[Federal Register Volume 63, Number 68 (Thursday, April 9, 1998)]
[Notices]
[Pages 17446-17454]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 98-9373]


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DEPARTMENT OF JUSTICE

Antitrust Division


United States of America v. Chancellor Media Company, Inc. and 
SFX Broadcasting, Inc.; Proposed Final Judgment and Competitive Impact 
Statement

    Notice is hereby given pursuant to the Antitrust Procedures and 
Penalties Act, 15 U.S.C. 16(b)-(h), that a proposed Final Judgment, 
Stipulation and Order, and Competitive Impact Statement have been filed 
with the United States District Court for the Eastern District of New 
York in United States v. Chancellor Media Company, Inc. and SFX 
Broadcasting, Inc. Civil Action No. CV97-6497. The proposed Final 
Judgment is subject to approval by the Court after the expiration of 
the statutory 60-day public comment period and compliance with the 
Antitrust Procedures and Penalties Act, 15 U.S.C. 16(b)-(h).
    Plaintiff filed a civil antitrust Complaint on November 6, 1997, 
alleging that Chancellor Media Corporation's (successor in interest to 
Chancellor Media Company, Inc.) (``Chancellor'') proposed acquisition 
of four radio stations in Suffolk County, Long Island, New York owned 
by SFX Broadcasting, Inc. (``SFX'') would violate Section 7 of the 
Clayton Act, 15 U.S.C. 18 and Section 1 of the Sherman Act, 15 U.S.C. 
1. The Complaint alleges, among other things, that Chancellor and SFX 
are the number one and number two radio companies on Long Island and 
that they each own radio stations in Suffolk County, New York. The 
Complaint also alleges that the proposed acquisition would increase 
Chancellor's share of the radio advertising market in Suffolk County, 
New York from 33 percent to over 65 percent. It further alleges that 
prices for radio advertising for coverage of Suffolk County would 
likely increase and the quality of promotional services would likely 
decline--especially to regional and local customers.
    The prayer for relief seeks: (a) Adjudication that Chancellor's 
proposed acquisition would violate Section 7 of the Clayton Act and 
Section 1 of the Sherman Act; (b) permanent injunctive relief 
preventing the consummation of the proposed acquisition; (c) a finding 
that the Local Marketing Agreement (LMA) between Chancellor and SFX 
regarding SFX's Suffolk County radio stations violates Section 1 of the 
Sherman Act and an Order terminating the LMA; (d) an award to the 
United

[[Page 17447]]

States of the costs of this action; and (e) such other relief as is 
proper.
    The United States and the defendants in this action have reached a 
proposed settlement in this proceeding, and a Stipulation and Order, 
and a proposed Final Judgment embodying the settlement have been filed 
with the Court. The proposed Final Judgment prohibits Chancellor and 
SFX from consummating their acquisition and orders them to terminate 
the LMA as soon as possible, but no later than August 1, 1998. In 
addition, the proposed Final Judgment would prevent Chancellor, SFX, 
and any of their successor companies from combining WALK-FM/AM with 
WBLI-FM and WBAB-FM. The proposed Final Judgment also requires 
Chancellor to ensure that, until termination of the LMA mandated by the 
Final Judgment has been accomplished, Chancellor will maintain the SFX 
radio stations as viable entities, including the obligation that 
Chancellor work to increase the sale of advertising and maintain 
promotional and marketing levels for the SFX stations. Further, the 
proposed Final Judgment requires defendants to give plaintiff prior 
notice regarding future radio station acquisitions or certain 
agreements pertaining to the sale of radio advertising time in Suffolk 
County, New York.
    A Competitive Impact Statement filed by the United States describes 
the Complaint, the proposed Final Judgment, and remedies available to 
private litigants.
    Public comment is invited within the statutory 60-day comment 
period. Such comments, and the responses thereto, will be published in 
the Federal Register and filed with the Court. Written comments should 
be directed to Craig W. Conrath, Chief, Merger Task Force, Antitrust 
Division, 1401 H Street, N.W., Suite 4000, Washington, D.C. 20530 
(telephone: (202) 307-0001). Copies of the Complaint, Stipulation and 
Order, proposed Final Judgment and Competitive Impact Statement are 
available for inspection in Room 215 of the U.S. Department of Justice, 
Antitrust Division, 325 7th Street, N.W., Washington, D.C. 20530 
(telephone: (202) 514-2481) and at the office of the Clerk of the 
United States District Court for the Eastern District of New York, 
United States Courthouse, 2 Uniondale Avenue, Uniondale, New York 
11553.
    Copies of any of these materials may be obtained upon request and 
payment of a copying fee.
Constance K. Robinson,
Director of Operations & Merger Enforcement, Antitrust Division.

Stipulation and Order

    Whereas, plaintiff, the United States of America, and defendants, 
Chancellor Media Corporation (successor in interest to Chancellor Media 
Company, Inc.) (``Chancellor'') and SFX Boardcasting, Inc. (``SFX''), 
acknowledge that this stipulation and order, wherein defendants consent 
to the entry of a Final Judgment trial, (i): Is made without there 
having been a trail or adjudication of any issue of fact or law and 
without the Final Judgment constituting any evidence against or an 
admission by any party with respect to any issue of law or fact, and 
(ii) is not intended to expand the effect of the Final Judgment before 
or after its entry,
    Now, Therefore, it is stipulated by and between plaintiff and 
defendants, Chancellor and SFX, as follows:
    (1) The Court has jurisdiction over the subject matter of this 
action and over each of the parties hereto, and venue of this action is 
proper in the United States District Court for the Eastern District of 
New York.
    (2) Plaintiff and defendants stipulate that a Final Judgment in the 
form hereto attached may be filed and entered by the Court, upon the 
motion of plaintiff or upon the Court's own motion, at any time after 
compliance with the requirements of the Antitrust Procedures and 
Penalties Act (15 U.S.C 16), and without further notice to any party or 
other proceedings, provided that plaintiff has not withdrawn its 
consent, which it may do at any time before the entry of the proposed 
Final Judgment by serving notice thereof on defendant and by filing 
that notice with the Court.
    (3) Each defendant shall abide by and comply with the provisions of 
the proposed Final Judgment pending entry of the Final Judgment by the 
Court, or until expiration of time for all appeals of any Court ruling 
declining entry of the proposed Final Judgment, and shall, from the 
date of the signing of this Stipulation by plaintiff and defendants, 
comply with all the terms and provisions of the proposed Final Judgment 
as though the same were in full force and effect as an Order of the 
Court.
    (4) This Stipulation shall apply with equal force and effect to any 
amended proposed Final Judgment agreed upon in writing by plaintiff and 
defendants and submitted to the Court.
    (5) In the event plaintiff withdraws its consent, as provided in 
paragraph 2 above, or in the event the proposed Final Judgment is not 
entered pursuant to this Stipulation, the time has expired for all 
appeals of any Court ruling declining entry of the proposed Final 
Judgment, and the Court has not otherwise ordered continued compliance 
with the terms and provisions of the proposed Final Judgment, then 
plaintiff and defendants are released from all further obligations 
under this Stipulation, and the making of this Stipulation shall be 
without prejudice to any party in this or any other proceeding.
    (6) Each defendant represents that the obligations ordered in the 
proposed Final Judgment can and will be fulfilled, and that defendants 
will later raise no claim of hardship or difficulty as grounds for 
asking the Court to modify any of the obligations contained therein.

