[Federal Register Volume 64, Number 101 (Wednesday, May 26, 1999)]
[Notices]
[Pages 28512-28515]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 99-13403]
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DEPARTMENT OF JUSTICE
Antitrust Division
United States v. Capstar Broadcasting Corporation and Triathlon
Broadcasting Company; Proposed Final Judgment and Competitive Impact
Statement
Notice is hereby given pursuant to the Antitrust Procedures and
Penalties Act, 15 U.S.C. Section 16(b) through (h), that a proposed
Final Judgment, Stipulation and Competitive Impact Statement have been
filed with the United States District Court for the District of
Columbia in United States of America v. Capstar Broadcasting
Corporation and Triathlon Broadcasting Company, Civil Action No. 99-
CV00993. On April 21, 1999, the United States filed a Complaint
alleging that the proposed acquisition by Capstar Broadcasting
Corporation (``Capstar'') of the radio assets of Triathlon Broadcasting
Company (``Triathlon'') in Wichita, Kansas, would violate Section 7 of
the Clayton Act, 15 U.S.C. Sec. 18. The proposed Final Judgment, filed
the same time as the Complaint, requires Capstar to divest five radio
stations in Wichita pursuant to the Final Judgment. Copies of the
Complaint, proposed Final Judgment and Competitive Impact Statement are
available for inspection at the Department of Justice in Washington,
D.C. in Room 215, 325 Seventh Street, N.W., and at the Office of the
Clerk of the United States District Court for the District of the
District of Columbia.
Public comment is invited within 60 days of the date of this
notice. Such comments, and responses thereto, will be published in the
Federal Register and filed with the Court. Comments should be directed
to Craig W. Conrath, Chief, Merger Task Force, Antitrust Division,
Department of Justice, 1401 H St. N.W., Suite 4000, Washington, D.C.
20530 (telephone: (202) 307-0001).
Constance K. Robinson,
Director of Operations & Merger Enforcement.
United States District Court for the District of Columbia
United States of America, Plaintiff, v. Capstar Broadcasting
Corporation, and Triathlon Broadcasting Company, Defendants.
Civil Action No. 99-CV-00993 (Judge Oberdorfer).
Competitive Impact Statement
The United States, pursuant to Section 2(b) of the Antitrust
Procedures and Penalties Act (``APPA''), 15 U.S.C. Sec. 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 April 21, 1999,
alleging that Capstar Broadcasting Corporation's (``Capstar'') proposed
acquisition of Triathlon Broadcasting Company (``Triathlon'') would
violate Section 7 of the Clayton Act, as amended, 15 U.S.C. Sec. 18.
The Compliant alleges that Capstar and Triathlon both own and operate
radio stations throughout the United States, and that they each own and
operate radio stations in the Wichita, Kansas, metropolitan area.
Specifically, the complaint alleges that Capstar owns KKRD-FM, KRZZ-FM,
and KNSS-AM in Wichita and that Capstar controls approximately 20
percent of the Wichita radio advertising market. The complaint also
alleges that Triathlon owns KZSN-FM, KRBB-FM, KEYN-FM, KWSY-FM, KFH-AM,
and KQAM-FM in Wichita and controls approximately 33 percent of the
radio advertising revenues in the Wichita radio advertising market. The
proposed acquisition would give Capstar a significant share of the
radio advertising market in Wichita and control over stations that are
close substitutes for each other based upon their specific audience
characteristics. According to industry estimates, the proposed
acquisition would give Capstar control of over 45 percent of the radio
advertising revenue--even after Capstar divests the two lowest ranked
FM radio stations pursuant to Federal Communications Commission
(``FCC'') regulations. As a result, the combination would substantially
lessen competition in the sale of radio advertising time in the Wichita
metropolitan area.
The prayer for relief seeks: (a) adjudication that Capstar's
proposed acquisition of Triathlon described in the Complaint would
violate Section 7 of the Clayton Act, as amended, 15 U.S.C. Sec. 18;
(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.
