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

DEPARTMENT OF JUSTICE

Antitrust Division

United States of America v. Chancellor Media Company, Inc. and

SFX Broadcasting, Inc.; Proposed Final Judgment and Competitive Impact

Statement

Notice is hereby given pursuant to the Antitrust Procedures and

Penalties Act, 15 U.S.C. 16(b)-(h), that a proposed Final Judgment,

Stipulation and Order, and Competitive Impact Statement have been filed

with the United States District Court for the Eastern District of New

York in United States v. Chancellor Media Company, Inc. and SFX

Broadcasting, Inc. Civil Action No. CV97-6497. The proposed Final

Judgment is subject to approval by the Court after the expiration of

the statutory 60-day public comment period and compliance with the

Antitrust Procedures and Penalties Act, 15 U.S.C. 16(b)-(h).

Plaintiff filed a civil antitrust Complaint on November 6, 1997,

alleging that Chancellor Media Corporation's (successor in interest to

Chancellor Media Company, Inc.) (``Chancellor'') proposed acquisition

of four radio stations in Suffolk County, Long Island, New York owned

by SFX Broadcasting, Inc. (``SFX'') would violate Section 7 of the

Clayton Act, 15 U.S.C. 18 and Section 1 of the Sherman Act, 15 U.S.C.

1. The Complaint alleges, among other things, that Chancellor and SFX

are the number one and number two radio companies on Long Island and

that they each own radio stations in Suffolk County, New York. The

Complaint also alleges that the proposed acquisition would increase

Chancellor's share of the radio advertising market in Suffolk County,

New York from 33 percent to over 65 percent. It further alleges that

prices for radio advertising for coverage of Suffolk County would

likely increase and the quality of promotional services would likely

decline--especially to regional and local customers.

The prayer for relief seeks: (a) Adjudication that Chancellor's

proposed acquisition would violate Section 7 of the Clayton Act and

Section 1 of the Sherman Act; (b) permanent injunctive relief

preventing the consummation of the proposed acquisition; (c) a finding

that the Local Marketing Agreement (LMA) between Chancellor and SFX

regarding SFX's Suffolk County radio stations violates Section 1 of the

Sherman Act and an Order terminating the LMA; (d) an award to the

United

[[Page 17447]]

States of the costs of this action; and (e) such other relief as is

proper.

The United States and the defendants in this action have reached a

proposed settlement in this proceeding, and a Stipulation and Order,

and a proposed Final Judgment embodying the settlement have been filed

with the Court. The proposed Final Judgment prohibits Chancellor and

SFX from consummating their acquisition and orders them to terminate

the LMA as soon as possible, but no later than August 1, 1998. In

addition, the proposed Final Judgment would prevent Chancellor, SFX,

and any of their successor companies from combining WALK-FM/AM with

WBLI-FM and WBAB-FM. The proposed Final Judgment also requires

Chancellor to ensure that, until termination of the LMA mandated by the

Final Judgment has been accomplished, Chancellor will maintain the SFX

radio stations as viable entities, including the obligation that

Chancellor work to increase the sale of advertising and maintain

promotional and marketing levels for the SFX stations. Further, the

proposed Final Judgment requires defendants to give plaintiff prior

notice regarding future radio station acquisitions or certain

agreements pertaining to the sale of radio advertising time in Suffolk

County, New York.

A Competitive Impact Statement filed by the United States describes

the Complaint, the proposed Final Judgment, and remedies available to

private litigants.

Public comment is invited within the statutory 60-day comment

period. Such comments, and the responses thereto, will be published in

the Federal Register and filed with the Court. Written comments should

be directed to Craig W. Conrath, Chief, Merger Task Force, Antitrust

Division, 1401 H Street, N.W., Suite 4000, Washington, D.C. 20530

(telephone: (202) 307-0001). Copies of the Complaint, Stipulation and

Order, proposed Final Judgment and Competitive Impact Statement are

available for inspection in Room 215 of the U.S. Department of Justice,

Antitrust Division, 325 7th Street, N.W., Washington, D.C. 20530

(telephone: (202) 514-2481) and at the office of the Clerk of the

United States District Court for the Eastern District of New York,

United States Courthouse, 2 Uniondale Avenue, Uniondale, New York

11553.

Copies of any of these materials may be obtained upon request and

payment of a copying fee.

Constance K. Robinson,

Director of Operations & Merger Enforcement, Antitrust Division.