    Dated: March 30, 1998.

    For Plaintiff United States of America:
Allee A. Ramadhan, Esq., (AR-0142).
Theresa H. Cooney, (TC-4933).
 U.S. Department of Justice, Antitrust Division, Merger Task Force, 
1401 H Street, NW., Suite 4000, Washington, D.C. 20530, (202) 307-0001.

    For Defendant Chancellor Media Corporation:
Edward P. Henneberry, Esq.,
 (EP-9043).
Howrey & Simon, 1299 Pennsylvania Avenue, NW., Washington, D.C. 20004, 
(202) 783-0800.
    For Defendant SFX Broadcasting, Inc.:
David A. Clanton,
(DC-2683).
Howard Adler, Jr.,
(HA-0425).
David J. Laing,
(DL-2400).
Baker & McKenzie, 815 Connecticut Avenue, NW., Washington, D.C. 20006, 
(202) 452-7000
    and
Michael Burrows,
(MB-2863).
Vincent A. Sama,
(VS-9027).
Baker & McKenzie, 805 Third Avenue, New York, New York 10022, (212) 
751-5700.

    SO ORDERED.

    Dated, ________________, New York, 1998.
----------------------------------------------------------------------
United States District Judge

Certificate of Service

    I hereby certify that, on March 31, 1998, I caused the foregoing 
Stipulation and Order to be served by having a copy hand delivered to:

Edward P. Henneberry, Esq., Howrey & Simon, 1299 Pennsylvania Avenue,

[[Page 17448]]

N.W., Washington, D.C. 20004, Counsel for Defendant, Chancellor Media 
Corporation

    and

Howard Adler, Jr., Baker & McKenzie, 815 Connecticut Avenue, N.W., 
Washington, D.C. 20006, Counsel for Defendant, SFX Broadcasting, Inc.
Seth E. Bloom.

United States District Court for the Eastern District of New York

    Whereas, plaintiff, the United States of America, filed its 
Complaint in this action on November 6, 1997, and plaintiff and 
defendants, Chancellor Media Corporation (successor in interest to 
Chancellor Media Company, Inc.) (``Chancellor'') and SFX Broadcasting, 
Inc. (``SFX'') by their respective attorneys, having consented to the 
entry of this Final Judgment without trial or adjudication of any issue 
of fact or law herein, and without this Final Judgment constituting any 
evidence against or an admission by any party with respect to any issue 
of law or fact herein;
    And Whereas, defendants have agreed to be bound by the provisions 
of this Final Judgment pending its approval by the Court;
    And Whereas, defendants have represented that the obligations 
ordered in this Final Judgment can and will be fulfilled, and that 
defendants will later raise no claim of hardship or difficulty as 
grounds for asking the Court to modify any of the obligations contained 
herein;
    Now, Therefore, before the taking of any testimony, and without 
trial or adjudication of any issue of fact or law herein, and upon 
consent of the parties hereto, it is hereby Ordered, Adjudged, and 
Decreed as follows:

I. Jurisdiction

    This Court has jurisdiction over each of the parties hereto and 
over the subject matter of this action. The Complaint states a claim 
upon which relief may be granted against defendants, as hereinafter 
defined, under Section 7 of the Clayton Act, as amended (15 U.S.C. 18) 
and Section 1 of the Sherman Act, 15 U.S.C. 1.

II. Definitions

    As used in this Final Judgment:
    A. ``Chancellor'' means defendant Chancellor Media Corporation 
(successor in interest to Chancellor Media Company, Inc.), a Delaware 
corporation with its headquarters in Irving, Texas, and includes its 
predecessors, successors and assigns, divisions, subsidiaries, 
companies, groups, partnerships and joint ventures that Chancellor 
controls, directly or indirectly, and their directors, officers, 
managers, agents and representatives, and their respective successors 
and assigns.
    B. ``SFX'' means defendant SFX Broadcasting, Inc., a Delaware 
corporation with its headquarters in New York, New York, and includes 
its predecessors, successors and assigns, divisions, subsidiaries, 
companies, groups, partnerships and joint ventures that SFX controls, 
directly or indirectly, and their directors, officers, managers, agents 
and representatives, and their respective successors and assigns.
    C. ``SFX Long Island Assets'' means all of the assets, tangible or 
intangible, used in the operations of the WBLI 106.1 FM radio station 
in Patchogue, Long Island, New York, the WBAB 102.3 FM radio station in 
Babylon, Long Island, New York, the WHFM 95.3 FM radio station in 
Southampton, New York, and the WGBB 1240 AM radio station in Freeport, 
New York including but not limited to: all real property (owned or 
leased) used in the operation of these stations; all broadcast 
equipment, personal property, inventory, office furniture, fixed assets 
and fixtures, materials, supplies and other tangible property used in 
the operations of these stations; all licenses, permits, 
authorizations, and applications therefor issued by the Federal 
Communications Commission (``FCC'') and other governmental agencies 
related to these stations; all contracts, agreements, leases and 
commitments of defendants pertaining to these stations and their 
operation; all trademarks, service marks, trade names, copyrights, 
patents, slogans, programming material and promotional materials 
relating to these stations; and all logs and other records maintained 
by defendants or these stations in connection with their business.
    D. ``WALK Assets'' means all of the assets, tangible or intangible, 
used in the operation of the WALK 97.5 FM and WALK 1370 AM radio 
stations in Patchogue, New York, including but not limited to: all real 
property (owned or leased) used in the operation of these stations; all 
broadcast equipment, personal property, inventory, office furniture, 
fixed assets and fixtures, materials, supplies and other tangible 
property used in the operation of these stations; all licenses, 
permits, authorizations, and applications therefor issued by the FCC 
and other governmental agencies related to these stations; all 
contracts, agreements, leases and commitments of defendant pertaining 
to these station and their operation; all trademarks, service marks, 
trade names, copyrights, patents, slogans, programming materials and 
promotional materials relating to these stations; and all logs and 
other records maintained by defendant Chancellor or these stations in 
connection with their business.
    E. ``Nassau-Suffolk Area'' means Nassau and Suffolk Counties, New 
York.
    F. ``Chancellor Radio Station'' means any radio station owned, 
operated, or controlled by Chancellor and broadcasting from a 
transmitter site located in the Nassau-Suffolk Area.
    G. ``SFX Radio Station'' means any radio station owned, operated, 
or controlled by SFX and broadcasting from a transmitter site located 
in the Nassau-Suffolk Area.
    H. ``Non-Chancellor Radio Station'' means any radio station 
broadcasting from a transmitter site located in the Nassau-Suffolk Area 
that is not a Chancellor Radio Station.
    I. ``Non-SFX Radio Station'' means any radio station broadcasting 
from a transmitter site located in the Nassau-Suffolk Area that is not 
an SFX Radio Station.
    J. ``LMA'' means the Local Marketing Agreement that Chancellor and 
SFX entered into on or about July 1, 1996, as part of their July 1, 
1996, asset exchange agreement whereby SFX agreed to exchange its four 
Long Island-based radio stations for Chancellor's two Jacksonville, 
Florida radio stations and an additional $11 million.

