[Federal Register Volume 63, Number 71 (Tuesday, April 14, 1998)]
[Notices]
[Pages 18214-18225]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 98-9800]
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DEPARTMENT OF JUSTICE
Antitrust Division
United States of America v. Hicks, Muse, Tate & Furst
Incorporated and Capstar Broadcasting Partners, 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. Hicks, Muse, Tate & Furst Incorporated and
Capstar Broadcasting Partners, Inc. and SFX Broadcasting, Inc. Civil
Action No. 98-2422. 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 March 31, 1998,
alleging that the proposed acquisition of SFX Broadcasting, Inc.
(``SFX'') by Capstar Broadcasting Partners, Inc. (``Capstar'') would
violate Section 7 of the Clayton Act, 15 U.S.C. 18. The Complaint
alleges that Capstar or its related entity Chancellor Media
Corporation, (``Chancellor''), and SFX own and operate numerous radio
stations throughout the United States, and the proposed transaction
would give defendants or Chancellor a significant share of the radio
advertising market in Greenville, SC, Houston, TX, Jackson, MS,
Pittsburgh, PA and Suffolk County, NY. As a result, the combination of
these radio stations would lessen competition substantially in the sale
of radio advertising time in the Greenville, Houston, Jackson,
Pittsburgh and Suffolk areas.
The prayer for relief seeks: (a) An adjudication that Capstar's
proposed acquisition described in the complaint would violate Section 7
of the Clayton Act; (b) preliminary and permanent injunctive relief
preventing the consummation of the proposed transaction; (c) an award
to the United States of the costs of this action; and (d) such other
relief as is proper.
Shortly before this suit was filed, a proposed settlement was
reached that permits Capstar to complete its transactions with SFX, yet
preserves competition in the markets in which the transactions would
raise significant competitive concerns. A Stipulation and Order and a
proposed Final Judgment embodying the settlement were filed at the same
time the Complaint was filed.
Unless the plaintiff grants a time extension, the proposed Final
Judgment orders Capstar to divest either within six months after the
filing of the complaint or within five (5) business days after notice
of entry of the Final Judgment, whichever is later, radio stations
WESC-FM, WESC-AM, WJMZ-FM, WTPT-FM in Greenville, SC, KKPN-FM in
Houston, TX, WJDX-FM in Jackson, MS and WTAE-AM in Pittsburgh, PA. The
proposed Final Judgment also orders Capstar to divest either within
three months after the filing of the Complaint or within five (5)
business days after notice of entry of the Final Judgment, whichever is
later, radio stations WBLI-FM, WBAB-FM, WGBB-AM and WHFM-FM in Suffolk,
NY. If Capstar does not divest the stations described above within the
divestiture period, the Court shall, upon plaintiff's application,
appoint a trustee to sell the assets. The proposed Final Judgment also
requires Capstar to ensure that, until the divestiture mandated by the
Final Judgment has been accomplished, WESC-FM, WESC-AM, WJMZ-FM, WTPT-
FM, KKPN-FM, WJDX-FM, WTAE-AM, WBLI-FM, WBAB-FM, WGBB-AM and WHFM-FM
will be operated independently as a viable, ongoing business, and kept
separate and apart from defendants' other radio stations located in
those areas. 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 the Greenville-Spartanburg, SC, Houston, TX,
Jackson, MS, Pittsburgh, PA and Suffolk County, NY areas.
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,
[[Page 18215]]
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.
United States District Court for the Eastern District of New York
United States of America, Plaintiff, v. Hicks, Muse, Tate &
Furst Incorporated, and Capstar Broadcasting Partners, Inc., and SFX
Broadcasting, Inc., Defendants. Hon. J. Seybert/M. Orenstein. Civil
Action No. CV 98 2422.
Stipulation and Order
It is stipulated by and between the undersigned parties, by their
respective attorneys, 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) The parties stipulate that a Final Judgment in the form hereto
attached may be filed and entered by the Court, upon the motion of any
party 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. Sec. 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 defendants and by filing that
notice with the Court.
(3) Defendants 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 the parties, 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) Defendant Capstar agrees that the transactions contemplated by
Letter Agreement dated February 20, 1998, between Chancellor and
Capstar, when consummated, will require Capstar to obtain from
Chancellor a commitment to be bound to the provisions of the Final
Judgment pursuant to Section III(B).
(5) The parties recognize that there could be a delay in obtaining
approval by or a ruling of a government agency related to the
divestitures required by Section IV of the Final Judgment,
notwithstanding the good faith efforts of the defendants and any
prospective Acquirer, as defined in the Final Judgment. In this
circumstance, plaintiff will, in the exercise of its sole discretion,
acting in good faith, give special consideration to forebearing from
applying for the appointment of a trustee pursuant to Section V of the
Final Judgment, or from pursuing legal remedies available to it as a
result of such delay, provided that: (i) Defendants have entered into
one or more definitive agreements to divest the Greenville Assets, the
Houston Assets, the Jackson Assets, the Pittsburgh Assets, and the SFX
Long Island Assets, as defined in the Final Judgment, and such
agreements and the Acquirer or Acquirers have been approved by
plaintiff; (ii) All papers necessary to secure any governmental
approvals and/or rulings to effectuate such divestitures (including but
not limited to FCC, SEC and IRS approvals or rulings) have been filed
with the appropriate agency; (iii) Receipt of such approvals are the
only closing conditions that have not been satisfied or waived; and
(iv) Defendants have demonstrated that neither they nor the prospective
Acquirer or Acquirers are responsible for any such delay.
(6) This Stipulation shall apply with equal force and effect to any
amended proposed Final Judgment agreed upon in writing by the parties
and submitted to the Court.
(7) 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 the
parties 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.
(8) Defendants represent that the divestitures ordered in the
proposed Final Judgment can and will be made, and that defendants will
later raise no claim of hardship or difficulty as grounds for asking
the Court to modify any of the divestiture provisions contained
therein.
Dated: March 31, 1998.
For Plaintiff United States of America
Asuncion Cummings (AC-1850),
U.S. Department of Justice, Antitrust Division, Merger Task Force, 1401
H Street, N.W., Suite 4000, Washington, D.C. 20005.
For Defendants Capstar Broadcasting Partners, Inc., and Hicks, Muse,
Tate & Furst, Incorporated
Neil Imus (NI-3536),
Vinson & Elkins, L.L.P., 1455 Pennsylvania Avenue, N.W., Washington,
D.C. 20004.
For Defendant SFX Broadcasting, Inc.
David A. Clanton (DC-2683),
Baker & McKenzie, 815 Connecticut Avenue, N.W., Washington, D.C. 20006-
4078.
SO ORDERED
Dated, ____________________, New York, 1998.
