also under
the terms of the agreement, Chancellor will not acquire the radio
stations at issue. Finally, defendants have agreed that they and their
successors will not convey the radio assets in any way that would allow
the entity controlling WALK-FM to control either WBLI-FM or WBAB-FM or
the entity controlling either WBLI-FM or WBAB-FM to control WALK-FM.\3\
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\2\ Although Chancellor sought to acquire four radio stations
from SFX--WBLI-FM, WBAB-FM, WHFM-FM and WGBB-AM--in the transaction
at issue in this case, the competitive concern arose from the
proposed acquisition of WBLI and WBAB.
\3\ The proposed final Judgment does not prevent Chancellor or
another party from owning WHFM-FM and WGBB-FM as well as WALK-FM. As
previously noted, the competitive concern of the proposed
transaction arose from Chancellor's proposed acquisition of WBLI and
WBAB.
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The plaintiff and the defendants have stipulated that the proposed
Final Judgment may be entered after compliance with the APPA and that
they can fulfill their obligations under the Final Judgment. Entry of
the proposed final Judgment would terminate this action, except that
the Court would retain jurisdiction to construe, modify, or enforce the
provisions of the proposed Final Judgment and to punish violations
thereof.
II. The Alleged Violation
A. The Defendants
Chancellor is a Delaware corporation headquartered in Irving,
Texas. At the time this action was commenced in November 1997, it was
the second largest owner of radio stations in the
[[Page 17451]]
United States and owned 95 radio stations in 21 major U.S. markets,
including in each of the 12 largest markets. Chancellor owns two radio
stations in Suffolk County, WALK-FM and WALK-AM. Chancellor's revenues
in 1996 from WALK-FM and WALK-AM was approximately $13.3 million.
Virtually all of Chancellors revenues on Long Island were generated by
WALK-FM.
SFX is a Delaware corporation headquartered in New York, N.Y. SFX
owns or operates 85 radio stations located in 23 markets in the United
States, including WBLI-FM, WBAB-FM, WHFM-FM, and WGBB-AM in Suffolk
County, New York (hereinafter, ``the SFX stations''). In 1996, SFX had
revenues of approximately $11 million from its Suffolk County-based
radio stations.
B. Description of the Events Giving Rise to the Alleged Violation
Prior to July 1, 1996, the Chancellor and SFX radio stations in
Suffolk County were vigorous and direct competitors for advertisers
seeking to reach potential customers in Suffolk County, New York.
Competition among these stations was an essential element in keeping
down radio advertising prices for Suffolk County advertisers. In fact,
WALK's Director of Sales wrote that WALK was ``[f]ighting WBLI['s] and
WBAB['s] low `firesale' rates.'' On or about July 1, 1996, Chancellor
and SFX entered into an asset exchange agreement whereby SFX agreed to
exchange its four Suffolk County-based radio stations--WBLI-FM, WBAB-
FM, WHFM-FM, and WGBB-AM--for Chancellor's two Jacksonville, Florida
radio stations and an additional $11 million. In addition, at
approximately the same time, the defendants entered into an LMA where
Chancellor took over control of programming and advertising sales at
the SFX stations in Suffolk County, N.Y. The result of the LMA was to
place in Chancellor's hands control over SFX's radio stations on Long
Island. The proposed acquisition would have made that control over
SFX's stations complete.
In evaluating the proposed acquisition, Chancellor wrote that
``WALK, WBLI and WBAB combined own about 63% of a market with 36
million in net revenues.'' Chancellor's chief financial officer told
the board of directors, the acquisition ``will make Chancellor the
dominant radio broadcaster'' on Long Island. Chancellor's marketing
executives wrote that the proposed acquisition ``will result in less
competitive undercutting'' and that ``[r]ates will increase as a result
of the removal of competitive pressures.'' Chancellor's Director of
Sales and Chancellor's General Sales Manager told the General Manager
heading Chancellor's Long Island operations that the proposed
accusation means ``The War is Won.''
C. Anticompetitive Consequences of the Proposed Merger
1. The Sale of Radio Advertising Time in Suffolk County, N.Y.
The Complaint alleges that the provision of advertising time on
radio stations serving Suffolk, N.Y. constitutes a line of commerce and
section of the country, or relevant market, for antitrust purposes. It
is important to note that radio stations by their music mix, attention
to local community news and events, and promotions seek to attract
listeners who they then sell advertisers access to by radio. Radio's
unique characteristics as an inexpensive drive-time and workplace news
and entertainment companion has given it a distinct and special place
in our lives. Retailers, in an effort to reach potential customers have
resorted to a mix of electronic and print media to deliver their
advertising message. In so doing, they have learned that certain
mediums are more cost-effective than others in meeting their
advertising goals. Radio advertising is such a medium.