III. Applicability

    A. The provisions of this Final Judgment apply to each of the 
defendants, their successors and assigns, subsidiaries, affiliates, 
companies, groups, partnerships, and joint venturers, their directors, 
officers, managers, agents and employees, and all other persons in 
active concert or participation with any of them who shall have 
received actual notice of this Final Judgment by personal service or 
otherwise.
    B. Each defendant shall require, as a condition of the sale or 
other disposition of all or substantially all of the assets used in its 
businesses of owning and operating the WALK Assets (in the case of 
Chancellor) of the SFX Long Island Assets (in the case of SFX), that 
the acquiring party agrees to be bound, as a successor or assign, by 
the provisions of this Final Judgment.

IV. Prohibition of Acquisition

    Defendants shall not directly or indirectly consummate the 
acquisition contract that is a subject of the complaint in this action. 
Defendant Chancellor shall not acquire, directly or

[[Page 17449]]

indirectly, the SFX Long Island Assets that encompasses WBLI-FM and 
WBAB-FM (hereinafter the ``SFX Long Island WBAB/WBLI Assets'') or any 
interest in the SFX Long Island WBAB/WBLI Assets. Defendant Chancellor 
shall not sell or otherwise convey, directly or indirectly, the WALK 
Assets or any interest in the WALK Assets to SFX or to any future owner 
or operator of the SFX WBAB/WBLI Long Island Assets. Defendant SFX 
shall not acquire, directly or indirectly, the WALK Assets or any 
interest in the WALK Assets. Defendant SFX shall not sell or otherwise 
convey, directly or indirectly, the SFX Long Island WBAB/WBLI Assets or 
any interest in the SFX Long Island WBAB/WBLI Assets to Chancellor or 
to any future owner or operator of the WALK Assets.

V. Termination of LMA

    Defendants shall terminate the LMA as soon as possible, but no 
later than August 1, 1998. Defendants shall not enter into any 
agreement or understanding (including a Local Marketing Agreement or 
similar agreement (such as a joint sales agreement (JSA))) that would 
allow joint marketing or sale of advertising time or joint 
establishment of advertising prices, with respect to the WALK Assets 
and the SFX Long Island Assets.

VI. Preservation of Assets

    Until the termination of the LMA, as required by Section V of this 
Final Judgment, has been accomplished:
    A. Defendant Chancellor shall take all steps necessary to operate 
the SFX Long Island Assets as ongoing, economically viable radio 
stations.
    B. Defendant Chancellor shall use all reasonable efforts to 
maintain and increase sales of advertising time by the SFX Long Island 
Assets and shall maintain at 1997 or previously approved levels for 
1998, whichever are higher, promotional advertising, sales, marketing 
and merchandising support for the SFX Long Island Assets.
    C. Defendant Chancellor shall take all steps necessary to ensure 
that the assets used in the operation of the SFX Long Island Assets are 
fully maintained. WBLI-FM, WBAB-FM, WHFM-FM, and WGBB-AM sales and 
marketing employees shall not be transferred or reassigned to any other 
station, except for transfer bids initiated by employees pursuant to 
defendant's regular, established job posting policies, provided that 
defendant Chancellor gives plaintiff ten (10) days' notice of any such 
transfer.
    D. Defendant Chancellor shall appoint a person or persons to be 
responsible for defendant Chancellor's compliance with this Section VI.

VII. Affidavits

    A. Within twenty (20) calendar days of the filing of this Final 
Judgment, defendant Chancellor shall deliver to plaintiff an affidavit 
which describes in reasonable detail all actions defendant Chancellor 
has taken and all steps defendant Chancellor has implemented on an on-
going basis to preserve the SFX Long Island Assets, pursuant to Section 
VI of this Final Judgment. Defendant Chancellor shall deliver to 
plaintiff an affidavit describing any changes to the efforts and 
actions outlined in its earlier affidavit(s) filed pursuant to this 
Section VII within fifteen (15) calendar days after such change is 
implemented.
    B. Defendant Chancellor shall preserve all records of efforts made 
to maintain or preserve the SFX Long Island Assets.

