FCC decision could affect ad price hikes

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The Federal Communications Commission's decision to allow greater media consolidation has placed pressure on the Justice Department to determine if some limits will be necessary to curb ad-price hikes.

"The Justice Department will look hard at what advertisers have to say," said M.J. Moltenbrey, partner, Freshfields Bruckhaus Deringer. "The key question is whether the [merged company] is going to be able to identify customers who have no alternative and selectively raise prices to them."

Rebecca P. Dick, a lawyer with the firm of Swidler Berlin Shereff Friedman, said that the key for the Justice Department will be whether marketers retain a choice of ad venues. "In evaluating [media consolidation] deals, the question for enforcers will be where it eliminates choices and allows prices to rise." She suggested that the department would look beyond across-the-board increases to see if prices could be affected.

Media attorneys said, for example, that while the FCC would allow a company to own three TV stations, eight radio stations, a daily newspaper and the local cable company in top markets, the Justice Department may scrutinize any single company owning the only two Hispanic TV stations in a market.

Less certain is the stance the Justice Department will take in cross-media deals, especially in medium- to small-sized markets where the FCC would allow a single company to own one or two TV stations, multiple radio stations, the daily newspaper and the cable operator.

The Justice Department declined to comment.

Adonis Hoffman, senior VP of the American Association of Advertising Agencies, said the group's Media Policy Committee intends to talk to the Justice Department about the effects of cross-ownership on pricing, but is still determining what to say. "Owning several different kinds of properties could let companies exercise considerable market power and could present some challenges to advertisers."

similar issues

For the Justice Department, the latest changes pose issues akin to those that happened after Congress approved a telecommunications deregulation bill in 1996 allowing media companies to own up to eight radio stations in a market. After a meeting with media buyers, the Justice Department eventually stepped in to block sales that would have given a single owner control of more than 40% of the radio ad market or, in some cases, of the audience for a specific radio format in a market.

Meanwhile, the status of the FCC rules approved June 2 grew less certain last week. Sens. Byron Dorgan, D-N.D., and John Kerry, D-Mass., said they will try to use the Congressional Review Act to overturn the action, a procedure that could avoid some parliamentary roadblocks. Senate Commerce Committee Chairman John McCain, R-Ariz., said his committee would vote on legislation June 19 that could overturn part of the changes.

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