Stipulation and Order

Whereas, plaintiff, the United States of America, and defendants,

Chancellor Media Corporation (successor in interest to Chancellor Media

Company, Inc.) (``Chancellor'') and SFX Boardcasting, Inc. (``SFX''),

acknowledge that this stipulation and order, wherein defendants consent

to the entry of a Final Judgment trial, (i): Is made without there

having been a trail or adjudication of any issue of fact or law and

without the Final Judgment constituting any evidence against or an

admission by any party with respect to any issue of law or fact, and

(ii) is not intended to expand the effect of the Final Judgment before

or after its entry,

Now, Therefore, it is stipulated by and between plaintiff and

defendants, Chancellor and SFX, as follows:

(1) The Court has jurisdiction over the subject matter of this

action and over each of the parties hereto, and venue of this action is

proper in the United States District Court for the Eastern District of

New York.

(2) Plaintiff and defendants stipulate that a Final Judgment in the

form hereto attached may be filed and entered by the Court, upon the

motion of plaintiff or upon the Court's own motion, at any time after

compliance with the requirements of the Antitrust Procedures and

Penalties Act (15 U.S.C 16), and without further notice to any party or

other proceedings, provided that plaintiff has not withdrawn its

consent, which it may do at any time before the entry of the proposed

Final Judgment by serving notice thereof on defendant and by filing

that notice with the Court.

(3) Each defendant shall abide by and comply with the provisions of

the proposed Final Judgment pending entry of the Final Judgment by the

Court, or until expiration of time for all appeals of any Court ruling

declining entry of the proposed Final Judgment, and shall, from the

date of the signing of this Stipulation by plaintiff and defendants,

comply with all the terms and provisions of the proposed Final Judgment

as though the same were in full force and effect as an Order of the

Court.

(4) This Stipulation shall apply with equal force and effect to any

amended proposed Final Judgment agreed upon in writing by plaintiff and

defendants and submitted to the Court.

(5) In the event plaintiff withdraws its consent, as provided in

paragraph 2 above, or in the event the proposed Final Judgment is not

entered pursuant to this Stipulation, the time has expired for all

appeals of any Court ruling declining entry of the proposed Final

Judgment, and the Court has not otherwise ordered continued compliance

with the terms and provisions of the proposed Final Judgment, then

plaintiff and defendants are released from all further obligations

under this Stipulation, and the making of this Stipulation shall be

without prejudice to any party in this or any other proceeding.

(6) Each defendant represents that the obligations ordered in the

proposed Final Judgment can and will be fulfilled, and that defendants

will later raise no claim of hardship or difficulty as grounds for

asking the Court to modify any of the obligations contained therein.

Dated: March 30, 1998.

For Plaintiff United States of America:

Allee A. Ramadhan, Esq., (AR-0142).

Theresa H. Cooney, (TC-4933).

U.S. Department of Justice, Antitrust Division, Merger Task Force,

1401 H Street, NW., Suite 4000, Washington, D.C. 20530, (202) 307-0001.

For Defendant Chancellor Media Corporation:

Edward P. Henneberry, Esq.,

(EP-9043).

Howrey & Simon, 1299 Pennsylvania Avenue, NW., Washington, D.C. 20004,

(202) 783-0800.

For Defendant SFX Broadcasting, Inc.:

David A. Clanton,

(DC-2683).

Howard Adler, Jr.,

(HA-0425).

David J. Laing,

(DL-2400).

Baker & McKenzie, 815 Connecticut Avenue, NW., Washington, D.C. 20006,

(202) 452-7000

and

Michael Burrows,

(MB-2863).

Vincent A. Sama,

(VS-9027).

Baker & McKenzie, 805 Third Avenue, New York, New York 10022, (212)

751-5700.

SO ORDERED.

Dated, ________________, New York, 1998.

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United States District Judge

Certificate of Service

I hereby certify that, on March 31, 1998, I caused the foregoing

Stipulation and Order to be served by having a copy hand delivered to:

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

[[Page 17448]]

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

Corporation

and

Howard Adler, Jr., Baker & McKenzie, 815 Connecticut Avenue, N.W.,

Washington, D.C. 20006, Counsel for Defendant, SFX Broadcasting, Inc.

Seth E. Bloom.

