FOR IMMEDIATE RELEASE Contact: William J. Friedman

March 12, 2001 (202) 418-2300

## PRESS STATEMENT OF COMMISSIONER GLORIA TRISTANI

## Approval of 32 Radio License Transactions in 26 Radio Markets

## by the Mass Media Bureau

The Bureau's approval of 32 license transactions in 26 radio markets
relies on a simplistic antitrust-like analysis of competition and
confounds the Commission's primary obligation to implement a federal
broadcast communications policy that serves the public interest. Each of
these license transfers brings about an increase, and in some cases an
unprecedented increase, in market power concentration. Taken together
they exemplify harmful levels of control of advertising revenues by both
single owners and duopolies in local radio markets that can hardly lay
claim to be supported, much less approved, by prior Commission cases or
logic.[^1] Today's approvals apparently initiate a new era where the
Commission will routinely approve transactions resulting in *single
owner revenue concentration levels over 50% and duopoly concentration
levels as high as 100%*. The Bureau's retreat from the Commission's past
practice is unjustified.

Undue economic concentration has an adverse impact on competition,
diversity and localism. When a single competitor, for example, acquires
sufficient market power through consolidation, it may likely exercise
that power to increase advertising rates, deter entry, disadvantage
rivals, or cause otherwise efficient rivals to exit from the market and
thus deprive the consumer of independent voices, thereby limiting the
range of information received by the listening public. Moreover,
vigorous competition among market participants usually compels
competitors to produce a better product, which directly benefits the
listening public. These concerns are at the core of the Commission's
statutory public interest mandate. The Bureau's action ignores that the
public interest requires us to consider more than the competitive impact
of proposed radio station transactions to avoid irreversibly adverse
consequences of extremely concentrated radio markets.

While I agree the Bureau should act on these applications, some of which
have been pending since 1998, most, if not all, of the cases should have
been designated for evidentiary hearings under Section 309(e) of the
Communications Act. Absent a better factual record upon which to base
the decision, these approvals appear to flatly contravene the
Commission's duty to ensure broadcast license transfers serve the public
interest. It is not *any* action that we are obligated to undertake, it
is action in the public interest. As the concentration in a particular
market increases, our duty to scrutinize the public interest benefits
should increase accordingly. Proper implementation of this Commission's
obligation requires a more complete record and analysis.

No single factor defines the level of competition or potential
competitive problems in radio markets. Without the fact gathering that
takes place at a hearing, there is insufficient evidence to fairly
consider or fulfill our statutory obligations. At a minimum these cases
should each be subject to a hearing that collects evidence on the
relevant markets, measures concentration, and evaluates the potential
adverse competitive effects and the relationship of such effects to our
public interest review. The hearing record should also include evidence
on the potential for entry by new competitors, information regarding
efficiencies that lead to demonstrable benefits to the listening public
and other consumer benefits that may result from the transaction.

**I. FACTS**

Today's license transfers are in 26 separate radio markets and involve
32 separate transactions.[^2] In 7 cases, Petitions to Deny the
transactions were filed, including one in a non-Arbitron market. In 6 of
the 7 cases, the top two revenue earning stations combined exceed 75% of
the advertising revenue generated by that market*.* In 5 of the 7
markets, no third competitor has as much as 20% of the revenue and in
one market, the third competitor has a mere 5.3%.[^3]

There are 25 transactions in 22 radio markets where no Petitions to Deny
were filed. In these markets the minimum share held by the top two
revenue earning stations is 73.9% (Cheyenne, WY) *and in two markets the
top two stations have 100%* (Casper, WY and Augusta, ME). In 10 of the
22 Arbitron markets, the top two stations control over 90% of the
revenues. In 10 of the same 22 markets, the third competitor has less
than 10% of the revenues and as little as 2.3%. None of the remaining 12
has over 20%. The highest single post merger revenue share is 67.3%
(Beckley, WV).

