United States v. Jacor Communications, Inc. et al.; Comments Relating to Proposed Modified Final Judgment and Response of United States to Comments

DEPARTMENT OF JUSTICE

Antitrust Division

United States v. Jacor Communications, Inc. et al.; Comments

Relating to Proposed Modified Final Judgment and Response of United

States to Comments

Pursuant to the Antitrust Procedures and Penalties Act, 15 U.S.C.

Sec. 16(c)-(h), the United States published below the comments received

on the proposed Modified Final Judgment in United States of America v.

Jacor Communication, Inc. et al., Civil Action C-1-96-757, filed in the

United States District Court for the Southern District of Ohio,

together with the Response of the United States to the comments.

Copies of the comments and Response are available for inspection

and copying 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 Southern District of Ohio. Copies of these

materials may be obtained upon request and payment of a copying fee.

Constance K. Robinson,

Director of Operations.

Comments Relating to Proposed Modified Final Judgment and Response

of United States to Comments

Pursuant to Section 2(b) of the Antitrust Procedures and Penalties

Act, 15 U.S.C. Sec. (b)-(h) (``APPA''), the United States of America

hereby files the public comments it has received relating to the

proposed Modified Final Judgment in this civil antitrust proceeding,

and herein responds to the public comments.

I. Background

This action was commenced on August 5, 1996, when the United States

filed a civil antitrust Complaint under Section 15 of the Clayton Act,

as amended, 15 U.S.C. Sec. 25, alleging that the proposed acquisition

of Citicasters, Inc. (``Citicasters'') by Jacor Communication, Inc.

(``Jacor'') would violate Section 7 of the Clayton Act, 15 U.S.C.

Sec. 18. The complaint alleges that the combination of these companies

would substantially lessen competition in the sale of radio advertising

time in Cincinnati, Ohio and the surrounding areas. Also on August 5,

the United States filed a proposed Final Judgment that would allow the

acquisition to proceed provided that Jacor divest the assets of

Cincinnati radio station WKRQ-FM. At the same time, the government

filed a Competitive Impact Statement explaining the basis for the

Complaint and the provisions of the proposed Final Judgment.

On September 16, 1996, the United States filed a Modified Final

Judgment with the Court superseding the original Final Judgment. The

Modified Final Judgment clarified the obligation of Jacor under Section

IX of the Judgment to file notice with the Department of Justice for

certain types of transactions. At the same time, the United States

filed a stipulation in which the parties consented to the entry of the

Modified Final Judgment after completion of the

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procedures required by the APPA. The United States published notice of

the Modified Final Judgment in the Federal Register on September 27,

1996 and in appropriate newspapers beginning on September 22, 1996.

II. Compliance with the APPA

The APPA requires a 60-day period for the submission of public

comments on the proposed Modified Final Judgment, 15 U.S.C. Sec. 16(b).

In this case, the 60-day comment period began on September 27, 1996 and

terminated on November 26, 1996. During this period, the United States

received comments from two interested parties. Sabre Communications,

Inc. and John J. Oezer, a Cincinnati resident.\1\ The United States

responds herein to these comments. Upon publication in the Federal

Register of these comments and of this Response of the United States to

these comments pursuant to 15 U.S.C. Sec. 16(d) of the APPA, the

procedures required by the APPA prior to entry of the proposed Modified

Final Judgment will be completed. The United States will then certify

that the requirements of the Tunney Act have been satisfied and move

for entry of the proposed Modified Final Judgment.\2\

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\1\ These comments are attached as Exhibits A & B.

\2\ Until these events have taken place, and the United States

has certified that the requirements of the Tunney Act have been met,

the Court should not rule on entry of the proposed Modified Final

Judgment.

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III. Response to Public Comments

The United States has reviewed the comments received and believes

that neither one addresses the issue of whether entry of the proposed

Modified Final Judgment is in the public interest. We, however,

summarize the comments below and briefly respond to the issues raised.

Sabre Communications, Inc. in its comments contends that no radio

station owner could exercise market power because radio competes with

other forms of advertising, and because only 7% of overall advertising

dollars are spent on radio. As the United States discusses at length in

Section II of the Competitive Impact Statement, radio is a separate

market for antitrust purposes because it possesses unique qualities

compared to other advertising media. Many Cincinnati advertisers would

consequently continue to purchase radio advertising even in the fact of

a 5 to 10% price increase, evidence that a radio station owner could

successfully raise advertising rates if it possessed market power.

Sabre also suggested that the position taken by the United States in

this case contradicted Congress' intent in enacting the

Telecommunications Act of 1996, Pub. L. No. 104-104, 110 Stat. 56, 111

(1996), which eased previous FCC limits on common ownership of radio

stations. Sabre, however, ignores Section 601(b)(1) of the Act which

explicitly provides that ``nothing in the Act * * * shall be construed

to modify, impair, or supersede the applicability of any of the

antitrust laws.'' 110 Stat. at 141 (1996). Thus, Congress intended

radio station mergers to still be subject to challenge under the

antitrust law.