When radio advertisers use radio as part of a ``media mix,'' they
often view the other advertising media (such as television or
newspapers) as a complement to, and not a substitute for, radio
advertising. Many advertisers who use radio as part of a multi-media
campaign do so because they believe that the radio component enhances
the effectiveness of their overall advertising campaign. They view
radio as giving them unique and cost-effective access to certain
audiences. They recognize that since radio is portable people can
listen to it anywhere especially in places and situations where other
media are not present, such as in the office and car. In addition, they
know that radio formats are designed to target listeners in specific
demographic groups. Defendants' documents clearly confirm these facts.
Their documents show that radio stations see other radio stations as
their principal competition. For example, one such document
acknowledged that ``pressure from other [radio] stations keep [sic] us
from selling new business at the rates we want to get.'' Another high
level management strategic document unearthed in the files of WBLI and
WBAB echoed the same sentiments by noting that ``WALK and WBZO are the
primary barriers to increasing rate[s].'' The quality and magnitude of
evidence such as this showing that radio stations constrain the price
of other radio stations in their efforts to charge higher prices to
advertising customers is powerful evidence supporting the allegation in
the Complaint that the sale of radio advertising time constitutes a
line of commerce for antitrust purposes.
2. Harm to Competition
The Complaint alleges that Chancellor's acquisition of SFX's Long
Island stations would join under single ownership the principal
stations serving Suffolk County, New York and give to Chancellor the
ability to raise radio advertising prices to its customers. Local and
national advertising placed on radio stations within Suffolk County,
N.Y. are aimed at reaching listening audiences in Suffolk County, and
radio stations located outside of Suffolk County do not provide cost-
effective access to this audience. Thus, if Chancellor were to impose a
small but significant non-transitory increase in radio advertising
prices on the radio stations it owns or controls in Suffolk County,
radio stations located outside of Suffolk County would not be able to
defeat it. In fact, defendants in marketing their radio stations to
Suffolk County radio advertisers emphasized the fact that New York City
radio stations do not provide cost-effective access to Suffolk County
customers. Defendants characterized New York City radio stations'
ability to reach the tri-state metropolitan area as ``waste'' to those
Suffolk County advertisers not seeking to attract customers from New
York City, New Jersey, or Connecticut to their local Suffolk County
establishments.
Defendants' documents further disclosed that when Chancellor's and
SFX's radio stations on Long Island operated independently, advertisers
obtained lower prices by ``playing off'' Chancellor's WALK-FM against
SFX's WBLI-FM and WBAB-FM. Advertisers used the threat to move their
business between the Chancellor and the SFX stations to get more
favorable prices and services at each. That documentary evidence is
corroborated by the testimony of local and regional advertisers who
testified how they feared the joining of WALK with WBLI and WBAB would
mean that Chancellor could raise prices to them. In short, advertisers
in Suffolk County paid less for radio advertising as a result of price
competition between the Chancellor and SFX radio stations. The proposed
acquisition would have ended that price
[[Page 17452]]
competition harming consumers on Long Island.
a. Advertisers Could Not Turn to Other Suffolk County Radio Stations to
Prevent Chancellor From Imposing an Anticompetitive Price Increase
Barnstable is the only company other than Chancellor and SFX that
generates more than five percent of the total radio revenues spent by
advertisers on Long Island-based radio stations that offer coverage of
Suffolk County (``Suffolk County stations''). Barnstable owns WBZO-FM,
the only other Suffolk County station that generates ratings and
advertising revenues comparable to the Chancellor and SFX stations.
Barnstable is not able to offer, individually or in combination with
any non-Chancellor owned or operated stations, enough listeners in the
Chancellor/SFX-dominated market to provide a non-Chancellor alternative
for many advertisers who want access to Suffolk County radio listeners.
Moreover, if Chancellor were to impose a non-competitive price increase
on its Chancellor/SFX radio stations, Barnstable would not be able to
present itself as a credible alternative to those advertisers seeking
to escape the price increase on the Chancellor/SFX radio stations. That
is so, because an increase in demand for WBZO as a result of radio
advertisers trying to flee a price increase on the Chancellor/SFX
stations could undermine the attractiveness of WBZO to listeners who
would have to contend with a larger number of advertising commercials
and less music and news on WBZO. Recognizing that fact, WBZO would
likely increase its price to dampen the demand on its station in order
to maintain its attractiveness to listeners. Thus, a price increase on
the Chancellor/SFX stations would likely provide an opportunity for
Barnstable to increase its prices as well.