Before this suit was filed, the United States reached a proposed
settlement with Capstar and Triathlon which is memorialized in the
Stipulation and proposed Final Judgment which have been filed with the
Court. Under the terms of the proposed Final Judgment, Capstar must
divest five stations--KEYN-FM, KWSJ-FM, KFH-AM, KNSS-AM and KQAM-AM--to
another radio operator approved by plaintiff at the time it acquires
Triathlon. If Capstar does not divest these stations to an approved
buyer at the time it acquires Triathlon, Capstar must place the
stations in an FCC Trust. The FCC Trust Agreement was filed with the
Court as an attachment to the proposed Final Judgment. Unless the
Antitrust Division of the United States Department of Justice (the
``Antitrust Division'') grants an extension, the Trustee must divest
the stations to a buyer approved by the Antitrust Division at its sole
discretion within four (4) months of the date of entry of the Final
Judgment.
The proposed Final Judgment also requires both Capstar and
Triathlon to ensure, to the extent they are able under the proposed
Final Judgment, that these stations will be operated independently as
viable ongoing businesses while Capstar and Triathlon continue to
operate them. If the stations are transferred to the Trustee, the
Trustee has agreed that he will operate the stations independently as
viable ongoing businesses. Further, the proposed Final Judgment
requires Capstar to give plaintiff prior notice regarding future radio
station acquisitions or certain agreements pertaining to the sale of
broadcast radio advertising time in Wichita.
The plaintiff and defendants have stipulated that the proposed
Final Judgment may be entered after compliance with 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 Defendants
Capstar is a Delaware corporation with its headquarters in Austin,
Texas.
[[Page 28513]]
Capstar owns approximately 309 radio stations in 76 U.S. markets. In
1997, Capstar had total revenue of approximately $350 million,
approximately $4.9 million of which was derived from its Wichita
stations.
Triathlon is a Delaware corporation headquartered in San Diego,
California. Triathlon currently owns 31 radio stations in six U.S.
markets. In 1997, Triathlon had total revenue of approximately $33.6
million, approximately $8 million of which was derived from its Wichita
stations.
B. Description of the Events Giving Rise to the Alleged Violation
On July 23, 1998, Capstar and Triathlon entered into an Agreement
and Plan of Merger (``Agreement''). Under the terms of the Agreement,
Triathlon agreed to transfer its licensee companies, including
Triathlon Broadcasting of Wichita Licensee, Inc. to Capstar. Also under
the terms of the Agreement, Triathlon agreed to sell Triathlon
Broadcasting Company to Capstar.
Capstar and Triathlon compete for the business of local and
national companies seeking to advertise in the Wichita radio market.
The proposed acquisition of Triathlon and Capstar, and the threatened
loss of competition that would be caused thereby precipitated the
government suit.
C. Anticompetitive Consequences of the Proposed Acquisition
1. The Sale of Radio Advertising Time in Wichita
The Complaint alleges that the provision of advertising time on
radio stations serving the Wichita, Kansas Metropolitan Survey Area
(``MSA'') constitutes a line of commerce and a section of the country,
or a relevant market, for antitrust purposes. The Wichita MSA is the
geographical unit for which Arbitron furnishes radio stations,
advertising agencies, and advertisers with data to aid in evaluating
radio audience size and composition. Advertisers use this data in
making decisions about which radio station or combination of radio
stations can deliver their target audiences in the most efficient and
cost-effective way. The Wichita MSA includes Butler, Harvey, and
Sedgwick Counties. Radio stations earn their revenues from the sale of
advertising time to local and national advertisers. Many local and
national advertisers purchase radio advertising time in Wichita because
they find such advertising preferable to advertising in other media for
their specific needs. For such advertisers, radio time (a) may be less
expensive and more cost-efficient than other media at reaching the
advertiser's target audience (individuals most likely to purchase the
advertiser's products or services); (b) may reach certain target
audiences that cannot be reached as effectively through other media; or
(c) may render certain services or offer promotional opportunities to
advertisers that they cannot exploit as effectively using other media.
For these and other reasons, many local and national advertisers in
Wichita who purchase radio advertising time view radio either as a
necessary advertising medium for them or as a necessary advertising
complement to other media.
Although some local and national advertisers may switch some of
their advertising to other media rather than absorb a price increase in
radio advertising time in Wichita, the existence of such advertisers
would not prevent radio stations from raising their prices a small but
significant amount. At a minimum, stations could raise prices
profitably to those advertisers who view radio either as a necessary
advertising medium for them, or as a necessary advertising complement
to other media. Radio stations, which negotiate prices individually
with advertisers, can identify those advertisers with strong radio
preferences. Consequently, radio stations can charge different
advertisers different rates. Because of this ability to price
discriminate among different customers, radio stations may charge
higher rates to advertisers that view radio as particularly effective
for their needs, while maintaining lower rates for other advertisers.