**II. APPLICABLE LAW**

The Commission may grant a requested license transfer only if it
determines that "the public interest, convenience and necessity will be
served thereby." 47 U.S.C. § 310(d). Where broadcast licenses are
concerned, the effects of a proposed transaction on the diversity of
voices, local programming, and economic competition in a given market
have long been core considerations. The license transfers at issue in
this clutch of applications, with the exceptions of those in
Harrisonburg, Va., and Utica, NY, do not implicate the ownership cap
rules but nonetheless present levels of economic concentration that pose
a threat to competition and the public interest principles that have
guided this agency for many years. The transactions before the Bureau
today may comply with the numerical station ownership limits but
nonetheless may result in substantial and harmful economic
concentration.[^4] In high-concentration cases such as these, the
Commission has previously found it:

> \[H\]as an independent obligation to consider whether a proposed
> pattern of radio ownership that complies with the local ownership
> limits would otherwise have an adverse competitive effect in a
> particular radio market and thus, would be inconsistent with the
> public interest. 47 U.S.C. § 309(a)(requiring the Commission to make a
> determination that the transfer or assignment of a broadcast license
> would be in the public interest).[^5]

It is nonsensical to contend otherwise. The 1996 Act did not remove the
Commission's statutory obligation to grant sales applications only if it
can conclude that doing so would serve the public interest. Nor did it
remove competitive impact as a component of the Commission's public
interest review of broadcast sales applications under Section 310(d) of
the Communications Act, any more than it removed the Department of
Justice's or the Federal Trade Commission's ("Antitrust Agencies")
antitrust oversight of radio merger cases. Today's approvals baldly
presume that the statutory public interest standard is met even where
the approval results in injurious economic concentration.

> \[O\]ur jurisdiction \[nor\] our obligation with respect to
> competition in broadcast markets is coincident with that of the
> Antitrust Agencies. Rather, our interests in this area are
> complementary.[^6]

The Commission has repeatedly said that its analysis of competitive
effects is informed by antitrust principles but is not governed by them.
The public interest standard, and the competitive analysis conducted
thereunder, call for an examination of a larger field of facts than
review to ascertain violations of the antitrust laws[^7][^8]

**III. PAST COMMISSION DECISIONS AND PRACTICES APPEAR TO HAVE BEEN
IGNORED BY THE BUREAU**

This Commission has previously followed a screening procedure where
applications for license transfers are reviewed by the Bureau to
determine whether they raise competitive concerns. Two calculations are
undertaken. First, the post-merger share of radio revenues received by
the applicant is calculated. Second, the post-merger share of the same
revenues that would be controlled by the applicant and the second
largest firm in the market is calculated. If the applicant's share is 50
percent or more, or if the two-firm share is 70 percent or more, the
transaction poses a potential competitive risk. The Bureau then would
seek public comment on the competitive impact of the transaction and
indicate that the Commission would subject the case to further
competitive analysis[^9][^10] All but four of the cases at issue today
were put on public notice pursuant to this procedure.

Had the Bureau followed its ordinary practice in the subject cases, or
expanded the factors to include those that have been occasionally used,
including market capacity, the distribution of classes of stations and
conditions of entry, these cases would still appear to have failed to
pass public interest muster. Accordingly, a substantial and material
question of fact exists whether any of these transactions would have had
an adverse effect on competition in the local radio advertising market
thereby irreparably harming listeners by reducing viewpoint diversity.
It appears none of these cases would have likely cleared our
well-settled public interest hurdle under Section 310(d) of the
Communications Act. Designation for hearing pursuant to Section 309(e)
of the Communications Act would have been the better disposition.