VIII. Notice

    A. Unless such transaction is otherwise subject to the reporting 
and waiting period requirements of the Hart-Scott-Rodino Antitrust 
Improvements Act of 1976, as amended, 15 U.S.C. 18a (the ``HSR Act''), 
defendants, without providing advance notification to the plaintiff, 
shall not directly or indirectly acquire any assets of or any interest, 
including any financial, security, loan, equity or management interest, 
in any Non-Chancellor Radio Station (in the case of an acquisition by 
Chancellor) or in any Non-SFX Radio Station (in the case of an 
acquisition by SFX).
    B. Defendants, without providing advance notification to the 
plaintiff, shall not directly or indirectly enter into any agreement or 
understanding (including a Local Marketing Agreement or similar 
agreement (such as a joint sales agreement (JSA)) that would allow 
either defendant to market or sell advertising time or to establish 
advertising prices for any Non-Chancellor Radio Station (in the case of 
Chancellor) or any Non-SFX Radio Station (in the case of SFX).
    C. The notification obligations required by paragraphs (A) or (B) 
of this Section VIII shall not apply to defendant Chancellor following 
its sale of all of the WALK Assets to a third party that is in no way 
affiliated with defendant Chancellor, provided that the provisions of 
Section III have been complied with. The notification obligations 
required by paragraphs (A) or (B) of this Section VIII shall not apply 
to defendant SFX following its sale of the SFX Long Island Assets to a 
third party that is in no way affiliated with SFX, provided that the 
provisions of Section III have been complied with.
    D. Notification described in (A) and (B) of this Section VIII shall 
be provided to the United States Department of Justice (``the 
Department'') in the same format as, and per the instructions relating 
to the Notification and Report Form set forth in the Appendix to Part 
803 of Title 16 of the Code of Federal Regulations as amended, except 
that the information requested in Items 5-9 of the instructions must be 
provided, in the case of Chancellor, only with respect to any 
Chancellor Radio Station, and in the case of SFX, only with respect to 
any SFX Radio Station. Notification shall be provided at least thirty 
(30) days prior to acquiring any such interest covered in (A) or (B) 
above, and shall include, beyond what may be required by the applicable 
instructions, the names of the principal representatives of the parties 
to the agreement who negotiated the agreement, and any management or 
strategic plans discussing the proposed transaction. If within the 30-
day period after notification, representatives of the Department make a 
written request for additional information, defendants shall not 
consummate the proposed transaction or agreement until twenty (20) days 
after submitting all such additional information. Early termination of 
the waiting periods in this paragraph (C) may be requested and, where 
appropriate, granted in the same manner as is applicable under the 
requirements and provisions of the HSR Act and rules promulgated 
thereunder.
    E. This Section shall be broadly construed and any ambiguity or 
uncertainty regarding the filing of notice under this Section shall be 
resolved in favor of filing notice.

IX. Compliance Inspection

    For the purpose of determining or securing compliance with this 
Final Judgment and subject to any legally recognized privilege, from 
time to time:
    A. Duly authorized representatives of the United States Department 
of Justice, including consultants and other persons retained by the 
plaintiff, upon written request of the Attorney General, or of the 
Assistant Attorney General in charge of the Antitrust Division, and on 
reasonable notice to each defendant made to their principal offices, 
shall be permitted:
    (1) Access during office hours of each defendant to inspect and 
copy all books, ledgers, accounts, correspondence, memoranda and other 
records and documents in the possession or under the control of each 
defendant, who may have counsel present, relating to the

[[Page 17450]]

matters contained in this Final Judgment; and
    (2) Subject to the reasonable convenience of each defendant and 
without restraint or interference from it, to interview, either 
informally or on the record, directors, officers, employees and agents 
of each defendant, who may have counsel present, regarding any such 
matters.
    B. Upon the written request of the Attorney General, or of the 
Assistant Attorney General in charge of the Antitrust Division, made to 
defendants' principal offices, each defendant shall submit such written 
reports, under oath if requested, with respect to any of the matters 
contained in this Final Judgment as may be requested.
    C. No information or documents obtained by the means provided in 
Section VII or this Section IX shall be divulged by any representative 
of plaintiff to any person other than a duly authorized representative 
of the Executive Branch of the United States, except in the course of 
legal proceedings to which plaintiff is a party (including grand jury 
proceedings), or for the purpose of securing compliance with this Final 
Judgment, or as otherwise required by law.
    D. If at the time information or documents are furnished by 
defendants to plaintiff, and defendants represent and identify in 
writing the material in any such information or documents to which a 
claim of protection may be asserted under Rule 26(c)(7) of the Federal 
Rules of Civil Procedure, and defendants marks each pertinent page of 
such material, ``Subject to claim of protection under Rule 26(c)(7) of 
the Federal Rules of Civil Procedure,'' then ten (10) calendar days 
notice shall be given by plaintiff to defendants prior to divulging 
such material in any legal proceeding (other than a grand jury 
proceeding) to which defendants are not a party.

X. Retention of Jurisdiction

    Jurisdiction is retained by this Court for the purpose of enabling 
any of the parties to this Final Judgment to apply to this Court at any 
time for such further orders and directions as may be necessary or 
appropriate for the construction or carrying out of this Final 
Judgment, for the modification of any of the provisions hereof, for the 
enforcement of compliance herewith, and for the punishment of any 
violations hereof.

XI. Termination

    Unless this Court grants an extension, this Final Judgment will 
expire upon the tenth anniversary of the date of its entry.

XII. Public Interest

    Entry of this Final Judgment is in the public interest.

    Dated: ________________.

----------------------------------------------------------------------
United States District Judge

Competitive Impact Statement

    The United States, pursuant to Section 2(b) of the Antitrust 
Procedures and Penalties Act (``APPA''), 15 U.S.C. 16(b)-(h), files 
this Competitive Impact Statement relating to the proposed Final 
Judgment submitted for entry in this civil antitrust proceeding.

