The Game of Radiopoly: An Antitrust Perspective of Consolidation in the Radio Industry

I. INTRODUCTION The mass consolidation of the radio industry is a result of two recent developments: the enactment of the Telecommunications Act of 1996 (Telecom Act)(1) and the use of the 1992 Merger Guidelines(2) by federal antitrust enforcement agencies. This Comment explores current merger policy and its effect on the radio industry to determine whether consolidation continues to serve the public interest. The unique characteristics of radio as a scarce spectrum and forum of public expression raise concern as to whether a traditional antitrust analysis provides sufficient guidelines for regulation. Although there are numerous factors acting on the radio industry and it may be too early to determine the outcome of the current merger treatment, this Comment primarily examines the merger analysis employed by the federal antitrust enforcement agencies. First, this Comment addresses the various roles of federal agencies in reviewing radio mergers and policy considerations underlying agency decisions. Second, this Comment examines economic and noneconomic factors of the 1992 Merger Guidelines used by the antitrust enforcement agencies. Third, this Comment discusses implications of the consolidation for the radio industry, including economic benefits and effects on diversity. Finally, in light of the fact that consolidation adversely effects the radio industry, this Comment notes forthcoming deregulation in the radio industry. Amidst the record-breaking wave of mergers that has taken place during the Clinton administration, federal agencies have been faced with the task of reviewing a staggering number of proposed mergers.(3) The underlying movement pushing deregulation forward is well expressed by Vice President Gore's statement regarding mergers in the communication industry: "Competition is always better than monopoly. But monopoly power must never be confused with competition. Two enemies of competition are monopoly power and unwise government regulation. We must remember, after all, that the goal we seek is real competition. Not the illusion of competition; not the distant prospect of competition.(4) In this line of thinking, Congress made a major overhaul of the regulation of the telecommunications market and the Telecom Act became law on February 8, 1996.(5) The Telecom Act's most significant effects in mass media occurred in the radio industry with the elimination of nationwide ownership restrictions and the liberalization of local ownership caps under sections 202(a) and 202(b)(1).(6) II. AGENCY REGULATION OF RADIO CONSOLIDATION A. Consolidation of the Radio Industry Beginning in 1985, the Federal Communications Commission (FCC) relaxed radio ownership limits to increase competition and diversity in the radio industry.(7) These effects have been even more dramatic with the Telecom Act,(8) where the radio industry has experienced tremendous consolidation and the number of radio station owners has dropped significantly. The number of radio station owners has declined 11.7%; whereas the number of radio outlets has dropped 2.5%.(9) The decline in radio station owners is the result of a vast amount of trading.(10) In 1996 alone, 2066 radio station transactions were made, comprising about 20% of the total number of stations.(11) In 1996, $2.84 billion were spent in radio transactions and in 1997 another $2.46 billion were spent.(12) Although 1998 radio transactions have decreased, they continue to represent a healthy revenue of roughly $1.6 billion, a slight decrease from dollars spent in 1996 and 1997.(13) Three years after the Telecom Act, industry participants expect that the radio consolidation boom will shortly come to an end.(14) Others project that if consolidation continues it will involve mostly smaller markets.(15) In 1998, the market experienced an overall decrease in FM station transaction revenues; although there was a sixty-five percent increase in the sale of AM stations. …