The decision, which stopped one station owner from holding the major rock-music stations and the other country music stations, also poses new antitrust concerns for broadcasters.
Justice said the swap was an attempt to allocate Charlotte advertising by the two owners and raise prices to marketers. This marks the first time the government, in its antitrust review of recent radio station deals, has looked beyond overall market concentration and focused on its effects on a specific target market.
COULD HAVE SNAGGED CBS DEAL
A similar approach three months ago could have caused problems for Westinghouse Corp.'s purchase of CBS, which combined all-news radio stations in New York, Chicago and Los Angeles-although it's not known if Justice would have viewed all-news listenerships or those larger markets as seriously as it did the attempted North Carolina arrangments.
But the Feb. 27 action may yet raise some issues in Chancellor Broadcasting Co.'s merger last month with Evergreen Media Corp., and that combined entity's buy of Viacom International's stations.
"These are significant cases," said John Kamp, VP of the American Association of Advertising Agencies. "They are clearly doing more than just saying 40% [of advertising dollars in a market prompts scrutiny]. I would suspect that many [agency media] buyers find this action very positive."
Andy Schwartzman, executive director of the Media Access Project, said the decision was most significant in indicating the scope of Justice's examination of future media deals.
"This is significant less for the details than the principles the Justice Department is determined to explore-the implications of ownership consolidation," he said. "Just as there are no limits as to how to do deals, the department is focusing on this in the broadest possible way."
Actually, Justice took no formal action on the Charlotte deal, in which EZ Communications was trading a station with SFX Broadcasting. Instead, the government agency told EZ its $655 million merger with American Radio Systems would not be approved while the planned Charlotte swap was alive, prompting the companies to scrap the North Carolina trade.
COULD HAVE RAISED PRICES
EZ was giving SFX one of the six Charlotte stations it was getting as part of a multimarket deal with Evergreen Media in exchange for cash and two EZ Philadelphia stations. Without the SFX swap, the Evergreen deal boosted EZ's share of Charlotte advertising to 55% from 21%, "resulting in EZ having the ability to raise prices" to advertisers trying to reach males, said Justice in requiring EZ to sell off the biggest rock station in town and get the share down to 40%.
The department required American Radio to sell off at least one Sacramento, Calif., station, where the combination with EZ would have given the merged company eight stations, including six of the 12 larger FM stations and a 36% share of advertising.
The Justice Department's examination of formats had been signaled before, but Charlotte was the first case where the agency took action because of a format issue.
"We are ultimately concerned with mergers that give control of advertising to a company, and one way to look at that is the effect on the format where one station is off against another,' said Charles Biggio, senior counsel to the assistant attorney general. "If the competition is gone, the [advertisers'] choices are gone after the merger.'
A spokesman said the National Association of Broadcasters continues to believes "radio formats are easily substitutable . . . concern that a particular operator could corner formats is unfounded."