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United States District Judge
Certificate of Service
I hereby certify that, on this 31st day of March, 1998, I caused to
be served by hand delivery a copy of the foregoing proposed Final
Judgment and Stipulation and Order upon the following:
David A. Clanton, Baker & McKenzie, 815 Connecticut Avenue, N.W.,
Washington, D.C. 20006-4078
Neil Imus, Vinson & Elkins, 1455 Pennsylvania Avenue, N.W., Washington,
D.C. 20004
Asuncion Cummings
United States District Court for the Eastern District of New York
United States of America, Plaintiff v. Hicks, Muse, Tate & Furst
Incorporated, and Capstar Broadcasting Partners, Inc., and SFX
Broadcasting, Inc., Defendants. Hon. J. Seybert/M. Orenstein. Civil
Action No. CV 98 2422.
Final Judgment
Whereas, plaintiff, the United States of America, filed its
Complaint in this action on March 31, 1998, and plaintiff and
defendants 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 the 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;
[[Page 18216]]
AND WHEREAS, the purpose of this Final Judgment is prompt and
certain divestiture of certain assets to assure that competition is not
substantially lessened;
And whereas, plaintiff requires defendants to make certain
divestitures for the purpose of remedying the loss of competition
alleged in the Complaint;
And whereas, defendants have represented to plaintiff that the
divestitures ordered herein can and will be made and that defendants
will later raise no claims of hardship or difficulty as grounds for
asking the Court to modify any of the divestiture provisions contained
below;
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 Hicks, Muse, Tate &
Furst Incorporated (Hicks Muse), Capstar Broadcasting Partners, Inc.
(Capstar), and SFX Broadcasting, Inc. (SFX), as hereinafter defined,
under Section 7 of the Clayton Act, as amended (15 U.S.C. Sec. 18).
II. Definitions
As used in this Final Judgment:
A. ``Capstar'' means defendant Capstar Broadcasting Partners, Inc.,
a Delaware corporation with its headquarters in Austin, Texas, and
includes its predecessors, successors and assigns, divisions,
subsidiaries, companies, groups, partnerships and joint ventures that
Capstar controls, directly or indirectly, and their directors,
officers, managers, agents and representatives, and their respective
successors and assigns.
B. ``Chancellor'' means 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.
C. ``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.
D. ``Hicks Muse'' means Hicks, Muse, Tate & Furst Incorporated, an
investment firm headquartered in Dallas, Texas, its domestic and
foreign parents, predecessors, divisions, subsidiaries, partnerships
and joint ventures that Hicks Muse controls, directly or indirectly,
and all directors, officers, employees, agents and representatives of
the foregoing.
E. ``Greenville Assets'' means all of the assets, tangible or
intangible, used respectively in the operation of the WESC 92.5 FM
radio station in Greenville, South Carolina; the WESC 660 AM radio
station in Greenville, South Carolina; the WJMZ 107.3 FM radio station
in Anderson, South Carolina; and the WTPT 93.3 FM radio station in
Forest City, North Carolina; including but not limited to: all real
property (owned or leased) used in the operation of each station; all
broadcast equipment, personal property, inventory, office furniture,
fixed assets and fixtures, materials, supplies and other tangible
property or improvements used in the operation of each station; all
licenses, permits and authorizations and applications therefor issued
by the Federal Communications Commission (``FCC'') and other
governmental agencies relating to that station; all contracts,
agreements, leases and commitments of defendants pertaining to that
station and its operations; all trademarks, service marks, trade names,
copyrights, patents, slogans, programming materials and promotional
materials relating to that station; and all logs and other records
maintained by defendants or that station in connection with its
business.
F. ``Houston Assets'' means all of the assets, tangible or
intangible, used in the operation of the KKPN 102.9 FM radio station in
Houston, Texas, including but not limited to: all real property (owned
or leased) used in the operation of that station; all broadcast
equipment, personal property, inventory, office furniture, fixed assets
and fixtures, materials, supplies and other tangible property or
improvements used in the operation of that station; all licenses,
permits and authorizations and applications therefor issued by the FCC
and other governmental agencies relating to that station; all
contracts, agreements, leases and commitments of defendants pertaining
to that station and its operations; all trademarks, service marks,
trade names, copyrights, patents, slogans, programming materials and
promotional materials relating to that station; and all logs and other
records maintained by defendants or that station in connection with its
business.
G. ``Jackson Assets'' means all of the assets, tangible or
intangible, used in the operation of the WJDX 96.3 FM radio station in
Jackson, Mississippi, including but not limited to: All real property
(owned or leased) used in the operation of that station; all broadcast
equipment, personal property, inventory, office furniture, fixed assets
and fixtures, materials, supplies and other tangible property or
improvements used in the operation of that station; all licenses,
permits and authorizations and applications therefor issued by the FCC
and other governmental agencies relating to that station; all
contracts, agreements, leases and commitments of defendants pertaining
to that station and its operations; all trademarks, service marks,
trade names, copyrights, patents, slogans, programming materials and
promotional materials relating to that station; and all logs and other
records maintained by defendants or that station in connection with its
business.
H. ``Pittsburgh Assets'' means all of the assets, tangible or
intangible, used in the operation of the WTAE 1250 AM radio station in
Pittsburgh, Pennsylvania, including but not limited to: All real
property (owned or leased) used in the operation of that station; all
broadcast equipment, personal property, inventory, office furniture,
fixed assets and fixtures, materials, supplies and other tangible
property or improvements used in the operation of that station; all
licenses, permits and authorizations and applications therefor issued
by the FCC and other governmental agencies relating to that station;
all contracts, agreements, leases and commitments of defendants
pertaining to that station and its operations; all trademarks, service
marks, trade names, copyrights, patents, slogans, programming materials
and promotional materials relating to that station; and all logs and
other records maintained by defendants or that station in connection
with its business.
I. ``The SFX Long Island Assets'' means all of the assets, tangible
or intangible, used in the operation of the SBLI 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, Long Island, 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 each station; all broadcast
equipment,
[[Page 18217]]
personal property, inventory, office furniture, fixed assets and
fixtures, materials, supplies and other tangible property or
improvements used in the operation of each station; all licenses,
permits, authorizations, and applications therefor issued by the FCC
and other governmental agencies related to each station; all contracts,
agreements, leases and commitments of defendants pertaining to each
station and its operations; all trademarks, service marks, trade names,
copyrights, patents, slogans, programming materials and promotional
materials relating to each station; and all logs and other records
maintained by defendants or each station in connection with its
business.
J. ``Greenville Area'' means the Greenville-Spartanburg, South
Carolina area, as identified by the Spring 1997 Arbitron Radio Market
Report for Greenville-Spartanburg.
K. ``Houston Area'' means the Houston, Texas area, as identified by
the Spring 1997 Arbitron Radio Market Report for Houston, Texas.
L. ``Jackson Area'' means the Jackson, Mississippi area, as
identified by the Spring 1997 Arbitron Radio Market Report for Jackson,
Mississippi.