2. Harm to Competition
The Complaint alleges that Capstar's proposed acquisition of
Triathlon would lessen competition substantially in the provision of
radio advertising time in the Wichita MSA. The proposed transaction
would create further market concentration in an already concentrated
market. Using a measure of market concentration called the Herfindahl-
Hirschman Index (``HHI''), explained in Appendix A of the Complaint, a
combination of Capstar and Triathlon would substantially increase the
concentration in the Wichita radio advertising markets. The HHI
currently is 3040. If Capstar divests only the two least significant FM
stations, Capstar's share of the Wichita radio market, based on
advertising revenue, would increase from approximately 20 percent to
approximately 45 percent. The approximate post-merger HHI would be
3680, representing an increase of about 640 points. This substantial
increase in concentration is likely to give Capstar unilateral power to
raise advertising rates and reduce the level of service provided to
advertisers in Wichita.
Today, several Capstar and Triathlon stations in Wichita compete
head-to-head to reach the same audiences and, for many local and
national advertisers buying time in Wichita, they are close substitutes
for each other based on their specific audience characteristics. The
proposed merger would eliminate this competition.
During individual price negotiations between advertisers and radio
stations, advertisers provide the stations with information about their
advertising needs, including their target audience and the desired
frequency and timing of ads. Radio stations thus have the ability to
charge advertisers differing rates based in part on the number and
attractiveness of competitive radio stations that can meet a particular
advertiser's specific target needs.
During individualized rate negotiations, advertisers that desire to
reach certain listeners can help ensure competitive rates by ``playing
off'' Capstar stations against Triathlon stations. Capstar's
acquisition of Triathlon will end this competition. After the
acquisition, such advertisers will be unable to reach their desired
audiences with equivalent efficiency without using Capstar stations.
Because advertisers seeking to reach these audiences would have
inferior alternatives to the merged entity as a result of the
acquisition,the acquisition would give Capstar the ability to raise
prices and reduce the quality of its service to some advertisers on its
stations in Wichita.
b. Advertisers could not turn to other Wichita radio Stations to
prevent Capstar from imposing an anticompetitive price increase.--If
Capstar raised prices or lowered services to those advertisers who buy
advertising time on Capstar and Triathlon stations in Wichita because
of their strength in delivering access to certain audiences, non-
Capstar radio stations in Wichita would not be induced to change their
formats to attract those audiences in sufficiently large numbers to
defeat a price increase. Successful radio stations are unlikely to
undertake a format change solely in response to small but significant
increases in price being charged to advertisers by a multi-station firm
such as Capstar because they would likely lose a substantial portion of
their existing audiences. Even if less successful stations did change
format, they would still be unlikely to attract
[[Page 28514]]
enough listeners to provide suitable alternatives to the merged entity.
In addition, new entry into the Wichita radio advertising market would
not be timely, likely or sufficient to deter the exercise of market
power. For all these reasons, plaintiff concludes that the proposed
transactions would lessen competition substantially in the sale of the
radio advertising time on radio stations serving the Wichita MSA 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 Wichita. It requires Capstar to divest
five stations: KEYN-FM, KWSJ-FM, KFH-AM, KNSS-AM and KQAM-AM. The
relief will reduce the share in advertising revenues Capstar would have
achieved in the transaction from 45 percent to less than 40 percent.
The divestitures will preserve choices for advertisers and will ensure
that radio advertising prices do not increase and services do not
decline as a result of the transaction.
Capstar must divest KEYN-FM, KWSJ-FM, KFH-AM, KNSS-AM and KQAM-AM
assets to either another buyer or a Trustee at the time it acquires
Triathlon. The divestitures must be to a purchaser or purchasers
acceptable to the plaintiff in its sole discretion. Except in the case
of KNSS-AM, the divestitures shall include all the assets of the
stations being divested. The divestitures shall be accomplished in such
a way as to satisfy plaintiff, in its sole discretion, that such assets
can and will be used as viable, ongoing commercial radio businesses. If
defendants fail to divest these stations within the time periods
specified in the Final Judgment, a Trustee agreed upon by plaintiff and
Defendants and identified in the Final Judgment will be entrusted to
effect the divestitures. If the Trustee is appointed, the proposed
Final Judgment provides that Capstar will pay all costs and expenses of
the Trustee and any professionals and agents retained by the Trustee.