**IV. UNANSWERED QUESTIONS**

These approvals raise a significant question whether the FCC has a
coherent approach to determine if the public interest is served when
reviewing competitive concerns in the broadcast radio context. While not
explicitly overthrowing our traditional analysis, many relevant
questions have been overlooked here. With respect to radio transactions
that present horizontal market power concerns, do we utilize a
consistent definition of the relevant market, both in terms of the
relevant product and geographic markets?[^11] Do we have a consistent
and logical methodology for identifying the market participants?[^12]
The approval letters released by the Bureau barely examined whether the
transactions under review were likely to result in either unilateral or
coordinated effects that enhance or maintain market power[^13][^14] The
approvals contain little or no discussion whether the proposed
transactions may result in transaction-specific efficiencies such as
cost reductions that can demonstrably lead to consumer benefits,
productivity enhancements that flow through to listeners, or improved
incentives for innovation that can lead to reasonably foreseeable
benefits to the listening public[^15][^16] and whether the transactions
would support the general policies that underlie the 1996 Act. In the
absence of hearings on these cases, it is difficult to see how the
applicants have carried their burden to demonstrate the transactions
serve the public interest, convenience and necessity. This Commission
has departed without reason from its prior standards and has set the
public interest adrift on uncharted seas.

[^1]: I am unable to locate a single case where the post-transaction
    duopoly market share has reached some of the levels approved here.
    The Bureau cites *Shareholders of AMFM, Inc.,* 15 FCC Rcd. 16062
    (2000) for the proposition that duopoly concentrations of
    approximately 82% have been previously approved. While that figure
    appears in the *AMFM* decision at 16070, there is no analysis. The
    sole contention was the public interest standard was not violated
    because certain divestitures compelled by the Antitrust Division of
    the Department of Justice remedied the competition concerns
    presented by such high revenue concentrations. Unfortunately, the
    divestitures cited in the reported decision were *in different
    markets than those that contained the offending concentrations. See*
    15 FCC Rcd. at 16070-71, n.23. In short, the citation to prior
    Commission authority appears to be citation to a precedent that
    never was. Finally, it cannot be overlooked that only a *single
    commissioner voted to approve both the outcome and the rationale.*
    *See* 15 FCC Rcd. At 16062 (noting Commissioners Tristani and Powell
    concurred and Commissioner's Ness and Furchgott-Roth dissented in
    part)

    Many of today's approval letters cite *New Cities Communications
    Inc.,* 12 FCC Rcd. 3929 (1997) for the proposition that single owner
    advertising revenue levels of 52.4% are consistent with prior
    precedent. However, close reading of *New Cities* reveals that the
    Commission did not analyze the revenue concentration level for
    public interest harms, it simply said the Department of Justice did
    not find an antitrust violation and the post-transaction increase
    was marginally greater than had previously been approved. By this
    rationale the Commission has no principled public interest analysis,
    nor is there any numerical limit to the percentage of advertising
    revenue share a single owner may possess. This approach simply
    writes the public interest requirement out of the statute.

[^2]: One transaction is in a non-Arbitron market. There are 5
    transactions in duplicate markets (Santa Barbara, CA, Harrisonburg,
    VA, Great Falls, MT, Williamsport, PA, and Casper, WY)

[^3]: ^?^ Santa Barbara, CA; Harrisonburg, VA (2 transactions); Mt.
    Sterling/Lexington, KY; and Utica/Rome, NY.

[^4]: New entry into the commercial broadcasting industry is extremely
    difficult. In many local markets, there are no available frequencies
    to permit the entry of a new station. As a result, new entry as a
    constraint on the possible exercise of market power by incumbent
    radio stations is often ineffective. This structural characteristic
    of local commercial radio markets requires a careful scrutiny of any
    proposed aggregation of station capacity in a local market, even
    where small increments of market share are involved.

[^5]: ^?^ *CHET-5 Broadcasting L.P.,* 14 FCC Rcd 13041, 13043 (1999).
    The courts have long agreed that competition is a component of the
    Commission's public interest review of broadcast applications. *See,
    e.g., FCC v. RCA Communications, Inc.,* 346 U.S. 86, 94
    (1953)("There can be no doubt that competition is a relevant factor
    in weighing the public interest."); *Mansfield Journal Co. v. FCC,*
    180 F.2d 28, 33 (D.C. Cir. 1950)("Monopoly in the mass
    communications of news and advertising is contrary to the public
    interest, even if not in terms proscribed by the antitrust laws.");
    *Rogers Radio Communications Services, Inc. v. FCC,* 593 F.2d 1225,
    1230 (D.C. Cir. 1978)(The "effect on competition \[is\] clearly a
    proper factor for the Commission to consider under the public
    interest, convenience and necessity standard. . . .").