United States District Court for the Eastern District of New York

Whereas, plaintiff, the United States of America, filed its

Complaint in this action on November 6, 1997, and plaintiff and

defendants, Chancellor Media Corporation (successor in interest to

Chancellor Media Company, Inc.) (``Chancellor'') and SFX Broadcasting,

Inc. (``SFX'') by their respective attorneys, having consented to the

entry of this Final Judgment without trial or adjudication of any issue

of fact or law herein, and without this Final Judgment constituting any

evidence against or an admission by any party with respect to any issue

of law or fact herein;

And Whereas, defendants have agreed to be bound by the provisions

of this Final Judgment pending its approval by the Court;

And Whereas, defendants have represented that the obligations

ordered in this Final Judgment can and will be fulfilled, and that

defendants will later raise no claim of hardship or difficulty as

grounds for asking the Court to modify any of the obligations contained

herein;

Now, Therefore, before the taking of any testimony, and without

trial or adjudication of any issue of fact or law herein, and upon

consent of the parties hereto, it is hereby Ordered, Adjudged, and

Decreed as follows:

I. Jurisdiction

This Court has jurisdiction over each of the parties hereto and

over the subject matter of this action. The Complaint states a claim

upon which relief may be granted against defendants, as hereinafter

defined, under Section 7 of the Clayton Act, as amended (15 U.S.C. 18)

and Section 1 of the Sherman Act, 15 U.S.C. 1.

II. Definitions

As used in this Final Judgment:

A. ``Chancellor'' means defendant Chancellor Media Corporation

(successor in interest to Chancellor Media Company, Inc.), a Delaware

corporation with its headquarters in Irving, Texas, and includes its

predecessors, successors and assigns, divisions, subsidiaries,

companies, groups, partnerships and joint ventures that Chancellor

controls, directly or indirectly, and their directors, officers,

managers, agents and representatives, and their respective successors

and assigns.

B. ``SFX'' means defendant SFX Broadcasting, Inc., a Delaware

corporation with its headquarters in New York, New York, and includes

its predecessors, successors and assigns, divisions, subsidiaries,

companies, groups, partnerships and joint ventures that SFX controls,

directly or indirectly, and their directors, officers, managers, agents

and representatives, and their respective successors and assigns.

C. ``SFX Long Island Assets'' means all of the assets, tangible or

intangible, used in the operations of the WBLI 106.1 FM radio station

in Patchogue, Long Island, New York, the WBAB 102.3 FM radio station in

Babylon, Long Island, New York, the WHFM 95.3 FM radio station in

Southampton, New York, and the WGBB 1240 AM radio station in Freeport,

New York including but not limited to: all real property (owned or

leased) used in the operation of these stations; all broadcast

equipment, personal property, inventory, office furniture, fixed assets

and fixtures, materials, supplies and other tangible property used in

the operations of these stations; all licenses, permits,

authorizations, and applications therefor issued by the Federal

Communications Commission (``FCC'') and other governmental agencies

related to these stations; all contracts, agreements, leases and

commitments of defendants pertaining to these stations and their

operation; all trademarks, service marks, trade names, copyrights,

patents, slogans, programming material and promotional materials

relating to these stations; and all logs and other records maintained

by defendants or these stations in connection with their business.

D. ``WALK Assets'' means all of the assets, tangible or intangible,

used in the operation of the WALK 97.5 FM and WALK 1370 AM radio

stations in Patchogue, New York, including but not limited to: all real

property (owned or leased) used in the operation of these stations; all

broadcast equipment, personal property, inventory, office furniture,

fixed assets and fixtures, materials, supplies and other tangible

property used in the operation of these stations; all licenses,

permits, authorizations, and applications therefor issued by the FCC

and other governmental agencies related to these stations; all

contracts, agreements, leases and commitments of defendant pertaining

to these station and their operation; all trademarks, service marks,

trade names, copyrights, patents, slogans, programming materials and

promotional materials relating to these stations; and all logs and

other records maintained by defendant Chancellor or these stations in

connection with their business.

E. ``Nassau-Suffolk Area'' means Nassau and Suffolk Counties, New

York.

F. ``Chancellor Radio Station'' means any radio station owned,

operated, or controlled by Chancellor and broadcasting from a

transmitter site located in the Nassau-Suffolk Area.

G. ``SFX Radio Station'' means any radio station owned, operated,

or controlled by SFX and broadcasting from a transmitter site located

in the Nassau-Suffolk Area.

