Acting Assistant Attorney General Joel I. Klein, in a speech last week to the National Association of Broadcasters, quoted from two memos found during investigations into a recent spate of radio mergers. The consolidation is the result of the easing of radio station ownership limits by last year's Telecommunications Act.
While avoiding naming names, Mr. Klein said the memos clearly showed broadcasters acting in violation of antitrust laws. He cited for instance a memo from two stations that had merged.
"I have already put a 20% rate increase for 6 a.m.-7 p.m. time periods which agencies typically purchase," read one memo from two stations that had merged. "Many buyers work [one station] against [the other station] to get the lowest rate possible, since both stations are `must' buys in many cases . . . I will use our combined stations' cooperation to get some of our long-term low dollar contracts raised to a higher rate."
In the second memo, a station buying its rival envisioned the benefits of "working in conjunction with [the other station] to raise rates . . . One of the biggest reasons our rates are so low is the direct format competitor . . . Simply raising our rates by 50%, which I think is possible, will accomplish our goal."
Mr. Klein warned broadcasters the Justice Department would look closely at any deal that gives broadcasters the power to take that kind of action.
"If . . . a significant number of advertisers can no longer effectively `buy around' a single owner . . . that merger would likely be anti-competitive," he said.
Yet even as Mr. Klein was warning broadcasters that the department would look at monopolization of advertising for a specific audience-not just at total market dollars-he acknowledged the Justice Department could still approve deals giving two owners each more than 40% of a market.
EVERGREEN, CHANCELLOR MERGE
The consolidation wave continued last week, as Evergreen Media Corp. and Chancellor Broadcasting Co. announced a deal to merge and to acquire Viacom International's 10 radio stations.
The deal will give Chancellor 103 radio stations in 21 markets, though eight stations will have to be sold. The Telecommunications Act limits broadcasters to eight radio stations per market, not more than five of any one type, and the combination exceeds that in San Francisco, Chicago, Detroit and Washington.
The Chancellor deal would mean that in New York, CBS would own 35.4% of the radio ad dollars, while Chancellor would have 14.7%, according to BIA Research.
"It's a problem when anybody has that kind of control," said Jean Pool, exec VP-director of North American Media Buying Service,
J. Walter Thompson USA, New York. "If radio can do it, then it's going to spread to TV and networks and magazines. Then all of a sudden you have five owners of everything and everyone is clamoring for space and time. This country wasn't built on a monopoly."
Allen Banks, executive media director at Saatchi & Saatchi Advertising, said independent stations will be hit the hardest.
"They are going to get squeezed like crazy, and I do worry about what will happen in eliminating the smaller guys," Mr. Banks said.
4A'S WANTS NEW RULES
The American Association of Advertising Agencies, which had been worried about the possibility of broadcasters using their clout to raise prices, had asked the Federal Communications Commission to write rules that prevent abuses.
Sen. Conrad Burns (R., Mont.), chairman of the Senate Commerce Committee's Communications Subcommittee, however, last week questioned the FCC's looking at either concentration or maintaining "diversity" in market ownership in a letter to FCC Chairman Reed Hundt.