After appointment, the Trustee will file monthly reports with the
plaintiff, Capstar 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
four (4) months after the date of the Order's entry, 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.
The proposed Final Judgment requires that prior to the consummation
of the transaction, defendants will maintain the independence of their
respective radio stations in Wichita until the closing of the merger
and the transfer of KEYN-FM, KWSJ-FM, KFH-AM, KNSS-AM and KQAM-AM to
either a buyer approved by the plaintiff or to the Trustee.
The proposed Final Judgment also prohibits Capstar from entering
into certain agreements with other Wichita radio stations without
providing at least thirty (30) days' notice of the plaintiff.
Specifically, Capstar must notify the plaintiff before acquiring any
interest in another Wichita radio station. Such acquisitions could
raise competitive concerns but might be too small to be reported
otherwise under the Hart-Scott-Rodino Antitrust Improvements Act of
1976, as amended, 15 U.S.C. Sec. 18a (the ``HSR Act''). Moreover,
Capstar may not agree to sell radio advertising time for any other
Wichita radio station, or to have another radio station that also sells
radio advertising time in Wichita sell its radio advertising time,
without providing plaintiff with notice. In particular, the provision
requires Capstar to notify the plaintiff before it enters into any
Joint Sales Agreements (``JSAs'') in Wichita. Under a JSA, one station
sells another station's advertising time. Despite their clear
competitive significance, JSAs may not all be reportable to the
Department under the HSR Act. Thus, this provision in the proposed
Final Judgment ensures that the plaintiff will receive notice of and be
able to act, if appropriate, to stop any agreements that might have
anticompetitive effects in the Wichita radio advertising market.
The relief in the proposed Final Judgment is intended to remedy the
likely anticompetitive effects of Capstar's proposed transaction with
Triathlon in Wichita. Nothing in this Final Judgment is intended to
limit the plaintiff's ability to investigate or to bring actions, where
appropriate, challenging other past or future activities of defendants
in Wichita, or any other markets.
IV. Remedies Available to Potential Private Litigants
Section 4 of the Clayton Act, 15 U.S.C. Sec. 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.
Sec. 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 plaintiff 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, NW, Suite 4000, Washington, DC 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
[[Page 28515]]
divestiture of KEYN-FM, KWSJ-FM, KFH-AM, KNSS-AM and KQAM-AM and other
relief contained in the proposed Final Judgment will preserve viable
competition in the sale of radio advertising time in the Wichita radio
advertising markets. Thus, the proposed Final Judgment would achieve
the relief the plaintiff 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.
10 U.S.C. Sec. 16(e).
As the United States Court of Appeals for the District of Columbia
Circuit held, this statute permits to court to consider, among other
things, the relationship between the remedy secured and the specific
allegations set forth in the plaintiff'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 Corp., 56 F.3d 1448, 1461-62 (D.C. Cir. 1995).
In conducting this inquiry, ``[t]he Court is nowhere compelling 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.'' \1\ Rather,
\1\ 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. Sec. 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.
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[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. 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 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.\2\
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\2\ 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.2d 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.' '' \3\
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\3\ 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 transaction.
VIII. Determinative Documents
There are no determinative materials or documents within the
meaning of the APPA that were considered by the plaintiff in
formulating the proposed Final Judgment.
Dated: May 12, 1999.
Respectfully submitted,
Karl D. Knutsen,
Attorney, Merger Task Force.
U.S. Department of Justice, Antitrust Division
1401 H Street, N.W., Washington, D.C. 20530, (202) 514-0976.
Certificate of Service
I, Karl D. Knutsen, of the Antitrust Division of the United States
Department of Justice, do hereby certify that true copies of the
foregoing Competitive Impact Statement were served this 12th day of
May, 1999, by United States mail, to the following:
David J. Laing, Baker & McKenzie,
815 Connecticut Ave. N.W., Washington, D.C. 20006.
Counsel for Triathlon Broadcasting Company.
Neil W. Imus, Vinson & Elkins,
1455 Pennsylvania Avenue, N.W., Washington, D.C. 20006.
Counsel for Capstar Broadcasting Corporation.
Karl D. Knutsen
[FR Doc. 99-13403 Filed 5-25-99; 8:45 am]
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