I. Nature and Purpose of the Proceeding

    The plaintiff filed a civil antitrust Complaint on November 6, 
1997, alleging that Chancellor Media Corporation (successor in interest 
to Chancellor Media Company, Inc.) (``Chancellor'') proposed 
acquisition of four radio stations in Suffolk County, N.Y. owned by SFX 
Broadcasting, Inc. (``SFX'') would violate Section 7 of the Clayton 
Act, 15 U.S.C. 18 and Section 1 of the Sherman Act, 15 U.S.C. 1. The 
Complaint alleges, among other things, that Chancellor and SFX are the 
number one and number two radio companies on Long Island and that they 
each own radio stations is Suffolk County, N.Y. The Complaint also 
alleges that WALK-FM (Chancellor) and WBLI-FM/WBAB-FM (SFX) have been 
locked in a daily battle against each other for radio advertising 
revenues in Suffolk County, N.Y. The Complaint further alleges that the 
proposed acquisition would substantially lessen competition in the sale 
of radio advertising time in Suffolk County, N.Y. Specifically, the 
Complaint alleges that the proposed acquisition would increase 
Chancellor's share of the radio advertising market in Suffolk County, 
N.Y. from 33 percent to over 65 percent, and would give to Chancellor 
the ability to raise prices to many advertisers, and to reduce 
promotional services to regional and local customers. Finally, the 
Complaint alleges that meaningful entry into the market is blockaded 
and entry would not undermine an anticompetitive price increase imposed 
by the Chancellor/SFX radio stations.
    The prayer for relief seeks: (a) Adjudication that Chancellor's 
proposed acquisition of WBLI-FM and WBAB-FM from SFX would violate 
Section 7 of the Clayton Act and Section 1 of the Sherman Act; (b) 
permanent injunctive relief preventing the consummation of the proposed 
acquisition; (c) a finding that the Local Marketing Agreement (LMA) 
between Chancellor and SFX regarding SFX's Suffolk County radio 
stations violates Section 1 of the Sherman Act and an Order terminating 
the LMA \1\; (d) an award to the United States of the costs of this 
action; and (e) such other relief as is proper.
---------------------------------------------------------------------------

    \1\ The LMA is an agreement between Chancellor and SFX which 
permits Chancellor to take operating control of the SFX stations 
before taking ownership. Under the LMA Chancellor is permitted to 
program the SFX stations and to sell advertising time on them.
---------------------------------------------------------------------------

    The United States has reached a proposed settlement with Chancellor 
and SFX which is memorialized in the proposed Final Judgment which has 
been filed with the Court. Under the terms of the proposed Final 
Judgment, defendants Chancellor and SFX will terminate the LMA as soon 
as possible, but not later than August 1, 1998. Chancellor will thus 
cease operating the four stations it sought to acquire from SFX in 
Suffolk County--WBLI-FM, WBAB-FM, WGBB-AM, and WHFM-FM--by August 1, 
1998 and the market will return to its pre-LMA structure.\2\ Also under 
the terms of the agreement, Chancellor will not acquire the radio 
stations at issue. Finally, defendants have agreed that they and their 
successors will not convey the radio assets in any way that would allow 
the entity controlling WALK-FM to control either WBLI-FM or WBAB-FM or 
the entity controlling either WBLI-FM or WBAB-FM to control WALK-FM.\3\
---------------------------------------------------------------------------

    \2\ Although Chancellor sought to acquire four radio stations 
from SFX--WBLI-FM, WBAB-FM, WHFM-FM and WGBB-AM--in the transaction 
at issue in this case, the competitive concern arose from the 
proposed acquisition of WBLI and WBAB.
    \3\ The proposed final Judgment does not prevent Chancellor or 
another party from owning WHFM-FM and WGBB-FM as well as WALK-FM. As 
previously noted, the competitive concern of the proposed 
transaction arose from Chancellor's proposed acquisition of WBLI and 
WBAB.
---------------------------------------------------------------------------

    The plaintiff and the defendants have stipulated that the proposed 
Final Judgment may be entered after compliance with the APPA and that 
they can fulfill their obligations under the Final Judgment. Entry of 
the proposed final Judgment would terminate this action, except that 
the Court would retain jurisdiction to construe, modify, or enforce the 
provisions of the proposed Final Judgment and to punish violations 
thereof.

II. The Alleged Violation

A. The Defendants

    Chancellor is a Delaware corporation headquartered in Irving, 
Texas. At the time this action was commenced in November 1997, it was 
the second largest owner of radio stations in the

[[Page 17451]]

United States and owned 95 radio stations in 21 major U.S. markets, 
including in each of the 12 largest markets. Chancellor owns two radio 
stations in Suffolk County, WALK-FM and WALK-AM. Chancellor's revenues 
in 1996 from WALK-FM and WALK-AM was approximately $13.3 million. 
Virtually all of Chancellors revenues on Long Island were generated by 
WALK-FM.
    SFX is a Delaware corporation headquartered in New York, N.Y. SFX 
owns or operates 85 radio stations located in 23 markets in the United 
States, including WBLI-FM, WBAB-FM, WHFM-FM, and WGBB-AM in Suffolk 
County, New York (hereinafter, ``the SFX stations''). In 1996, SFX had 
revenues of approximately $11 million from its Suffolk County-based 
radio stations.

B. Description of the Events Giving Rise to the Alleged Violation

    Prior to July 1, 1996, the Chancellor and SFX radio stations in 
Suffolk County were vigorous and direct competitors for advertisers 
seeking to reach potential customers in Suffolk County, New York. 
Competition among these stations was an essential element in keeping 
down radio advertising prices for Suffolk County advertisers. In fact, 
WALK's Director of Sales wrote that WALK was ``[f]ighting WBLI['s] and 
WBAB['s] low `firesale' rates.'' On or about July 1, 1996, Chancellor 
and SFX entered into an asset exchange agreement whereby SFX agreed to 
exchange its four Suffolk County-based radio stations--WBLI-FM, WBAB-
FM, WHFM-FM, and WGBB-AM--for Chancellor's two Jacksonville, Florida 
radio stations and an additional $11 million. In addition, at 
approximately the same time, the defendants entered into an LMA where 
Chancellor took over control of programming and advertising sales at 
the SFX stations in Suffolk County, N.Y. The result of the LMA was to 
place in Chancellor's hands control over SFX's radio stations on Long 
Island. The proposed acquisition would have made that control over 
SFX's stations complete.
    In evaluating the proposed acquisition, Chancellor wrote that 
``WALK, WBLI and WBAB combined own about 63% of a market with 36 
million in net revenues.'' Chancellor's chief financial officer told 
the board of directors, the acquisition ``will make Chancellor the 
dominant radio broadcaster'' on Long Island. Chancellor's marketing 
executives wrote that the proposed acquisition ``will result in less 
competitive undercutting'' and that ``[r]ates will increase as a result 
of the removal of competitive pressures.'' Chancellor's Director of 
Sales and Chancellor's General Sales Manager told the General Manager 
heading Chancellor's Long Island operations that the proposed 
accusation means ``The War is Won.''