[^6]: *Shareholders of Citicasters, Inc.*, 11 FCC Rcd 19135, 19143
    (1996); The Department of Justice has recognized the complementary
    role played by the Commission. To the extent that discretionary
    decisions not to prosecute reflect the limited resources of the
    antitrust enforcement agencies, the FCC's review, which is not
    discretionary, provides a check against potential under-enforcement.
    *See* U.S. Department of Justice, International Competition Policy
    Advisory Committee, *Final Report*, at 150 and n. 167, 154 (February
    28, 2000).

[^7]: ^.^

[^8]: *See United States v. FCC,* 652 F.2d 72, 81-82 (D.C. Cir.
    1980)(The Commission's "determination about the proper role of
    competitive forces in an industry must ... be based not exclusively
    on the letter of the antitrust laws, but also on the 'special
    considerations' of the particular industry.").

[^9]: ^.^

[^10]: The public notice listing any transaction identified by the
    screen includes the following language:

    Note: Based on our initial analysis of this application and other
    publicly available information, including advertising revenue share
    data from the BIA database, the Commission intends to conduct
    additional analysis of the ownership concentration in the relevant
    market. This analysis is undertaken pursuant to the Commission's
    obligation under Section 310(d) of the Communications Act, 47 U.S.C.
    Section 310(d), to grant an application to transfer or assign a
    broadcast license or permit only if so doing serves the public
    interest, convenience and necessity. We request that anyone
    interested in filing a response to this notice specifically address
    the issue of concentration and its effect on competition and
    diversity in the broadcast markets at issue and serve the response
    on the parties.

    The Commission has used this screening method since August 1998.
    *See Public Notice Broadcast Applications,* Report No. 24303 (August
    12, 1998); *Great Empire Broadcasting, Inc.,* 14 FCC Rcd 11145
    (1999).

[^11]: *See e.g. Brown Shoe Co v. United States*, 370 U.S. 294, 324-25
    (1962) (defining relevant product market in terms of reasonable
    interchangeability of a service or product and its substitute, while
    considering price, use, and quality); *United States v. FCC,* 652
    F.2d 72, 97 (D.C. Cir. 1980); *Craig O. McCaw*, 9 FCC Rcd at 5845 ¶
    10, nn.27-28. With regard to the definition of the relevant
    geographic scope of relevant markets, see *United States v.
    Philadelphia Nat\'l Bank*, 374 U.S. 321, 359 (1963) (defining
    relevant geographic market as an area in which a buyer may purchase
    a product or service from alternative sources, or in which the
    presence of other sellers restrains prices charged to buyers).

[^12]: *See Merger Guidelines*, 57 Fed. Reg. at 41556-41557 § 1.3.

[^13]: ^.^

[^14]: *See, e.g. Philadelphia Nat\'l Bank*, 374 U.S. at 363 ("\[A\]
    significant increase in the concentration . . . must be enjoined in
    the absence of evidence clearly showing that the merger is not
    likely to have such anticompetitive effects."). *See also Merger
    Guidelines* at 41558 §§ 2.1, 2.2; *New York v. Kraft General Foods*,
    926 F. Supp. 321, 359 (S.D.N.Y. 1995); *Amendment of Parts 20 and 24
    of the Commission\'s Rules ‑‑ Broadband PCS Competitive Bidding and
    the Commercial Mobile Radio Service Spectrum Cap*, WT Docket
    No. 96‑59, Report and Order, 11 FCC Rcd 7824 (1996).

[^15]: ^,^

[^16]: *See Merger Guidelines* Section 4; *see, e.g., FTC v. University
    Health, Inc.*, 938 F.2d 1206, 1213 (11th Cir. 1991) (stating that
    defendants must show that acquisition would result in significant
    efficiencies that would benefit competition and the consumer).