To the degree there are a number of other radio broadcasters on
Long Island, individually or in combination they are less able than
Barnstable to offer an alternative for those advertisers--especially
local and regional advertisers--who would have to deal with Chancellor
to gain access to Suffolk County radio listeners after the proposed
acquisition.
b. The Effect of the Acquisition Would Be Substantially To Lessen
Competition in the Relevant Market
As previously noted, Defendants' documents tell a compelling story
of how the proposed acquisition would enable Chancellor to increase
rates by stifling the ``competitive undercutting'' that went on among
the Chancellor/SFX stations. The dominant market share Chancellor would
have attained from the proposed acquisition would have the following
effects, among others:
a. Competition in the sale of radio advertising time for
coverage of Suffolk County would be substantially lessened;
b. Actual and potential competition between Chancellor and SFX
radio stations in the sale of advertising time--especially to
regional and local advertisers--would be eliminated;
c. Chancellor's share of the relevant market would have
increased from 33 percent to over 65 percent, whether measured by
radio advertising revenues or by listenership. Using a measure of
market concentration called the Herfindahl-Hirschman Index
(``HHI''), explained in Appendix A, the acquisition would yield a
post-merger HHI of at least 4975, representing an increase of 2085;
and
d. Prices for radio advertising for coverage of Suffolk County
would likely increase, and the quality of promotional services would
likely decline--especially to regional and local customers.
The proposed Final Judgment will remedy the competitive concerns
raised by the proposed acquisition.
III. Explanation of the Proposed Final Judgment
The proposed Final Judgment would preserve competition in the sale
of radio advertising time in Suffolk County, N.Y. It requires
Chancellor and SFX to terminate their LMA as soon as possible, but no
later than August 1, 1998. In addition, the proposed Final Judgment
provides that neither defendant, nor their successors, can own or
control at the same time WALK-FM and either WBLI-FM or WBAB-FM. This
relief will terminate the LMA and return the market pre-LMA structure.
If Chancellor had acquired the stations, it would have controlled about
65% of the Suffolk County radio market. Under the proposed Final
Judgment, Chancellor will return to it pre-LMA market shares of
approximately 35% while another party or parties will control the
approximately 30% of the market that WBLI-FM and WBAB-FM possess. The
proposed Final Judgment will preserve choices for advertisers. In
addition, the proposed Final Judgment will help insure that WALK's,
WBLI's and WBAB's radio advertising rates will be subject to the
``playing off'' by advertisers that they were subject to prior to the
LMA.
In addition to requiring the defendants to terminate the LMA and
prohibiting them from consummating the transaction, the proposed Final
Judgment requires Chancellor to preserve the assets of the SFX stations
until termination of the LMA. Specifically, the proposed Final Judgment
requires that Chancellor maintain the stations as viable entities,
including the obligation that Chancellor work to increase the sale of
advertising and maintain promotional and marketing levels for the SFX
stations. The proposed Final Judgment also contains provisions to
ensure that Chancellor will not divert resources from the SFX stations
to its own radio stations during the course of the LMA. To determine
and secure compliance with the proposed Final Judgment, the United
States has the authority to monitor and review the activities of the
stations. Nothing in this proposed Final Judgment is intended to limit
the plaintiff's ability to investigate or bring actions, where
appropriate, challenging other past or future activities of defendants
in Suffolk County or any other markets, including their entry into an
LMA or any other agreements related to the sale of advertising time.
IV. Remedies Available to Potential Private Litigants
Section 4 of the Clayton Act, 15 U.S.C. 15, provides that any
person who has been injured as a result of conduct prohibited by the
antitrust laws may bring suit in federal court to recover three times
the damages the person has suffered, as well as costs and reasonable
attorneys' fees. Entry of the proposed Final Judgment will neither
impair nor assist the bringing of any private antitrust damage action.
Under the provisions of Section 5(a) of the Clayton Act, 15 U.S.C.
16(a), the proposed Final Judgment has no prima facie effect in any
subsequent private lawsuit that may be brought against defendants.
V. Procedures Available for Modification of the Proposed Final
Judgment
The plaintiff and the defendants have stipulated that the proposed
Final Judgment may be entered by the Court after compliance with the
provisions of the APPA, provided that the United States has not
withdrawn its consent. The APPA conditions entry upon the Court's
determination that the proposed Final Judgment is in the public
interest.