M. ``Pittsburgh Area'' means the Pittsburgh, Pennsylvania area, as
identified by the Spring 1997 Arbitron Radio Market Report for
Pittsburgh, Pennsylvania.
N. ``Suffolk Area'' means the Nassau-Suffolk area, as identified by
the Spring 1997 Arbitron Radio Market Report for Nassau and Suffolk
Counties in New York.
O. ``Hicks Muse Radio Station'' means any radio station owned,
operated, or controlled by Chancellor, Capstar, SFX or Hicks Muse and
licensed to a community in the Greenville, Houston, Jackson or
Pittsburgh areas, or broadcasting from a transmitter site located in
Nassau-Suffolk Area.
P. ``Non-Hicks Muse Radio Station'' means any radio station that is
licensed to a community in the Greenville, Houston, Jackson or
Pittsburgh Areas, or broadcasting from a transmitter site located in
the Nassau-Suffolk Area, and is not a Hicks Muse Radio Station.
Q. ``Acquirer'' means the entity or entities to whom defendants
divest the Greenville Assets, the Houston Assets, the Jackson Assets,
the Pittsburgh Assets, or the SFX Long Island Assets under this Final
Judgment.
R. ``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, 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. Defendants shall require, as a condition of the sale or other
disposition of all or substantially all of the assets used in their
business of owning and operating radio stations in the Greenville area,
the Houston area, the Jackson area, the Pittsburgh area or the Nassau-
Suffolk area, that the respective acquiring party of parties agree to
be bound, as a successor or assign, by the provisions of this Final
Judgment, provided, however, that defendants need not obtain such an
agreement from an Acquirer.
C. The term ``sale or other disposition'' used in paragraph (B) of
this Section shall include in whole or in part, without limitation, any
agreement (such as Local Marketing Agreement or Joint Sales Agreement)
pursuant to which another entity has the right to operate, program or
sell advertising time on a radio station in the relevant Area.
IV. Divestitures
A. Hicks Muse and Capstar are hereby ordered and directed, in
accordance with the terms of this Final Judgment, within six (6) months
after the filing of the complaint in this action, or within five (5)
business days after notice of entry of this final judgment, whichever
is later, to divest the Greenville Assets, the Houston Assets, the
Jackson Assets, and the Pittsburgh Assets to one or more Acquirers
acceptable to plaintiff in its sole discretion.
B. Hicks Muse and Capstar are hereby ordered and directed, in
accordance with the terms of this Final Judgment, within three (3)
months after the filing of the complaint in this action, or within five
(5) business days after notice of entry of this final judgment,
whichever is later, to divest the SFX Long Island Assets to one or more
Acquirers acceptable to plaintiff in its sole discretion.
C. Defendants shall use their best efforts to divest the Greenville
Assets, the Houston Assets, the Jackson Assets, the Pittsburgh Assets,
and the SFX Long Island Assets, and to obtain all regulatory approvals
necessary for such divestitures, as expeditiously as possible.
Plaintiff, in its sole discretion, may extend the time period for the
divestitures for two (2) additional thirty (30)-day periods of time,
not to exceed sixty (60) calendar days in total.
D. In accomplishing the divestitures ordered by this Final
Judgment, defendants promptly shall make known, by usual and customary
means, the availability for sale of the Greenville Assets, the Houston
Assets, the Jackson Assets, the Pittsburgh Assets, and the SFX Long
Island Assets. Defendants shall inform any person making an inquiry
regarding a possible purchase that the sale is being made pursuant to
this Final Judgment and provide such person with a copy of the Final
Judgment. Defendants shall also offer to furnish to all prospective
purchasers, subject to customary confidentiality assurances, all
information regarding the Greenville Assets, the Houston Assets, the
Jackson Assets, the Pittsburgh Assets, and the SFX Long Island Assets
customarily provided in a due diligence process, except such
information subject to attorney-client privilege or attorney work-
product privilege. Defendants shall make available such information to
plaintiff at the same time that such information is made available to
any other person.
E. Defendants shall permit prospective purchasers of the Greenville
Assets, the Houston Assets, the Jackson Assets, the Pittsburgh Assets,
and the SFX Long Island Assets to have access to personnel and to make
such inspection of the assets, and any and all financial, operational
or other documents and information customarily provided as part of a
due diligence process.
F. Unless plaintiff otherwise consents in writing, the divestitures
pursuant to Section IV of this Final Judgment, or by the trustee
appointed pursuant to Section V, shall include all the Greenville
Assets, Houston Assets, Jackson Assets, Pittsburgh Assets, and SFX Long
Island Assets, and shall be accomplished in such a way as to satisfy
plaintiff, in its sole discretion, that the Greenville Assets, the
Houston Assets, the Jackson Assets, the Pittsburgh Assets, and the SFX
Long Island Assets can and will be used by an Acquirer or Acquirers as
viable, ongoing commercial radio businesses. The divestitures, whether
pursuant to Sections IV or V of this Final Judgment, shall be made (I)
to an Acquirer or Acquirers that in plaintiff's sole discretion, has or
have the capability and intent of competing effectively, and has or
have the managerial, operational and financial capability to compete
effectively as
[[Page 18218]]
radio station operators in the Greenville, Houston, Jackson, Pittsburgh
or Nassau-Suffolk Areas, as the case may be, and intends in good faith
to continue the operations of the radio station as were in effect in
the period immediately prior to the filing of the complaint in this
action (unless any significant change in the operations planned by the
acquirer is accepted by the plaintiff in its sole discretion); and (ii)
pursuant to agreements the terms of which shall not, in the sole
judgment of plaintiff, interfere with or otherwise diminish the ability
of the purchaser(s) to compete effectively against defendants.
G. Defendants shall not interfere with any efforts by any Acquirer
or Acquirers to employ the general manager or any other person working
at any of the Greenville, Houston, Jackson, Pittsburgh, or SFX Long
Island Assets.
V. Appointment of Trustee
A. In the event that defendants have not divested the Greenville
Assets, the Houston Assets, the Jackson Assets, the Pittsburgh Assets,
or the SFX Long Island Assets within the time specified in Section IV
of this Final Judgment, the Court shall appoint, on application of the
United States, a trustee selected by plaintiff to effect the
divestiture of the Greenville Assets, the Houston Assets, the Jackson
Assets, the Pittsburgh Assets, or the SFX Long Island Assets.
B. After the appointment of a trustee becomes effective, only the
trustee shall have the right to sell the Greenville Assets, the Houston
Assets, the Jackson Assets, the Pittsburgh Assets, or the SFX Long
Island Assets described in Section II of this Final Judgment. The
trustee shall have the power and authority to accomplish the
divestiture at the best price then obtainable upon a reasonable effort
by the trustee, subject to the provisions of Sections IV and VI of this
Final Judgment, and shall have such other powers as the Court shall
deem appropriate. Subject to Section V(C) of this Final Judgment, the
trustee shall have the power and authority to hire at the cost and
expense of defendants any investment bankers, attorneys, or other
agents reasonably necessary in the judgment of the trustee to assist in
the divestiture, and such professionals and agents shall be accountable
solely to the trustee. The trustee shall have the power and authority
to accomplish the divestiture at the earliest possible time to a
purchaser acceptable to the plaintiff, and shall have such other powers
as this Court shall deem appropriate. Defendants shall not object to a
sale by the trustee on any grounds other than the trustee's
malfeasance. Any such objections by defendants must be conveyed in
writing to plaintiff and the trustee within ten (10) calendar days
after the trustee has provided the notice required under Section VII of
this Final Judgment.