H. ``Non-Chancellor Radio Station'' means any radio station

broadcasting from a transmitter site located in the Nassau-Suffolk Area

that is not a Chancellor Radio Station.

I. ``Non-SFX Radio Station'' means any radio station broadcasting

from a transmitter site located in the Nassau-Suffolk Area that is not

an SFX Radio Station.

J. ``LMA'' means the Local Marketing Agreement that Chancellor and

SFX entered into on or about July 1, 1996, as part of their July 1,

1996, asset exchange agreement whereby SFX agreed to exchange its four

Long Island-based radio stations for Chancellor's two Jacksonville,

Florida radio stations and an additional $11 million.

III. Applicability

A. The provisions of this Final Judgment apply to each of the

defendants, their successors and assigns, subsidiaries, affiliates,

companies, groups, partnerships, and joint venturers, their directors,

officers, managers, agents and employees, and all other persons in

active concert or participation with any of them who shall have

received actual notice of this Final Judgment by personal service or

otherwise.

B. Each defendant shall require, as a condition of the sale or

other disposition of all or substantially all of the assets used in its

businesses of owning and operating the WALK Assets (in the case of

Chancellor) of the SFX Long Island Assets (in the case of SFX), that

the acquiring party agrees to be bound, as a successor or assign, by

the provisions of this Final Judgment.

IV. Prohibition of Acquisition

Defendants shall not directly or indirectly consummate the

acquisition contract that is a subject of the complaint in this action.

Defendant Chancellor shall not acquire, directly or

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indirectly, the SFX Long Island Assets that encompasses WBLI-FM and

WBAB-FM (hereinafter the ``SFX Long Island WBAB/WBLI Assets'') or any

interest in the SFX Long Island WBAB/WBLI Assets. Defendant Chancellor

shall not sell or otherwise convey, directly or indirectly, the WALK

Assets or any interest in the WALK Assets to SFX or to any future owner

or operator of the SFX WBAB/WBLI Long Island Assets. Defendant SFX

shall not acquire, directly or indirectly, the WALK Assets or any

interest in the WALK Assets. Defendant SFX shall not sell or otherwise

convey, directly or indirectly, the SFX Long Island WBAB/WBLI Assets or

any interest in the SFX Long Island WBAB/WBLI Assets to Chancellor or

to any future owner or operator of the WALK Assets.

V. Termination of LMA

Defendants shall terminate the LMA as soon as possible, but no

later than August 1, 1998. Defendants shall not enter into any

agreement or understanding (including a Local Marketing Agreement or

similar agreement (such as a joint sales agreement (JSA))) that would

allow joint marketing or sale of advertising time or joint

establishment of advertising prices, with respect to the WALK Assets

and the SFX Long Island Assets.

VI. Preservation of Assets

Until the termination of the LMA, as required by Section V of this

Final Judgment, has been accomplished:

A. Defendant Chancellor shall take all steps necessary to operate

the SFX Long Island Assets as ongoing, economically viable radio

stations.

B. Defendant Chancellor shall use all reasonable efforts to

maintain and increase sales of advertising time by the SFX Long Island

Assets and shall maintain at 1997 or previously approved levels for

1998, whichever are higher, promotional advertising, sales, marketing

and merchandising support for the SFX Long Island Assets.

C. Defendant Chancellor shall take all steps necessary to ensure

that the assets used in the operation of the SFX Long Island Assets are

fully maintained. WBLI-FM, WBAB-FM, WHFM-FM, and WGBB-AM sales and

marketing employees shall not be transferred or reassigned to any other

station, except for transfer bids initiated by employees pursuant to

defendant's regular, established job posting policies, provided that

defendant Chancellor gives plaintiff ten (10) days' notice of any such

transfer.

D. Defendant Chancellor shall appoint a person or persons to be

responsible for defendant Chancellor's compliance with this Section VI.

VII. Affidavits

A. Within twenty (20) calendar days of the filing of this Final

Judgment, defendant Chancellor shall deliver to plaintiff an affidavit

which describes in reasonable detail all actions defendant Chancellor

has taken and all steps defendant Chancellor has implemented on an on-

going basis to preserve the SFX Long Island Assets, pursuant to Section

VI of this Final Judgment. Defendant Chancellor shall deliver to

plaintiff an affidavit describing any changes to the efforts and

actions outlined in its earlier affidavit(s) filed pursuant to this

Section VII within fifteen (15) calendar days after such change is

implemented.