The APPA provides a period of at least sixty (60) days preceding
the effective date of the proposed Final Judgment within which any
person may submit to the United States written comments regarding the
proposed Final Judgment. Any person who wishes to comment should do so
within sixty (60) days of the date of publication of this Competitive
Impact Statement in the Federal Register. The United States will
evaluate and respond to the comments.
[[Page 17453]]
All comments will be given due consideration by the Department of
Justice, which remains free to withdraw its consent to the proposed
Final Judgment at any time prior to its entry. The comments and the
response of the United States will be filed with the Court and
published in the Federal Register.
Any such written comments should be submitted to: Craig W. Conrath,
Chief, Merger Task Force, Antitrust Division, United States Department
of Justice, 1401 H Street, N.W., Suite 4000, Washington, D.C. 20530.
The proposed Final Judgment provides that the Court retains
jurisdiction over this action, and the parties may apply to the Court
for any order necessary or appropriate for the modification,
interpretation, or enforcement of the Final Judgment.
VI. Alternatives to the Proposed Final Judgment
The plaintiff considered, as an alternative to the proposed Final
Judgment, a full trial on the merits of its complaint against
defendants. The plaintiff is satisfied, however, that the termination
abandonment of the proposed and other relief contained in the proposed
Final Judgment will preserve viable competition in the sale of radio
advertising time in the Suffolk County, N.Y. area. Thus, the proposed
Final Judgment would achieve the relief of the Government would have
obtained through litigation, but avoids the time, expense and
uncertainty of a full trial on the merits of the complaint.
VII. Standard of Review Under the APPA for Proposed Final Judgment
The APPA requires that proposed consent judgments in antitrust
cases brought by the United States be subject to a sixty (60) day
comment period, after which the court shall determine whether entry of
the proposed Final Judgment ``is in the public interest.'' In making
that determination, the court may consider--
(1) The competitive impact of such judgment, including
termination of alleged violations, provisions for enforcement and
modification, duration or relief sought, anticipated effects of
alternative remedies actually considered, and any other
considerations bearing upon the adequacy of such judgment;
(2) the impact of entry of such judgment upon the public
generally and individuals alleging specific injury from the
violations set forth in the complaint including consideration of the
public benefit, if any, to be derived from a determination of the
issues at trial.
15 U.S.C. 16(e). As the United States Court of Appeals for the D.C.
Circuit recently held, this statute permits a court to consider, among
other things, the relationship between the remedy secured and the
specific allegations set forth in the government's complaint, whether
the decree is sufficiently clear, whether enforcement mechanisms are
sufficient, and whether the decree may positively harm third parties.
See United States versus Microsoft, 56 F.3d 1448, 1461-62 (D.C. Cir.
1995).
In conducting this inquiry, ``[t]he Court is nowhere compelled to
go to trial or to engage in extended proceedings which might have the
effect of vitiating the benefits of prompt and less costly settlement
through the consent decree process.'' \4\ Rather,
---------------------------------------------------------------------------
\4\ 119 Cong. Rec. 24598 (1973). See United States v. Gillette
Co., 406 F. Supp. 713, 715 (D. Mass. 1975). A ``public interest''
determination can be made properly on the basis of the Competitive
Impact Statement and Response to Comments filed pursuant to the
APPA. Although the APPA authorizes the use of additional procedures,
15 U.S.C. 16(f), those procedures are discretionary. A court need
not invoke any of them unless it believes that the comments have
raised significant issues and that further proceedings would aid the
court in resolving those issues. See H.R. Rep. 93-1463, 93rd Cong.
2d Sess. 8-9 (1974), reprinted in U.S.C.C.A.N. 6535, 6538.
---------------------------------------------------------------------------
[a]bsent a showing of corrupt failure of the government to discharge
its duty the Court, in making its public interest finding, should *
* * carefully consider the explanations of the government in the
competitive impact statement and its responses to comments in order
to determine whether those explanations are reasonable under the
circumstances.
United States v. Mid-America Dairymen, Inc., 1977-1 Trade Cas. para.
61,508, at 71,980 (W.D. Mo. 1977).
