JUSTICE DEPT. SUES TO STOP RADIO ACQUISITION: CONCERN ABOUT HIGHER AD RATES CITED IN MOVE TO BLOCK CHANCELLOR

By Published on .

The Justice Department, as a warning over the fast pace of radio station-ownership consolidations, is suing to halt one deal, citing the fear that advertisers would have to pay higher rates.

The suit filed last week in U.S. District Court in New York seeks to bar Chancellor Media, which owns two Long Island stations, from acquiring four more stations on Long Island in a swap for some Jacksonville, Fla., stations with SFX Broadcasting.

It also seeks to end the local marketing agreement giving Chancellor the rights to program and sell the SFX stations, which had been in effect pending Justice Department action.

HURTING COMPETITION?

The U.S., in its first such action, charges that the $54 million deal would end vigorous competition among three of the stations-Chancellor's WALK-FM and SFX's WBLI-FM and WBAB-FM-for the age 25-to-54 demographic, and give Chancellor 65% of the market's overall ad dollars.

The suit takes no action on SFX's acquisition of two Jacksonville stations, although that company already owns four Jacksonville stations.

Justice previously had taken the position that more than a 40% share of ad dollars in a market or in a key demographic would draw scrutiny. But up to now it has found broadcasters willing to restructure deals to avoid problems.

The fact that it's taking legal action could mean major problems for some other recently announced consolidations, including Westinghouse Electric Corp.'s $1.6 billion deal for American Radio Systems and Hicks Muse Tate & Furst's $1.2 billion deal for SFX.

Charles Biggio, senior counsel to the assistant attorney general, said attempts to get Chancellor to restructure the Long Island deal-to keep the three key stations out of the four total in separate hands-had failed.

Chancellor executives did not return calls for comment.

The company is expected to claim that the Long Island market is not separate from the New York market, an issue the Justice Department disputes.

FOUR A'S CONCERNS

The American Association of Advertising Agencies has been raising concerns about radio consolidation in discussions with Justice.

"I don't care who owns a station as long as you are not owning a market," said Jean Pool, exec VP-North American director of media services for J. Walter Thompson USA. In a single market, "40% bothers me, and anything beyond that is against the law and people shouldn't be allowed to do it."

"Good for Justice. I applaud them for watching, for being the lookout," said Allen Banks, exec VP-North American media, Saatchi & Saatchi Worldwide, New York. "I don't care how small a market or where it occurs, when you have a

In this article:
Most Popular