C. Anticompetitive Consequences of the Proposed Merger

1. The Sale of Radio Advertising Time in Suffolk County, N.Y.
    The Complaint alleges that the provision of advertising time on 
radio stations serving Suffolk, N.Y. constitutes a line of commerce and 
section of the country, or relevant market, for antitrust purposes. It 
is important to note that radio stations by their music mix, attention 
to local community news and events, and promotions seek to attract 
listeners who they then sell advertisers access to by radio. Radio's 
unique characteristics as an inexpensive drive-time and workplace news 
and entertainment companion has given it a distinct and special place 
in our lives. Retailers, in an effort to reach potential customers have 
resorted to a mix of electronic and print media to deliver their 
advertising message. In so doing, they have learned that certain 
mediums are more cost-effective than others in meeting their 
advertising goals. Radio advertising is such a medium.
    When radio advertisers use radio as part of a ``media mix,'' they 
often view the other advertising media (such as television or 
newspapers) as a complement to, and not a substitute for, radio 
advertising. Many advertisers who use radio as part of a multi-media 
campaign do so because they believe that the radio component enhances 
the effectiveness of their overall advertising campaign. They view 
radio as giving them unique and cost-effective access to certain 
audiences. They recognize that since radio is portable people can 
listen to it anywhere especially in places and situations where other 
media are not present, such as in the office and car. In addition, they 
know that radio formats are designed to target listeners in specific 
demographic groups. Defendants' documents clearly confirm these facts. 
Their documents show that radio stations see other radio stations as 
their principal competition. For example, one such document 
acknowledged that ``pressure from other [radio] stations keep [sic] us 
from selling new business at the rates we want to get.'' Another high 
level management strategic document unearthed in the files of WBLI and 
WBAB echoed the same sentiments by noting that ``WALK and WBZO are the 
primary barriers to increasing rate[s].'' The quality and magnitude of 
evidence such as this showing that radio stations constrain the price 
of other radio stations in their efforts to charge higher prices to 
advertising customers is powerful evidence supporting the allegation in 
the Complaint that the sale of radio advertising time constitutes a 
line of commerce for antitrust purposes.
2. Harm to Competition
    The Complaint alleges that Chancellor's acquisition of SFX's Long 
Island stations would join under single ownership the principal 
stations serving Suffolk County, New York and give to Chancellor the 
ability to raise radio advertising prices to its customers. Local and 
national advertising placed on radio stations within Suffolk County, 
N.Y. are aimed at reaching listening audiences in Suffolk County, and 
radio stations located outside of Suffolk County do not provide cost-
effective access to this audience. Thus, if Chancellor were to impose a 
small but significant non-transitory increase in radio advertising 
prices on the radio stations it owns or controls in Suffolk County, 
radio stations located outside of Suffolk County would not be able to 
defeat it. In fact, defendants in marketing their radio stations to 
Suffolk County radio advertisers emphasized the fact that New York City 
radio stations do not provide cost-effective access to Suffolk County 
customers. Defendants characterized New York City radio stations' 
ability to reach the tri-state metropolitan area as ``waste'' to those 
Suffolk County advertisers not seeking to attract customers from New 
York City, New Jersey, or Connecticut to their local Suffolk County 
establishments.
    Defendants' documents further disclosed that when Chancellor's and 
SFX's radio stations on Long Island operated independently, advertisers 
obtained lower prices by ``playing off'' Chancellor's WALK-FM against 
SFX's WBLI-FM and WBAB-FM. Advertisers used the threat to move their 
business between the Chancellor and the SFX stations to get more 
favorable prices and services at each. That documentary evidence is 
corroborated by the testimony of local and regional advertisers who 
testified how they feared the joining of WALK with WBLI and WBAB would 
mean that Chancellor could raise prices to them. In short, advertisers 
in Suffolk County paid less for radio advertising as a result of price 
competition between the Chancellor and SFX radio stations. The proposed 
acquisition would have ended that price

[[Page 17452]]

competition harming consumers on Long Island.
a. Advertisers Could Not Turn to Other Suffolk County Radio Stations to 
Prevent Chancellor From Imposing an Anticompetitive Price Increase
    Barnstable is the only company other than Chancellor and SFX that 
generates more than five percent of the total radio revenues spent by 
advertisers on Long Island-based radio stations that offer coverage of 
Suffolk County (``Suffolk County stations''). Barnstable owns WBZO-FM, 
the only other Suffolk County station that generates ratings and 
advertising revenues comparable to the Chancellor and SFX stations. 
Barnstable is not able to offer, individually or in combination with 
any non-Chancellor owned or operated stations, enough listeners in the 
Chancellor/SFX-dominated market to provide a non-Chancellor alternative 
for many advertisers who want access to Suffolk County radio listeners. 
Moreover, if Chancellor were to impose a non-competitive price increase 
on its Chancellor/SFX radio stations, Barnstable would not be able to 
present itself as a credible alternative to those advertisers seeking 
to escape the price increase on the Chancellor/SFX radio stations. That 
is so, because an increase in demand for WBZO as a result of radio 
advertisers trying to flee a price increase on the Chancellor/SFX 
stations could undermine the attractiveness of WBZO to listeners who 
would have to contend with a larger number of advertising commercials 
and less music and news on WBZO. Recognizing that fact, WBZO would 
likely increase its price to dampen the demand on its station in order 
to maintain its attractiveness to listeners. Thus, a price increase on 
the Chancellor/SFX stations would likely provide an opportunity for 
Barnstable to increase its prices as well.
    To the degree there are a number of other radio broadcasters on 
Long Island, individually or in combination they are less able than 
Barnstable to offer an alternative for those advertisers--especially 
local and regional advertisers--who would have to deal with Chancellor 
to gain access to Suffolk County radio listeners after the proposed 
acquisition.
b. The Effect of the Acquisition Would Be Substantially To Lessen 
Competition in the Relevant Market
    As previously noted, Defendants' documents tell a compelling story 
of how the proposed acquisition would enable Chancellor to increase 
rates by stifling the ``competitive undercutting'' that went on among 
the Chancellor/SFX stations. The dominant market share Chancellor would 
have attained from the proposed acquisition would have the following 
effects, among others:

    a. Competition in the sale of radio advertising time for 
coverage of Suffolk County would be substantially lessened;
    b. Actual and potential competition between Chancellor and SFX 
radio stations in the sale of advertising time--especially to 
regional and local advertisers--would be eliminated;
    c. Chancellor's share of the relevant market would have 
increased from 33 percent to over 65 percent, whether measured by 
radio advertising revenues or by listenership. Using a measure of 
market concentration called the Herfindahl-Hirschman Index 
(``HHI''), explained in Appendix A, the acquisition would yield a 
post-merger HHI of at least 4975, representing an increase of 2085; 
and
    d. Prices for radio advertising for coverage of Suffolk County 
would likely increase, and the quality of promotional services would 
likely decline--especially to regional and local customers.