C. The trustee shall serve at the cost and expense of defendants,
on such terms and conditions as the Court may prescribe, and shall
account for all monies derived from the sale of the assets sold by the
trustee and all costs and expenses so incurred. After approval by the
Court of the trustee's accounting, including fees for its services and
those of any professionals and agents retained by the trustee, all
remaining money shall be paid to defendants and the trust shall then be
terminated. The compensation of such trustee and of any professionals
and agents retained by the trustee shall be reasonable in light of the
value of the divested assets and based on a fee arrangement providing
the trustee with an incentive based on the price and terms of the
divestiture and the speed with which it is accomplished.
D. Defendants shall use their best efforts to assist the trustee in
accomplishing the required divestiture, including best efforts to
effect all necessary regulatory approvals. The trustee and any
consultants, accountants, attorneys, and other persons retained by the
trustee shall have full and complete access to the personnel, books,
records, and facilities of the assets to be divested, and defendants
shall develop financial or other information relevant to the assets to
be divested customarily provided in a due diligence process as the
trustee may reasonably request, subject to customary confidentiality
assurances. Defendants shall permit prospective acquirers of the assets
to have reasonable access to personnel and to make such inspection of
physical facilities and any and all financial, operational or other
documents and other information as may be relevant to the divestiture
required by this Final Judgment.
E. After its appointment, the trustee shall file monthly reports
with the parties and the Court setting forth the trustee's efforts to
accomplish the divestiture ordered under this Final Judgment; provided,
however, that to the extent such reports contain information that the
trustee deems confidential, such reports shall not be filed in the
public docket of the court. Such reports shall include the name,
address and telephone number of each person who, during the preceding
month, made an offer to acquire, expressed an interest in acquiring,
entered into negotiations to acquire, or was contacted or made an
inquiry about acquiring, any interest in the assets to be divested, and
shall describe in detail each contact with any such person during that
period. The trustee shall maintain full records of all efforts made to
divest the assets to be divested.
F. If the trustee has not accomplished such divestiture within six
(6) months after its appointment, the trustee thereupon shall file
promptly with the Court a report setting forth (1) the trustee's
efforts to accomplish the required divestitures, (2) the reasons, in
the trustee's judgment why the required divestitures have not been
accomplished, and (3) the trustee's recommendations; provided, however,
that to the extent such reports contain information that the trustee
deems confidential, such reports shall not be filed in the public
docket of the Court. The trustee shall at the same time furnish such
report to the parties, who shall each have the right to be heard and to
make additional recommendations consistent with the purpose of the
trust. The Court shall enter thereafter such orders as it shall deem
appropriate in order to carry out the purpose of the trust which may,
if necessary, include extending the trust and the term of the trustee's
appointment by a period requested by plaintiff.
VI. Preservation of Assets
Until the divestitures of the Greenville Assets, the Houston
Assets, the Jackson Assets, the Pittsburgh Assets and the SFX Long
Island Assets, as required by Section IV of the Final Judgment, have
been accomplished:
A. Prior to the consummation of Capstar's acquisition of SFX,
defendants shall maintain the independence of their respective radio
station operations in the Areas, and following the consummation of
Capstar's acquisition of SFX, defendants shall take all steps necessary
to operate the Greenville Assets, the Houston Assets, the Jackson
Assets, and the Pittsburgh Assets as separate, independent, ongoing,
economically viable and active competitors to defendants' other
stations in the Greenville, Houston, Jackson, or Pittsburgh Areas,
respectively, and shall take all steps necessary to insure that, except
as necessary to comply with Section IV and paragraphs B and C of this
Section of the Final Judgment, the management of said Assets, including
the performance of decision-making functions regarding marketing and
pricing, will be kept separate and apart from, and not influenced by,
defendants.
[[Page 18219]]
B. Defendants shall use all reasonable efforts to maintain and
increase sales of advertising time by the Greenville, Houston, Jackson,
and Pittsburgh Assets, and shall maintain at 1997 or previously
approved levels for 1998, whichever are higher, promotional
advertising, sales, marketing and merchandising support for said
stations.
C. Defendants shall take all steps necessary to ensure that the
assets used in the operation of the Greenville, Houston, Jackson, and
Pittsburgh Assets, are fully maintained. Sales and marketing employees
shall not be transferred or reassigned to any other station, except for
transfer bids initiated by employees pursuant to defendants' regular,
established job posting policies, provided that defendants give
plaintiff and Acquirer ten (10) days' notice of any such transfer.
D. Defendants shall use their best efforts, consistent with their
rights and obligations under the LMA, to cause the SFX Long Island
Assets to be operated in a manner consistent with the obligations in
paragraphs B and C of this Section; provided, however, that, in the
event the LMA is terminated, paragraphs A, B and C of this Section
shall apply fully to the operation of the SFX Long Island Assets by or
on behalf of defendants.
E. Defendants shall not, except as part of a divestiture approved
by plaintiff, in its sole discretion, or a transfer to a trust approved
by the FCC, also approved by plaintiff, in its sole discretion, sell
any Greenville Assets, Houston Assets, Jackson Assets, Pittsburgh
Assets or SFX Long Island Assets.
F. Defendants shall take no action that would jeopardize the sale
of the Greenville Assets, the Houston Assets, the Jackson Assets, the
Pittsburgh Assets, or the SFX Long Island Assets.
G. Defendants shall appoint a person or persons to oversee the
Assets to be held separate and who will be responsible for defendants'
compliance with Section VI of this Final Judgment.
VII. Notification
Within two (2) business days following execution of a definitive
agreement, contingent upon compliance with the terms of this Final
Judgment, to effect, in whole or in part, any proposed divestitures
pursuant to Section IV or V of this Final Judgment, defendants or the
trustee, whichever is then responsible for effecting the divestitures,
shall notify plaintiff of the proposed divestitures. If the trustee is
responsible, it shall similarly notify defendants. The notice shall set
forth the details of the proposed transaction and list the name,
address and telephone number of each person not previously identified
who offered to, or expressed an interest in or a desire to, acquire any
ownership interest in the Greenville Assets, the Houston Assets, the
Jackson Assets, the Pittsburgh Assets, or the SFX Long Island Assets,
as the case may be, together with full details of same. Within fifteen
(15) calendar days of receipt by plaintiff of such notice, plaintiff
may request from defendants, the proposed purchaser or purchasers, or
any other third party, additional information concerning the proposed
divestitures and the proposed purchaser. Defendants and the trustee
shall furnish any additional information from them within fifteen (15)
calendar days of the receipt of the request, unless the parties shall
otherwise agree. Within thirty (30) calendar days after receipt of the
notice or within twenty (20) calendar days after plaintiff has been
provided the additional information requested from defendants, the
proposed purchaser or purchasers, and any third party, whichever is
later, plaintiff shall provide written notice to defendants and the
trustee, if there is one, stating whether or not it objects to the
proposed divestiture. If plaintiff provides written notice to
defendants and the trustee that it does not object, then the
divestiture may be consummated, subject only to defendants' limited
right to object to the sale under Section V(B) of this Final Judgment.