B. Defendant Chancellor shall preserve all records of efforts made

to maintain or preserve the SFX Long Island Assets.

VIII. Notice

A. Unless such transaction is otherwise subject to the reporting

and waiting period requirements of the Hart-Scott-Rodino Antitrust

Improvements Act of 1976, as amended, 15 U.S.C. 18a (the ``HSR Act''),

defendants, without providing advance notification to the plaintiff,

shall not directly or indirectly acquire any assets of or any interest,

including any financial, security, loan, equity or management interest,

in any Non-Chancellor Radio Station (in the case of an acquisition by

Chancellor) or in any Non-SFX Radio Station (in the case of an

acquisition by SFX).

B. Defendants, without providing advance notification to the

plaintiff, shall not directly or indirectly enter into any agreement or

understanding (including a Local Marketing Agreement or similar

agreement (such as a joint sales agreement (JSA)) that would allow

either defendant to market or sell advertising time or to establish

advertising prices for any Non-Chancellor Radio Station (in the case of

Chancellor) or any Non-SFX Radio Station (in the case of SFX).

C. The notification obligations required by paragraphs (A) or (B)

of this Section VIII shall not apply to defendant Chancellor following

its sale of all of the WALK Assets to a third party that is in no way

affiliated with defendant Chancellor, provided that the provisions of

Section III have been complied with. The notification obligations

required by paragraphs (A) or (B) of this Section VIII shall not apply

to defendant SFX following its sale of the SFX Long Island Assets to a

third party that is in no way affiliated with SFX, provided that the

provisions of Section III have been complied with.

D. Notification described in (A) and (B) of this Section VIII shall

be provided to the United States Department of Justice (``the

Department'') in the same format as, and per the instructions relating

to the Notification and Report Form set forth in the Appendix to Part

803 of Title 16 of the Code of Federal Regulations as amended, except

that the information requested in Items 5-9 of the instructions must be

provided, in the case of Chancellor, only with respect to any

Chancellor Radio Station, and in the case of SFX, only with respect to

any SFX Radio Station. Notification shall be provided at least thirty

(30) days prior to acquiring any such interest covered in (A) or (B)

above, and shall include, beyond what may be required by the applicable

instructions, the names of the principal representatives of the parties

to the agreement who negotiated the agreement, and any management or

strategic plans discussing the proposed transaction. If within the 30-

day period after notification, representatives of the Department make a

written request for additional information, defendants shall not

consummate the proposed transaction or agreement until twenty (20) days

after submitting all such additional information. Early termination of

the waiting periods in this paragraph (C) may be requested and, where

appropriate, granted in the same manner as is applicable under the

requirements and provisions of the HSR Act and rules promulgated

thereunder.

E. This Section shall be broadly construed and any ambiguity or

uncertainty regarding the filing of notice under this Section shall be

resolved in favor of filing notice.

IX. Compliance Inspection

For the purpose of determining or securing compliance with this

Final Judgment and subject to any legally recognized privilege, from

time to time:

A. Duly authorized representatives of the United States Department

of Justice, including consultants and other persons retained by the

plaintiff, upon written request of the Attorney General, or of the

Assistant Attorney General in charge of the Antitrust Division, and on

reasonable notice to each defendant made to their principal offices,

shall be permitted:

(1) Access during office hours of each defendant to inspect and

copy all books, ledgers, accounts, correspondence, memoranda and other

records and documents in the possession or under the control of each

defendant, who may have counsel present, relating to the

[[Page 17450]]

matters contained in this Final Judgment; and

(2) Subject to the reasonable convenience of each defendant and

without restraint or interference from it, to interview, either

informally or on the record, directors, officers, employees and agents

of each defendant, who may have counsel present, regarding any such

matters.

B. Upon the written request of the Attorney General, or of the

Assistant Attorney General in charge of the Antitrust Division, made to

defendants' principal offices, each defendant shall submit such written

reports, under oath if requested, with respect to any of the matters

contained in this Final Judgment as may be requested.

C. No information or documents obtained by the means provided in

Section VII or this Section IX shall be divulged by any representative

of plaintiff to any person other than a duly authorized representative

of the Executive Branch of the United States, except in the course of

legal proceedings to which plaintiff is a party (including grand jury

proceedings), or for the purpose of securing compliance with this Final

Judgment, or as otherwise required by law.