In his comment, John J. Oezer of Cincinnati urges the United States

not to permit the Jacor/Citicasters merger because it would result in

monopolistic control over the content of programming and advertising in

the Cincinnati area. The United States has, however, evaluated the

impacts of the Jacor/Citicasters merger and has challenged it under the

antitrust laws. The issue before the Court is whether the Modified

Final Judgment that requires the divesture of WKRQ-FM is adequate to

remedy the violations contained in the complaint. Mr. Oezer's comments

do not address the adequacy of the proposed relief, but raise issues

about other types of media, such as TV and newspapers, that are not

presently before the Court.

IV. Standard of Review

Pursuant to 15 U.S.C. 16(e), the proposed Modified Final Judgment

cannot be entered unless the Court determines that it is in the public

interest. The focus of this determination is whether the relief

provided by the proposed Modified Final Judgment is adequate to remedy

the antitrust violations alleged in the Complaint. United States v.

Bechtel Corp., 648 F.2d 660, 665-66 (9th Cir.), cert denied, 454 U.S.

1083 (1981), quoted with approval in United States v. Microsoft Corp.,

56 F.3d 1448, 1457-58, see also 56 F.3d at 1459-60 (D.C. Cir. 1995). In

the recent Microsoft decision by the United States Court of Appeals for

the District of Columbia Circuit, which reversed the district court's

refusal to enter an antitrust consent decree proposed by the United

States, the court of appeals held that the provision in Section

16(e)(1) of the Tunney Act allowing the district court to consider

``any other considerations bearing upon the adequacy of such

judgment,'' does not authorize extensive inquiry into the conduct of

the case. 56 F.3d at 1458-60. The court of appeals concluded that

``Congress did not mean for a district judge to construct his own

hypothetical case and then evaluate the decree against that case.'' Id.

To the contrary, ``[t]he court's authority to review the decree depends

entirely on the government's exercising its prosecutorial discretion by

bringing a case in the first place,'' and so the district court ``is

only authorized to review the decree itself,'' not other matters that

the government might have but did not pursue. Id.

Under the public interest standard, the Court's role is limited to

determining whether the proposed decree is within the ``zone of

settlements'' consistent with the public interest, not whether the

settlement diverges from the Court's view of what would best serve the

public interest. United States v. Western Electric Co., 993 F. 2d 1572,

1576 (quoting United States v. Western Electric Co., 900 F.2d 283, 307

(D.C. Cir. 1990)); United States v. Microsoft Corp., 56 F.3d at 1460.

Moreover, the Court should give a request for entry of a proposed

decree even more deference than a request by a party to an existing

decree for approval of a modification, for in dealing with an initial

settlement the Court is unlikely to have substantial familiarity with

the market involved. United States v. Microsoft Corp., 56 F.3d at 1460-

61.

Absent 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). The Court may reject the agreement

of the parties as to how the public interest is best served only if it

has ``exceptional confidence that adverse antitrust consequences will

result * * *'' United States v. Western Electric Co., 993 F.2d at 1577

(D.C. Cir.), cert. denied, 114 S. Ct. 487 (1993), quoted with approval

in United States v. Microsoft Corp., 56 F.3d at 1460.

V. Conclusion

After careful consideration of the comments, the United States

continues to believe that, for the reasons stated herein and in the

Competitive Impact Statement, the proposed Modified Final Judgment is

adequate to remedy the antitrust violations alleged in the Complaint.

There has been no showing that the proposed settlement constitutes an

abuse of the United States' discretion or that it is not within the

zone of settlements consistent with the public interest. Therefore, the

Court should

[[Page 67347]]

find entry of the proposed Modified Final Judgment to be in the public

interest, after the United States has completed the procedures mandated

by the Tunney Act and moved for entry of judgment.

Dated: December 5, 1996.

Respectfully submitted,

Andrew S. Cowan,

Attorney, Telecommunications Task Force, U.S. Department of Justice,

Antitrust Division, 555 4th Street, N.W., Room 8104, Washington, D.C.

20001, (202) 514-5621.

Edmund A. Sargus, Jr.,

United States Attorney.

Jan M. Holtzman,

Ohio Bar #0017949, Assistant United States Attorney, Rm. 220, Potter

Stewart Federal Courthouse, 5th & Walnut Streets, Cincinnati, Ohio

45202, (513) 684-3711.

Certificate of Service

I hereby certify that on this date I have caused to be served by

first class mail, postage prepaid, or by hand, if so indicated, a copy

of the foregoing Response to Public Comment upon the following person,

counsel for defendants in the matter of United States of America v.

Jacor Communications, Inc., and Citicasters, Inc.

Phillip A. Proger, Esquire, Jones, Day, Reavis & Pogue, 1450 G Street,

NW, Washington, D.C. 20005-2088, Counsel for Defendant, Jacor

Communications, Inc.--BY HAND

Dated: December 5, 1996.