Absent written notice that plaintiff does not object to the proposed
purchaser or upon objection by the plaintiff, a divestiture proposed
under Sections IV or V may not be consummated. Upon objection by
defendants under the provision in Section V(B), a divestiture proposed
under Section V shall not be consummated unless approved by the Court.
VIII. Financing
Defendants are ordered and directed not to finance all or any part
of any purchase by an Acquirer made pursuant to Sections IV or V of
this Final Judgment, without the prior written consent of plaintiff.
IX. Affidavits
A. Within twenty (20) calendar days of the filing of this Final
Judgment and every thirty (30) calendar days thereafter until the
divestitures have been completed whether pursuant to Section IV or
Section V of this Final Judgment, defendants shall deliver to plaintiff
an affidavit as to the fact and manner of their compliance with Section
IV or V of this Final Judgment. Each such affidavit shall include,
inter alia, the name, address and telephone number of each person who,
at any time after the period covered by the last such report, made an
offer to acquire, expressed an interest in acquiring, entering into
negotiations to acquire, or was contacted or made an inquiry about
acquiring, any interest in the Greenville Assets, the Houston Assets,
the Jackson Assets, the Pittsburgh Assets, and the SFX Long Island
Assets, and shall describe in detail each contact with any such person
during that period. Each such affidavit shall also include a
description of the efforts that defendants have taken to solicit a
buyer or buyers for the Greenville Assets, the Houston Assets, the
Jackson Assets, the Pittsburgh Assets, or the SFX Long Island Assets,
as the case may be.
B. Within twenty (20) calendar days of the filing of the complaint
in this action, defendants shall deliver to plaintiff an affidavit
which describes in reasonable detail all actions defendants have taken
and all steps defendants have implemented on an on-going basis to
preserve Greenville, Houston, Jackson, and Pittsburgh Assets, and the
SFX Long Island Assets, pursuant to Section VI of this Final Judgment.
Defendants shall deliver to plaintiff an affidavit describing any
changes to the efforts and actions outlined in their earlier
affidavit(s) filed pursuant to this Section within fifteen (15)
calendar days after such change is implemented.
C. Defendants shall preserve all records of efforts made to
preserve the assets to be divested and effect the divestitures.
X. 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-Hicks Muse Radio Station, or would transfer the power to
market or sell advertising time or to establish advertising prices for
Hicks Muse Radio Stations in an Area to any other owner or operator of
Non-Hicks Muse Radio Station.
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 (``LMA'') or Joint
Sales Agreement (``JSA'')), that would allow defendants to market or
sell advertising time or to
[[Page 18220]]
establish advertising prices for any Non-Hicks Muse Radio Station.
C. The notification obligations required by paragraphs (A), (B), or
(E) of this Section X shall not apply to defendants with respect to an
Area at such time as there are no Hicks Muse Radio stations in that
Area, provided that the provisions of Section III have been complied
with.
D. Notification described in Section X (A) and (B) or (E) shall be
provided to the United States Department of Justice 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 only with respect to
radio stations owned or operated by defendants in the Area or Areas in
which the notifiable transaction takes place. 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 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. Hicks Muse shall notify plaintiff in writing (or arrange for
Chancellor to provide such notification) ten (10) days prior to (I)
consummation of any direct or indirect acquisition of a Non-Hicks Muse
Radio Station by Chancellor, or (ii) entry into force of any agreement
or understanding (including an LMA or JSA), that would allow Chancellor
to market or sell advertising time or to establish advertising prices
for any Non-Hicks Muse Radio Station.
F. 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.
XI. Compliance Inspection
For the purpose of determining or securing compliance with the
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 defendant made to their principal offices, shall
be permitted:
(1) Access during office hours of defendants to inspect and copy
all books, ledgers, accounts, correspondence, memoranda and other
records and documents in the possession or under the control of
defendants, who may have counsel present, relating to the matters
contained in this Final Judgment; and
(2) Subject to the reasonable convenience of defendants and without
restraint or interference from them, to interview, either informally or
on the record, directors, officers, employees and agents of defendants,
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, defendants shall submit such written
reports, under oath if requested, with respect to any of the matters
contained in the Final Judgment as may be requested.
C. No information or documents obtained by the means provided in
Section IX or this Section XI 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 complinance with this
Final Judgment, or as otherwise required by law.
D. If at the time information or documents are furnished by either
defendant to plaintiff, and such defendant represents and identifies 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 such defendant 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 such defendant prior to divulging
such material in any legal proceeding (other than a grand jury
proceeding) to which such defendant is not a party.
XII. 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.
XIII. Termination
Unless this Court grants an extension, this Final Judgment will
expire upon the tenth anniversary of the date of its entry.
XIV. Public Interest
Entry of this Final Judgment is in the public interest.
Dated: ____________________ 1998.
----------------------------------------------------------------------
United States District Judge
United States District Court for the Eastern District of New York
United States of America, Plaintiff, v. Hicks, Muse, Tate &
Furst Incorporated, and Capstar Broadcasting Partners, Inc., and SFX
Broadcasting Partners, Inc., Defendants. Hon. J. Seybert/M.
Orenstein. Civil Action No. CV 98 2422.
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 March 31, 1998,
alleging that a proposed acquisition of SFX Broadcasting, Inc.
(``SFX'') by Capstar Broadcasting Partners, Inc. (``Capstar'') \1\
would violate Section 7 of the Clayton Act, 15 U.S.C. 18. The complaint
alleges that Capstar, or its related entity, Chancellor Media
Corporation (``Chancellor''), and SFX own and operate several radio
stations throughout the United States, and that the transaction will
combine radio
[[Page 18221]]
station assets such that defendants would control stations that have
approximately 74 percent of the radio advertising revenue in
Greenville-Spartanburg (``Greenville''), SC, 41 percent in Houston, TX,
49 percent in Jackson, MS, 45 percent in Pittsburgh, PA, and 65 percent
in Suffolk County, NY.\2\ This acquisition would give defendants the
majority of the most competitively significant radio signals in the
Greenville, Houston, Jackson, Pittsburgh and Suffolk markets, and a
significant share of radio advertising in these markets. As a result,
this acquisition would substantially lessen competition in the sale of
radio advertising time in the Greenville, Houston, Jackson, Pittsburgh
and Suffolk markets.