Accordingly, with respect to the adequacy of the relief secured by
the decree, a court may not ``engage in an unrestricted evaluation of
what relief would best serve the public.'' United States v. BNS, Inc.,
858 F. 2d 456, 462 (9th Cir. 1988), citing United States v. Bechtel
Corp., 648 F. 2d 660, 666 (9th Cir.), cert. denied, 454 U.S. 1083
(1981); see also Microsoft, 56 F. 3d at 1460-62. Precedent requires
that
the balancing of competing social and political interests affected
by a proposed antitrust consent decree must be left, in the first
instance, to the discretion of the Attorney General. The court's
role in protecting the public interest is one of insuring that the
government has not breached its duty to the public in consenting to
the decree. The court is required to determine not whether a
particular decree is the one that will best serve society, but
whether the settlement is ``within the reaches of the public
interest.'' More elaborate requirements might undermine the
effectiveness of antitrust enforcement by consent decree.\5\
---------------------------------------------------------------------------
\5\ Bechtel, 648 F. 2d at 666 (citations omitted) (emphasis
added); see BNS, 858 F. 2d at 463; United States v. National Broad.
Co., 449 F. Supp. 1127, 1143 (C.D. Cal. 1978); Gillette, 406 F.
Supp. at 716. See also Microsoft, 56 F. 3d at 1461 (whether ``the
remedies [obtained in the decree are] so inconsonant with the
allegations charged as to fall outside of the `reaches of the public
interest' '') (citations omitted).
The proposed Final Judgment, therefore, should not be reviewed under a
standard of whether it is certain to eliminate every anticompetitive
effect of a particular practice or whether it mandates certainty of
free competition in the future. Court approval of a final judgment
requires a standard more flexible and less strict than the standard
required for a finding of liability. ``[A] proposed decree must be
approved even if it falls short of the remedy the court would impose on
its own, as long as it falls within the range of acceptability or is
`within the reaches of public interest.' '' \6\
---------------------------------------------------------------------------
\6\ United States v. American Tel. and Tel. Co., 552 F. Supp.
131, 151 (D.D.C. 1982), aff'd. sub nom. Maryland v. United States,
460 U.S. 1001 (1983) (quoting Gillette Co., 406. F. Supp. at 716
(citations omitted)); United States v. Alcan Aluminum, Ltd., 605 F.
Supp. 619, 622 (W.D. Ky. 1985).
---------------------------------------------------------------------------
In this case, the proposed Final Judgment reflects the Defendants
desire to abandon the proposed acquisition and end the LMA. Moreover,
it insures that the present and any future owner of WALK-FM may not own
either WBLI-FM or WBAB-FM. In sum, the Final Judgment represents every
objective the government sought through bringing its action.
VIII. Determinative Documents
There are no determinative materials or documents within the
meaning of the APPA that were considered by the United States in
formulating the proposed Final Judgment.
Respectfully submitted,
Allee A. Ramadhan,
(AR 0142).
Seth E. Bloom,
(SB 3709).
Theresa H. Cooney,
(TC 4933).
Merger Task Force, U.S. Department of Justice, Antitrust Division, 1401
H Street, N.W., Suite 4000, Washington, D.C. 20530, (202) 307-0001.
Dated: March 30, 1998.
Appendix A--Herfindahl-Hirschman Index Calculations
``HHI'' means the Herfindahl-Hirschman Index, a commonly accepted
measure of market concentration. It is calculated by squaring the
market share of each firm competing in the market and then summing the
resulting numbers. For example, for a market consisting of four firms
with shares of
[[Page 17454]]
thirty, thirty, twenty, and twenty percent, the HHI is 2600
(302+302+202+202=2600). The
HHI takes into account the relative size and distribution of the firms
in a market and approaches zero when a market consists of a large
number of firms of relatively equal size. The HHI increases both as the
number of firms in the market decreases and as the disparity in size
between those firms increases.
Markets in which the HHI is between 1000 and 1800 points are
considered to be moderately concentrated, and those in which the HHI is
in excess of 1800 points are considered to be concentrated.
Transactions that increase the HHI by more than 100 points in
concentrated markets presumptively raise antitrust concerns under the
Horizontal Merger Guidelines issued by the U.S. Department of Justice
and the Federal Trade Commission. See Merger Guidelines Sec. 1.51.
Certificate of Service
I hereby certify that, on this 30th day of March 1998, I caused to
be served via hand delivery a copy of the foregoing Competitive Impact
Statement upon the following:
Edward P. Henneberry, Esq., Roxann E. Henry, Esq., Howrey & Simon, 1299
Pennsylvania Avenue, N.W., Washington, D.C. 20004.
Howard Adler, Jr., Esq., David J. Laing, Esq., Baker & McKenzie, 815
Connecticut Avenue, N.W., Washington, D.C. 20006.
Seth E. Bloom.
[FR Doc. 98-9373 Filed 4-8-98; 8:45 am]
BILLING CODE 4410-11-M