Respectfully submitted,

Andrew S. Cowan,

Attorney, Telecommunications Task Force, U.S. Department of Justice,

Antitrust Division, 555 4th Street, N.W., Room 8104, Washington, D.C.

20001, (202) 514-5621.

Sabre Communications Inc.

August 15, 1996.

Mr. Donald J. Russell,

Chief, Telecommunications Task Force, Antitrust Division, U.S

Department of Justice, Room 8104, 555 Fourth Street, NW, Washington,

DC 20001.

Dear Mr. Russell: After reading various accounts of the Justice

Department's investigation re: the Jacor Broadcasting/Citicasters

acquisition as it applies to the Cincinnati market, I have concluded

that the Department has made a dreadful decision probably because it

failed to grasp the essence of the advertising business and arrived

at faulty conclusions after comparing apples to oranges.

Obviously the Department is concerned about a monopoly, but in

this case, monopoly is impossible. Please note that, while it is

true that the purchase of radio advertising is often decided by

determining specific demographic groups reached by individual

stations, it is also fact that radio captures only 7% of all

advertising dollars (in a typical US market, the local newspaper

annually generates more revenue from classified ads than that

revenue generated by all of the radio stations combined). This means

that 93% of all advertising dollars are spent elsewhere. Advertisers

have a multitude of choices other than a couple of radio stations,

among them, newspaper, newspaper inserts, magazines, penny savers,

specialty publications, TV [also very demographically specific],

cable [much different from broadcast TV], billboards, direct mail

[again, very demographically specific], matchbook covers and other

specialty items, other radio stations, etc. And advertisers use

those media (not radio), and spend 93% of their dollars doing it. By

the way, don't tell any of the ``other'' media that they ``. . .

lack . . . ability to provide efficient targeting.'' Each believes

that they provide efficiency better than radio or any of the others,

and they passionately present that case to advertisers every day.

All in the spirit of true competition!

Radio a monopoly? Under no circumstances! Even though there are

over 10,000 commercial radio stations in the United States, the pure

fact is that if one person owned every one of them, that person

still could never achieve a monopoly over either the spending of

advertising dollars or the opportunity for the advertiser to reach

consumers in any of the various demographic groups. That is unless

7% of something has suddenly become a monopoly. Anyway, the topic is

moot because owning all radio stations in any given market is not

only impractical, it is against the law.

I would suggest that if the Department is truly interested in

investigating advertising monopolies it should investigate the

newspaper business. Almost every market in our country has only one

newspaper thereby giving every potential newspaper advertiser no

choice. Where I went to school, we were taught that one was the

ultimate monopoly and monopoly meant no choice.

My recommendation is that the Justice Department spend some time

learning about the advertising business and the fierce competition

that exists between the media. The result of that effort will be a

clear understanding that, given radio's tiny piece of the

advertising pie and the multitude of choices offered to the

advertiser, monopoly is impossible and that, in this instance, the

Congress of the United States and the Federal Communications

Commission have got it right.

Respectfully,

Paul H. Rothfuss,

President, Sabre Communications, Inc.

Mr. Donald J. Russell,

Chief, Telecommunications Task Force, Antitrust Div., Department of

Justice, Room 8104, 555 Fourth St N.W., Washington, D.C. 20001.

Dear Sir:

Re. civil suit no. C-1-97-757.

We think that you should be made aware that the citizens in

Cincinnati, Hamilton County, and the Tristate area in southwest Ohio

are finding it more and more difficult to get unbiased news and

programming on radio, TV, and newspapers. Of the two daily

Cincinnati newspapers, one is owned by the other. Jacor

Communications already owns and puts Mr. Michael's ``flavor'' on

several local radio stations. Three major TV stations are affiliated

with networks which are owned by other corporate giants. WLW-TV, ch.

5 is the local NBC affiliate. NBC is owned by G.E. Co. and we seldom

hear anything negative about G.E products, especially Jet Aircraft

engines, even if there is news.

Advertising in the electronic media is becoming unbearable. In

the past, programs were separated by a respectable number of

informative commercials. Today, loud, hectic, demanding commercials

are separated by brief segments of programs lasting only 3 to 5

minutes.

Indepth news lasting more than 90 seconds is available only on

PBS, and our very own government is trying to abolish PBS!! Please

don't compound the abusive assault on our radio listening senses by

allowing Jacor to swallow up Citicasters Inc., thus giving Jacor a

near monolistic control over program content and advertising in our

Tristate area, with a population of about 2 million people.

To illustrate how controlled the local news already is, about 6

months ago we were active in a local tax issue and our group, which

had the backing of a large number of petitioners could not get equal

news coverage on any of the news media unless we paid for it. The

opposing side, favored by the news media, got free ``news bits''

every day, giving the voters one side of the issues of a very

controversial tax.

Please deny this monopolistic acquisition an keep healthy

competition alive.

Respectfully yours,

John J. Oezer,

PE, 5050 Miami Road, Indian Hill, Cincinnati, Ohio 45243.

[FR Doc. 96-32339 Filed 12-19-96; 8:45 am]

BILLING CODE 4410-01-M