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\1\ Capstar is wholly owned by Hicks, Muse, Tate & Furst,
Incorporated (``Hicks Muse''). Hicks Muse is also the largest and
controlling shareholder of Chancellor Media Corporation.
\2\ Following the acquisition, defendants and Chancellor would
own eight radio stations in the Greenville area (6 FMs and 2 AMs),
nine radio stations in the Houston area (6 FMs and 3 AMs), six radio
stations in the Jackson area (4 FMs and 2 AMs) seven radio stations
in the Pittsburgh area (5 FMs and 2 AMs) and six radio stations in
the Suffolk area (4 FMs and 2 AMs).
---------------------------------------------------------------------------
The prayer for relief seeks: (a) Adjudication that Capstar's
proposed acquisition of the radio stations from SFX would violate
Section 7 of the Clayton Act; (b) preliminary and permanent injunctive
relief preventing the consummation of the proposed acquisition; (c) an
award to the United States of the costs of this action; and (d) such
other relief as is proper.
Shortly before this suit was filed, a proposed settlement was
reached that permits Capstar to complete its acquisition of SFX, yet
preserves competition in the markets for which the transaction would
raise significant competitive concerns. A Stipulation and proposed
Final Judgment embodying the settlement were filed at the same time the
Complaint was filed.
The proposed Final Judgment orders Capstar and Hicks Muse to divest
WESC-FM, WESC-AM, WJMZ-FM and WTPT-FM in Greenville; KKPN-FM in
Houston; WJDX-FM in Jackson and WTAE-AM in Pittsburgh, WBLI-FM, WBAB-
FM, WHFM and WGBB-AM in Suffolk (the ``divestiture stations''). Unless
the United States grants an extension of time, Capstar and Hicks Muse
must divest these radio stations within six months after the filing of
the Final Judgment (three months in the case of the Suffolk stations).
If the parties do not divest these stations within the divestiture
period, the Court shall appoint a trustee to sell the assets. The
proposed Final Judgment also requires the defendants to ensure that,
until the divestitures mandated by the Final Judgment have been
accomplished, the divestiture stations will be operated independently
as viable, ongoing businesses, and kept separate and apart from the
other radio stations of Capstar, Chancellor and SFX in the Greenville,
Houston, Jackson, and Pittsburgh areas.\3\ The proposed Final Judgment
also requires that the divestitures be made to an acquirer or acquirers
that have the capability and intent to compete effectively as radio
station operators in the Greenville, Houston, Jackson, Pittsburgh and
Suffolk markets.
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\3\ In Suffolk County, the Chancellor and SFX stations are
currently being operated together by Chancellor under a local
marketing agreement. Under the terms of another proposed Final
Judgment, the parties have agreed to terminate this agreement on or
before August 1, 1998, after which time, the parties must operate
the Chancellor and SFX stations as separate entities, pending the
divestiture required by this Final Judgment.
---------------------------------------------------------------------------
The plaintiff and the defendants have stipulated that the proposed
Final Judgment may be entered after compliance with the APPA. 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 Parties
Defendant Capstar is a Delaware corporation headquartered in
Austin, Texas. Capstar currently owns and operates approximately 245
radio stations in 60 markets in the United States. In 1997, its
revenues were approximately $190 million. In Greenville, Capstar
currently owns WJMZ-FM, WTPT-FM, WESC-FM and WESC-AM. In Jackson,
Capstar owned WJMI-FM, WKXI-FM, WOAD-AM and WKXI-AM, until a recent
sale made in anticipation of this lawsuit. Capstar is wholly owned by
Hicks Muse.
Defendant Hicks Muse is an investment firm headquartered in Dallas,
Texas. Hicks Muse, through investment funds it controls, owns all the
stock of Capstar and has a significant ownership interest in
Chancellor.
Chancellor is a Delaware corporation headquartered in Irving,
Texas. In 1997, it was the second largest owner of radio stations in
the United States and owned 97 radio stations in 22 major U.S. markets,
including in each of the 12 largest markets. Chancellor revenues in
1997 were approximately $582.1 million. In Houston, Chancellor owns
KLDE-FM, KKBQ-FM, KLOL-FM, KTRH-AM and KKBQ-AM. In Pittsburgh,
Chancellor owns WWSW-FM and WWSW-AM. In Suffolk, Chancellor owns WALK-
FM and WALK-AM. Chancellor is a Hicks Muse-related company. Hicks Muse
owns a significant portion of Chancellor stock and Hicks Muse
management and owners influence or control Chancellor competitive
behavior to such an extent that Chancellor/Capstar ownership of
otherwise competing radio stations would substantially lessen
competition.
Defendant SFX is a Delaware corporation headquartered in New York,
New York. SFX owns and operates approximately 85 radio stations located
in 23 markets in the United States. SFX revenues in 1997 were
approximately $322 million. In Greenville, SFX owns WSSL-FM, WTPT-FM,
WYMI-FM, WROQ-FM and WGVL-AM. In Houston, SFX owns KKPN-FM, KODA-FM,
KKRW-FM and KQUE-AM. In Jackson, SFX owns WMSI-FM, WJDX-FM, WSTZ-FM,
WKTF-FM, WZRX-AM and WJDS-AM. WJDX-FM was recently acquired by SFX, in
1996. In Pittsburgh, SFX owns WDVE-FM, WVTY-FM, WXDX-FM, WJJJ-FM and
WTAE-AM. In Suffolk, SFX owns WBAB-FM, WBLI-FM, WHFM-FM and WGBB-AM.
B. Description of the Events Giving Rise to the Alleged Violations
On or about August 24, 1997, Capstar agreed to purchase SFX for
approximately $2.1 billion. Capstar or Chancellor and SFX own or
operate radio broadcast stations in five overlapping markets in which
there would be a lessening of competition: Greenville, Jackson,
Houston, Pittsburgh and Suffolk. As a result of this transaction,
defendants and Chancellor would control stations that have
approximately 74 percent of radio advertising revenue in Greenville, 41
percent in Houston, 49 percent in Jackson, 45 percent in Pittsburgh and
65 percent in Suffolk. Prior to the agreement, the Capstar/Chancellor
and SFX stations in the Greenville, Houston, Jackson, Pittsburgh and
Suffolk markets were vigorous competitors of each other. The proposed
acquisition of SFX by Capstar, and the threatened loss of such
competition that would be caused thereby, precipitated the Government's
suit.
C. Anticompetitive Consequences of the Proposed Merger
1. Sale of Radio Advertising Time In Greenville, Houston, Jackson,
Pittsburgh and Suffolk
The Complaint alleges that the sale of advertising time on radio
stations
[[Page 18222]]
serving the Greenville, Houston, Jackson, and Pittsburgh Metro Service
Areas (``MSA'') each constitute a line of commerce and section of the
country--or relevant market--for antitrust purposes. The Greenville MSA
includes four counties: Anderson, Greenville, Pickens and Spartanburg.
