A Justice Department spokeswoman confirmed the government is investigating "competition for advertising among certain TV stations in Los Angeles."
The probe, by the Tele-communications Task Force of Justice's antitrust division, has even reached New York.
Talking to N.Y. Shops
Formal interviews have been conducted with buyers at some Manhattan ad agencies who know the Los Angeles market, say executives familiar with the probe.
"Stations and reps are really upset about this," said an executive at one TV station group. "They're worried that it's just the tip of the iceberg, and that Justice may broaden the investigation to other markets."
Executives interviewed for this article declined to be named due to the sensitive nature of the investigation and because investigators asked those they interviewed not to talk about it.
The investigation apparently started when the Justice Department examined the antitrust implications of Walt Disney Co.'s acquisition of Capital Cities/ABC. In Los Angeles, ABC owns KABC-TV and Disney owns KCAL-TV, though the latter will be sold as a result of the merger.
'Ad Pacing' Numbers
The feds found documents detailing the ad pacing figures of competing TV stations, executives said. Pacing figures tell each station how it's doing in a market vs. an earlier time period. The numbers also can tell stations how they are pacing against the other stations in the current marketplace.
Of concern to investigators, say those familiar with the situation, is what additional sales information is known by most or all of the stations in the market, how stations get that competitive information, and whether pacing figures and other information are then used by the stations to collude in setting ad rates.
Phone calls to KCAL and its rep company, Blair Television, were not returned at press time.
"What the government might conclude," said an executive with a TV rep company, "is that if you knew that the other stations in town had all raised their rates because of various factors you had found out about through various documents, then you might raise your rates as well."
Range of Penalties
Penalties could range from fines to efforts to revoke a station's license. Justice also could ask the accounting firms Ernst & Young and Price Waterhouse & Co. to stop producing their quarterly audits that give stations marketplace information.
One dicey area being examined is how stations get their information-from reps or through direct exchanges with other stations.
"It's no secret that the reps can tell you about almost any buy in the market and maybe be off by only $50," said one general manager of a major-market TV station.
Rep firms do seem spooked by the investigation.
"I know at least one rep firm has told its people that they can no longer ask us a question like, `Can you give me an idea where a station I don't rep is pricing its late news right now?'*" said one buyer at a Los Angeles agency.
"He can only refer to the current piece of business he's working on and ask if we're competitive in this area," the buyer said. "He can't ask if the other station is raising its overall rate in April."
Not Necessarily Collusion
The practice of sharing pacing information is common in the TV industry, but wouldn't necessarily lead to collusion in a major market like Los Angeles.
"The L.A. market is so big that collusion's not a problem," said an executive at a major independent buying service. "Even if all the stations know how everyone else is pacing, there are too many players there to make collusion successful."
But this executive added that there is a collusion problem in smaller markets.
In 1989, Justice examined ad-rate price fixing among TV stations in the Roanoke, Va., market, but nothing ever came of it.