    The proposed Final Judgment will remedy the competitive concerns 
raised by the proposed acquisition.

III. Explanation of the Proposed Final Judgment

    The proposed Final Judgment would preserve competition in the sale 
of radio advertising time in Suffolk County, N.Y. It requires 
Chancellor and SFX to terminate their LMA as soon as possible, but no 
later than August 1, 1998. In addition, the proposed Final Judgment 
provides that neither defendant, nor their successors, can own or 
control at the same time WALK-FM and either WBLI-FM or WBAB-FM. This 
relief will terminate the LMA and return the market pre-LMA structure. 
If Chancellor had acquired the stations, it would have controlled about 
65% of the Suffolk County radio market. Under the proposed Final 
Judgment, Chancellor will return to it pre-LMA market shares of 
approximately 35% while another party or parties will control the 
approximately 30% of the market that WBLI-FM and WBAB-FM possess. The 
proposed Final Judgment will preserve choices for advertisers. In 
addition, the proposed Final Judgment will help insure that WALK's, 
WBLI's and WBAB's radio advertising rates will be subject to the 
``playing off'' by advertisers that they were subject to prior to the 
LMA.
    In addition to requiring the defendants to terminate the LMA and 
prohibiting them from consummating the transaction, the proposed Final 
Judgment requires Chancellor to preserve the assets of the SFX stations 
until termination of the LMA. Specifically, the proposed Final Judgment 
requires that Chancellor maintain the stations as viable entities, 
including the obligation that Chancellor work to increase the sale of 
advertising and maintain promotional and marketing levels for the SFX 
stations. The proposed Final Judgment also contains provisions to 
ensure that Chancellor will not divert resources from the SFX stations 
to its own radio stations during the course of the LMA. To determine 
and secure compliance with the proposed Final Judgment, the United 
States has the authority to monitor and review the activities of the 
stations. Nothing in this proposed Final Judgment is intended to limit 
the plaintiff's ability to investigate or bring actions, where 
appropriate, challenging other past or future activities of defendants 
in Suffolk County or any other markets, including their entry into an 
LMA or any other agreements related to the sale of advertising time.

IV. Remedies Available to Potential Private Litigants

    Section 4 of the Clayton Act, 15 U.S.C. 15, provides that any 
person who has been injured as a result of conduct prohibited by the 
antitrust laws may bring suit in federal court to recover three times 
the damages the person has suffered, as well as costs and reasonable 
attorneys' fees. Entry of the proposed Final Judgment will neither 
impair nor assist the bringing of any private antitrust damage action. 
Under the provisions of Section 5(a) of the Clayton Act, 15 U.S.C. 
16(a), the proposed Final Judgment has no prima facie effect in any 
subsequent private lawsuit that may be brought against defendants.

V. Procedures Available for Modification of the Proposed Final 
Judgment

    The plaintiff and the defendants have stipulated that the proposed 
Final Judgment may be entered by the Court after compliance with the 
provisions of the APPA, provided that the United States has not 
withdrawn its consent. The APPA conditions entry upon the Court's 
determination that the proposed Final Judgment is in the public 
interest.
    The APPA provides a period of at least sixty (60) days preceding 
the effective date of the proposed Final Judgment within which any 
person may submit to the United States written comments regarding the 
proposed Final Judgment. Any person who wishes to comment should do so 
within sixty (60) days of the date of publication of this Competitive 
Impact Statement in the Federal Register. The United States will 
evaluate and respond to the comments.

[[Page 17453]]

All comments will be given due consideration by the Department of 
Justice, which remains free to withdraw its consent to the proposed 
Final Judgment at any time prior to its entry. The comments and the 
response of the United States will be filed with the Court and 
published in the Federal Register.
    Any such written comments should be submitted to: Craig W. Conrath, 
Chief, Merger Task Force, Antitrust Division, United States Department 
of Justice, 1401 H Street, N.W., Suite 4000, Washington, D.C. 20530.
    The proposed Final Judgment provides that the Court retains 
jurisdiction over this action, and the parties may apply to the Court 
for any order necessary or appropriate for the modification, 
interpretation, or enforcement of the Final Judgment.

VI. Alternatives to the Proposed Final Judgment

    The plaintiff considered, as an alternative to the proposed Final 
Judgment, a full trial on the merits of its complaint against 
defendants. The plaintiff is satisfied, however, that the termination 
abandonment of the proposed and other relief contained in the proposed 
Final Judgment will preserve viable competition in the sale of radio 
advertising time in the Suffolk County, N.Y. area. Thus, the proposed 
Final Judgment would achieve the relief of the Government would have 
obtained through litigation, but avoids the time, expense and 
uncertainty of a full trial on the merits of the complaint.

VII. Standard of Review Under the APPA for Proposed Final Judgment

    The APPA requires that proposed consent judgments in antitrust 
cases brought by the United States be subject to a sixty (60) day 
comment period, after which the court shall determine whether entry of 
the proposed Final Judgment ``is in the public interest.'' In making 
that determination, the court may consider--

    (1) The competitive impact of such judgment, including 
termination of alleged violations, provisions for enforcement and 
modification, duration or relief sought, anticipated effects of 
alternative remedies actually considered, and any other 
considerations bearing upon the adequacy of such judgment;
    (2) the impact of entry of such judgment upon the public 
generally and individuals alleging specific injury from the 
violations set forth in the complaint including consideration of the 
public benefit, if any, to be derived from a determination of the 
issues at trial.