The Houston MSA includes eight counties: Brazoria, Chambers, Fort Bend,
Galveston, Harris, Liberty, Montgomery and Waller. The Jackson MSA
includes three counties: Hinds, Madison and Rankin. The Pittsburgh MSA
includes six counties: Allegheny, Beaver, Butler, Fayette, Washington
and Westmoreland. The relevant market for Suffolk County is Suffolk
County. Local and national advertising that is placed on radio stations
within Greenville, Houston, Jackson, Pittsburgh and Suffolk markets is
aimed at reaching listening audiences in each of these markets, and
radio stations located outside of Greenville, Houston, Jackson,
Pittsburgh and Suffolk do not provide effective access to these
audiences. Thus, if there were a small but significant nontransitory
increase in radio advertising within one of these markets, advertisers
would not buy enough advertising time from radio stations located
outside the Greenville, Houston, Jackson, Pittsburgh and Suffolk
markets to defeat the increase.
The defendants' radio stations, like most commercial radio
stations, generate almost all their revenues from the sale of
advertising time. In general, radio stations attract listeners, and
then sell access to those listeners (that is, advertising time) to
businesses who wish to advertise their products.
Radio stations price their advertising time in large part on the
basis of the number of listeners that they reach. Traditionally, this
is expressed on a cost-per-thousand (CPM) basis. When buying radio
advertising time, advertisers consider the CPM and the overlap of the
number and demographic characteristics of a radio station's listeners
with the advertisers' likely customers. If a station individually or
number of stations in combination efficiently reach an advertiser's
likely customers (target audience), the advertiser has a choice in how
to reach its potential customers. This choice creates competition
between radio stations and results in lower prices and better services.
In Greenville, Houston, Jackson, Pittsburgh and Suffolk, the
defendants' radio stations compete to serve a single distinct
geographic area. When the Capstar/Chancellor and SFX stations operate
independently, they are good substitutes for each other. The stations
compete head-to-head to reach listeners. Many local and regional
advertisers seeking to reach listeners in Greenville, Houston, Jackson,
Pittsburgh and Suffolk can reach a target efficiently by purchasing
time on Capstar and Chancellor or SFX stations or by using a
combination of Capstar, Chancellor, SFX and other stations in the
market. However, other stations, either alone or in combination with
other stations, cannot offer a sufficient number of listeners in
demographic groups to be an effective substitute for Capstar,
Chancellor and SFX.
When the Capstar and SFX stations operate independently,
advertisers can obtain lower prices by ``playing off'' Capstar-owned or
Chancellor-owned stations against SFX stations. Advertisers use the
threat to move their business between the Capstar/Chancellor and the
SFX stations to get more favorable prices and services at each.
Advertisers in Greenville, Houston, Jackson, Pittsburgh and Suffolk
have paid less for advertising as a result of price competition between
the Capstar/Chancellor and SFX radio stations.
2. Harm to Competition
The Complaint alleges that Capstar's acquisition of the SFX will
give defendants the ability to raise price to many advertisers--
especially local and regional advertisers. Price increases made
possible by the acquisition are likely to be profitable. Radio stations
see other radio stations as their principal competition. Moreover, for
many advertisers, other media do not serve as substitutes for radio
advertising. Radio enjoys unique access to certain audiences. A radio
is portable; people can listen to radio anywhere especially in places
and situations where other media are not present, such as in the car.
In addition, radio formats can target listeners in specific
demographics. These features make is a more effective means for many
advertisers to achieve what the advertising industry refers to as
``frequency.''
Many advertisers who purchase time on radio stations consider such
purchases preferable to purchases of other media to meet their specific
needs. When these 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.
Radio stations also provide certain value-added services or
promotional opportunitites--such as contests, disc jockey endorsements,
live remote broadcasts and greater flexibility in ad placement--that
many advertisers significantly value, and which many advertisers cannot
exploit as effectively using other media.
For many advertisers, radio advertising is more cost effective than
other media, like television and newspapers, in reaching their likely
customers. 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. Many
advertisers, especially local and regional advertisers, would not
switch their radio advertising purchases to other media if radio prices
rose a small but significant amount in relation to other media prices.
Because radio stations in Greenville, Houston, Jackson, Pittsburgh
and Suffolk would be able to charge higher prices to these customers
without losing the business of other advertisers, a small but
significant price increase would be profitable. This is because Capstar
will be able to raise price selectively without losing a significant
amount of business. Radio stations know a great deal about how likely
an advertiser is to turn to an alternative. In the negotiation process,
for example, radio stations obtain significant information about an
advertiser's objectives. As a result, radio stations know that some
advertisers are more likely than others to turn to alternatives.
Because prices are set through individual negotiation, station can
charge higher prices to advertisers that are less likely to use
alternatives, while charging lower prices to those advertisers that
would more readily switch. Consequently, defendants will be able to
raise price profitably to the many advertisers that would readily
switch between Capstar and Chancellor and SFX long before they would
consider other alternatives.
Accordingly, the complaint alleges that the relevant product market
within which to assess the competitive effects of this acquisition is
the sale of radio advertising time in the Greenville, Houston, Jackson,
Pittsburgh and Suffolk markets.
Using a measure of market concentration called the Herfindahl-
Hirschman Index (``HHI''), explained in Appendix A annexed hereto, the
transaction would substantially increase concentration in the
Greenville, Houston, Jackson, Pittsburgh and Suffolk radio advertising
markets.
a. Greenville. After the proposed transaction, defendants' share of
the Greenville market will be 74 percent, measured by radio advertising
revenues. The acquisition would yield a post-merger HHI of 5836,
representing an increase of 2571. Post-merger,
[[Page 18223]]
defendants will own and operate WSSL-FM and WESC-FM, the only two
successful country stations in the market. Accordingly, advertisers who
desire to target country listeners will not be able to buy around
defendants' stations.
b. Houston. In Houston, after the acquisition, defendants and
Chancellor together would have a 41 percent market share, measured by
radio advertising revenues. The acquisition would yield a postmerger
HHI of 2330, representing an increase of 765.
c. Jackson. In Jackson, defendants' share of the market would be 49
percent, measured by radio advertising revenues. After the acquisition,
there would be an HHI of 3320; it would have been significantly higher,
if certain stations had not already been sold by defendant Capstar in
anticipation of this lawsuit. Furthermore, the prior acquisition of
WJDX-FM by defendant SFX previously had increased the HHI by 1080. That
acquisition substantially lessened competition and resulted in a market
in which defendants would own three out of the four top-rated stations.
d. Pittsburgh. In Pittsburgh, after the acquisition, defendants and
Chancellor together would have a 45 percent market share, measured by
radio advertising revenues. The acquisition would yield a post-merger
HHI of 3162, representing an increase of 626. The ownership of some
Pittsburgh stations by Chancellor and others by defendants would
substantially lessen competition because of the relationship between
Chancellor and defendants Capstar and Hicks Muse.
e. Suffolk. In Suffolk, Chancellor and SFX are the number one and
number two radio companies. After the proposed acquisition, defendants
and Chancellor together would control over 65 percent of the radio
advertising market. A previous attempt to combine the Chancellor and
SFX stations in Suffolk was the subject of an earlier lawsuit, United
States v. Chancellor Media Co. and SFX Broadcasting, Inc., CV 97-6497.