15 U.S.C. 16(e). As the United States Court of Appeals for the D.C. 
Circuit recently held, this statute permits a court to consider, among 
other things, the relationship between the remedy secured and the 
specific allegations set forth in the government's complaint, whether 
the decree is sufficiently clear, whether enforcement mechanisms are 
sufficient, and whether the decree may positively harm third parties. 
See United States versus Microsoft, 56 F.3d 1448, 1461-62 (D.C. Cir. 
1995).
    In conducting this inquiry, ``[t]he Court is nowhere compelled to 
go to trial or to engage in extended proceedings which might have the 
effect of vitiating the benefits of prompt and less costly settlement 
through the consent decree process.'' \4\ Rather,
---------------------------------------------------------------------------

    \4\ 119 Cong. Rec. 24598 (1973). See United States v. Gillette 
Co., 406 F. Supp. 713, 715 (D. Mass. 1975). A ``public interest'' 
determination can be made properly on the basis of the Competitive 
Impact Statement and Response to Comments filed pursuant to the 
APPA. Although the APPA authorizes the use of additional procedures, 
15 U.S.C. 16(f), those procedures are discretionary. A court need 
not invoke any of them unless it believes that the comments have 
raised significant issues and that further proceedings would aid the 
court in resolving those issues. See H.R. Rep. 93-1463, 93rd Cong. 
2d Sess. 8-9 (1974), reprinted in U.S.C.C.A.N. 6535, 6538.
---------------------------------------------------------------------------

[a]bsent a showing of corrupt failure of the government to discharge 
its duty the Court, in making its public interest finding, should * 
* * carefully consider the explanations of the government in the 
competitive impact statement and its responses to comments in order 
to determine whether those explanations are reasonable under the 
circumstances.

United States v. Mid-America Dairymen, Inc., 1977-1 Trade Cas. para. 
61,508, at 71,980 (W.D. Mo. 1977).
    Accordingly, with respect to the adequacy of the relief secured by 
the decree, a court may not ``engage in an unrestricted evaluation of 
what relief would best serve the public.'' United States v. BNS, Inc., 
858 F. 2d 456, 462 (9th Cir. 1988), citing United States v. Bechtel 
Corp., 648 F. 2d 660, 666 (9th Cir.), cert. denied, 454 U.S. 1083 
(1981); see also Microsoft, 56 F. 3d at 1460-62. Precedent requires 
that

the balancing of competing social and political interests affected 
by a proposed antitrust consent decree must be left, in the first 
instance, to the discretion of the Attorney General. The court's 
role in protecting the public interest is one of insuring that the 
government has not breached its duty to the public in consenting to 
the decree. The court is required to determine not whether a 
particular decree is the one that will best serve society, but 
whether the settlement is ``within the reaches of the public 
interest.'' More elaborate requirements might undermine the 
effectiveness of antitrust enforcement by consent decree.\5\
---------------------------------------------------------------------------

    \5\ Bechtel, 648 F. 2d at 666 (citations omitted) (emphasis 
added); see BNS, 858 F. 2d at 463; United States v. National Broad. 
Co., 449 F. Supp. 1127, 1143 (C.D. Cal. 1978); Gillette, 406 F. 
Supp. at 716. See also Microsoft, 56 F. 3d at 1461 (whether ``the 
remedies [obtained in the decree are] so inconsonant with the 
allegations charged as to fall outside of the `reaches of the public 
interest' '') (citations omitted).

The proposed Final Judgment, therefore, should not be reviewed under a 
standard of whether it is certain to eliminate every anticompetitive 
effect of a particular practice or whether it mandates certainty of 
free competition in the future. Court approval of a final judgment 
requires a standard more flexible and less strict than the standard 
required for a finding of liability. ``[A] proposed decree must be 
approved even if it falls short of the remedy the court would impose on 
its own, as long as it falls within the range of acceptability or is 
`within the reaches of public interest.' '' \6\
---------------------------------------------------------------------------

    \6\ United States v. American Tel. and Tel. Co., 552 F. Supp. 
131, 151 (D.D.C. 1982), aff'd. sub nom. Maryland v. United States, 
460 U.S. 1001 (1983) (quoting Gillette Co., 406. F. Supp. at 716 
(citations omitted)); United States v. Alcan Aluminum, Ltd., 605 F. 
Supp. 619, 622 (W.D. Ky. 1985).
---------------------------------------------------------------------------

    In this case, the proposed Final Judgment reflects the Defendants 
desire to abandon the proposed acquisition and end the LMA. Moreover, 
it insures that the present and any future owner of WALK-FM may not own 
either WBLI-FM or WBAB-FM. In sum, the Final Judgment represents every 
objective the government sought through bringing its action.

VIII. Determinative Documents

    There are no determinative materials or documents within the 
meaning of the APPA that were considered by the United States in 
formulating the proposed Final Judgment.

    Respectfully submitted,
Allee A. Ramadhan,
(AR 0142).
Seth E. Bloom,
(SB 3709).
Theresa H. Cooney,
(TC 4933).
Merger Task Force, U.S. Department of Justice, Antitrust Division, 1401 
H Street, N.W., Suite 4000, Washington, D.C. 20530, (202) 307-0001.

    Dated: March 30, 1998.

Appendix A--Herfindahl-Hirschman Index Calculations

    ``HHI'' means the Herfindahl-Hirschman Index, a commonly accepted 
measure of market concentration. It is calculated by squaring the 
market share of each firm competing in the market and then summing the 
resulting numbers. For example, for a market consisting of four firms 
with shares of

[[Page 17454]]

thirty, thirty, twenty, and twenty percent, the HHI is 2600 
(302+302+202+202=2600). The 
HHI takes into account the relative size and distribution of the firms 
in a market and approaches zero when a market consists of a large 
number of firms of relatively equal size. The HHI increases both as the 
number of firms in the market decreases and as the disparity in size 
between those firms increases.
    Markets in which the HHI is between 1000 and 1800 points are 
considered to be moderately concentrated, and those in which the HHI is 
in excess of 1800 points are considered to be concentrated. 
Transactions that increase the HHI by more than 100 points in 
concentrated markets presumptively raise antitrust concerns under the 
Horizontal Merger Guidelines issued by the U.S. Department of Justice 
and the Federal Trade Commission. See Merger Guidelines Sec. 1.51.

Certificate of Service

    I hereby certify that, on this 30th day of March 1998, I caused to 
be served via hand delivery a copy of the foregoing Competitive Impact 
Statement upon the following:

Edward P. Henneberry, Esq., Roxann E. Henry, Esq., Howrey & Simon, 1299 
Pennsylvania Avenue, N.W., Washington, D.C. 20004.
Howard Adler, Jr., Esq., David J. Laing, Esq., Baker & McKenzie, 815 
Connecticut Avenue, N.W., Washington, D.C. 20006.
Seth E. Bloom.
[FR Doc. 98-9373 Filed 4-8-98; 8:45 am]
BILLING CODE 4410-11-M