A proposed final judgment in that matter also was field today, pursuant
to which that transaction will be abandoned.
For the reasons outlined above, the Department of Justice concludes
that the acquisition of SFX by Capstar would substantially lessen
competition in the sale of radio advertising time in Greenville,
Houston, Pittsburgh and Suffolk, and result in increased prices and
reduced quality of service for radio advertising time in each of these
overlapping markets, and that the prior acquisition of WJDX in Jackson
similarly substantially lessened competition, all in violation of
Section 7 of the Clayton Act.
III. Explanation of the Proposed Final Judgment
The proposed Final Judgment would preserve competition in the sale
of radio advertising time in Greenville, Houston, Jackson, Pittsburgh
and Suffolk. It requires the divestiture of several radio stations in
the affected markets. This relief-will reduce the market share Capstar
would have achieved through the acquisition in the overlapping markets.
The divestitures will preserve choices for advertisers, preserve
competition among these radio stations, and help ensure that radio
advertising rates do not increase and that services to do not decline
in the overlapping markets as a result of the acquisition.
The diverstitures will ensure that the affected markets will remain
competitive. First, no firm will dominate the competitively
significantly radio signals in any market. Second, advertisers will
have sufficient alternatives to the merged firm in reaching groups of
radio listeners most affected by the transaction; that is, advertisers
can reasonably efficiently reach such audiences (``buy around'')
without using the merged firm. Third, the ownership structure in each
market is such that it allows for the possibility of at least three
significant competitors who may compete for advertisers' business.
Unless the United States grants an extension of time, the parties
must divest the divestiture stations within six months after the Final
Judgment has been filed (three months in Suffolk). Until the
divestitures take place, these stations will be maintained as
independent competitors to the other stations in Greenville, Houston,
Jackson, Pittsburgh and Suffolk. If the parties fail to divest any of
the divestiture stations and their respective Assets within the time
period specified in the Final Judgment, or extension thereof, the
Court, upon application of the United States, shall appoint a trustee
nominated by the United States to effect the required divestiture or
divestitures. If a trustee is appointed, the proposed Final Judgment
provides that the defendants will pay all costs and expenses of the
trustee and any professionals and agents retained by the trustee. The
compensation paid to the trustee and any persons retained by the
trustee shall be both reasonable in light of the value of the
divestitures stations, and shall be based on a fee arrangement
providing the trustee with an incentive based on the price and terms of
the divestitures and the speed with which they are accomplished. After
appointment, the trustee will file monthly reports with the plaintiff,
the defendants and the Court, setting forth the trustee's efforts to
accomplish the divestitures ordered under the proposed Final Judgment.
If the trustee has not accomplished the divestitures within three (6)
months after its appointment, the trustee shall promptly file with the
Court a report setting forth (1) the trustee's efforts to accomplish
the required divestitures, (2) the reasons, in the trustee's judgment,
why the required divestitures have not been accomplished, and (3) the
trustee's recommendations. At the same time, the trustee will furnish
such report to the plaintiff and defendants, who will each have the
right to be heard and to make additional recommendations consistent
with the purpose of the trust.
The proposed Final Judgment requires that defendants maintain each
of the divestiture stations separate and apart from their other
stations, pending divestiture of those stations, in the Greenville,
Houston, Jackson and Pittsburgh areas. The Judgment also contains
provisions to ensure that these stations will be preserved, so that
they will remain viable, aggressive competitors after divestiture. The
defendants, without providing advance notification to the plaintiff,
may not acquire any assets in any Non-Hicks Muse Radio Stations. Also,
the defendants may not, without providing advance notice to the
plaintiff, enter into any agreement (including a Local marketing
agreement or a Joint Sales Agreement), that would allow defendant to
market or sell advertising time or to establish adverting prices for
any Non-Hicks Muse Radio Station.
The Judgment requires that the defendants or the trustee notify the
plaintiff of any proposed divestitures, within two (2) days following
the execution of a definitive agreement. Within fifteen (15) days of
receipt by plaintiff of notice, the plaintiff may request additional
information regarding the proposed divestiture and the proposed
purchaser. The defendants and the trustee must furnish the additional
information within fifteen (15) days of the receipt of the request.
Within thirty (30) days after receipt of the notice, or within twenty
days after plaintiff has been provided the additional information
requested from the defendants, the proposed purchaser or purchasers,
and any third party, plaintiff will provide written notice to the
defendants or the trustee stating whether or not it objects to the
proposed divestiture. Absent written notice that plaintiff does not
object to the proposed
[[Page 18224]]
divestiture, a divestiture may not be consummated.
The relief in the proposed Final Judgment is intended to remedy the
likely anticompetitive effects of the proposed acquisition of SFX by
Capstar. Nothing in this 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
Greenville, Houston, Jackson, Pittsburgh and Suffolk or any other
markets, including their entry into any JSAs. LMAs, 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
attorney's 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 the 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. 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 divestiture
of the divestiture stations and other relief contained in the proposed
Final Judgment will preserve viable competition in the sale of radio
advertising time in Greenville, Houston, Jackson, Pittsburgh and
Suffolk. Thus, the proposed Final Judgment would achieve the relief 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(a). 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 v. 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,
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\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 Comment 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 the 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 it 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-American 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 Mircosoft, 56 F.2d 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 undermine the effectiveness
of antitrust enforcement by consent decree.\5\
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\5\ Bectel, 648 F.2d at 666 (citations omitted) (emphasis
added); see 858 BNS, F.2d at 463; United States v. National
Broadcasting 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' '') (citation omitted).
The proposed Final Judgment, therefore, should not be reviewed under a
[[Page 18225]]
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\
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\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).
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This is strong and effective relief that should fully address the
competitive harm posed by the proposed acquisition.
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,
Asuncion Cummings (AC-1850),
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 31, 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 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 31st day of March 1998, I caused to
be served by hand delivery a copy of the foregoing Competitive Impact
Statement upon the following:
David A. Clanton, Baker & McKenzie, 815 Connecticut Avenue, N.W.,
Washington, D.C. 20006-4078
Neil Imus, Vinson & Elkins, 1455 Pennsylvania Avenue, N.W., Washington,
D.C. 20004
Asuncion Cummings
[FR Doc. 98-9800 Filed 4-13-98; 8:45 am]
BILLING CODE 4410-11-M