D. If at the time information or documents are furnished by

defendants to plaintiff, and defendants represent and identify in

writing the material in any such information or documents to which a

claim of protection may be asserted under Rule 26(c)(7) of the Federal

Rules of Civil Procedure, and defendants marks each pertinent page of

such material, ``Subject to claim of protection under Rule 26(c)(7) of

the Federal Rules of Civil Procedure,'' then ten (10) calendar days

notice shall be given by plaintiff to defendants prior to divulging

such material in any legal proceeding (other than a grand jury

proceeding) to which defendants are not a party.

X. Retention of Jurisdiction

Jurisdiction is retained by this Court for the purpose of enabling

any of the parties to this Final Judgment to apply to this Court at any

time for such further orders and directions as may be necessary or

appropriate for the construction or carrying out of this Final

Judgment, for the modification of any of the provisions hereof, for the

enforcement of compliance herewith, and for the punishment of any

violations hereof.

XI. Termination

Unless this Court grants an extension, this Final Judgment will

expire upon the tenth anniversary of the date of its entry.

XII. Public Interest

Entry of this Final Judgment is in the public interest.

Dated: ________________.

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United States District Judge

Competitive Impact Statement

The United States, pursuant to Section 2(b) of the Antitrust

Procedures and Penalties Act (``APPA''), 15 U.S.C. 16(b)-(h), files

this Competitive Impact Statement relating to the proposed Final

Judgment submitted for entry in this civil antitrust proceeding.

I. Nature and Purpose of the Proceeding

The plaintiff filed a civil antitrust Complaint on November 6,

1997, alleging that Chancellor Media Corporation (successor in interest

to Chancellor Media Company, Inc.) (``Chancellor'') proposed

acquisition of four radio stations in Suffolk County, N.Y. owned by SFX

Broadcasting, Inc. (``SFX'') would violate Section 7 of the Clayton

Act, 15 U.S.C. 18 and Section 1 of the Sherman Act, 15 U.S.C. 1. The

Complaint alleges, among other things, that Chancellor and SFX are the

number one and number two radio companies on Long Island and that they

each own radio stations is Suffolk County, N.Y. The Complaint also

alleges that WALK-FM (Chancellor) and WBLI-FM/WBAB-FM (SFX) have been

locked in a daily battle against each other for radio advertising

revenues in Suffolk County, N.Y. The Complaint further alleges that the

proposed acquisition would substantially lessen competition in the sale

of radio advertising time in Suffolk County, N.Y. Specifically, the

Complaint alleges that the proposed acquisition would increase

Chancellor's share of the radio advertising market in Suffolk County,

N.Y. from 33 percent to over 65 percent, and would give to Chancellor

the ability to raise prices to many advertisers, and to reduce

promotional services to regional and local customers. Finally, the

Complaint alleges that meaningful entry into the market is blockaded

and entry would not undermine an anticompetitive price increase imposed

by the Chancellor/SFX radio stations.

The prayer for relief seeks: (a) Adjudication that Chancellor's

proposed acquisition of WBLI-FM and WBAB-FM from SFX would violate

Section 7 of the Clayton Act and Section 1 of the Sherman Act; (b)

permanent injunctive relief preventing the consummation of the proposed

acquisition; (c) a finding that the Local Marketing Agreement (LMA)

between Chancellor and SFX regarding SFX's Suffolk County radio

stations violates Section 1 of the Sherman Act and an Order terminating

the LMA \1\; (d) an award to the United States of the costs of this

action; and (e) such other relief as is proper.

---------------------------------------------------------------------------

\1\ The LMA is an agreement between Chancellor and SFX which

permits Chancellor to take operating control of the SFX stations

before taking ownership. Under the LMA Chancellor is permitted to

program the SFX stations and to sell advertising time on them.

---------------------------------------------------------------------------

The United States has reached a proposed settlement with Chancellor

and SFX which is memorialized in the proposed Final Judgment which has

been filed with the Court. Under the terms of the proposed Final

Judgment, defendants Chancellor and SFX will terminate the LMA as soon

as possible, but not later than August 1, 1998. Chancellor will thus

cease operating the four stations it sought to acquire from SFX in

Suffolk County--WBLI-FM, WBAB-FM, WGBB-AM, and WHFM-FM--by August 1,

1998 and the market will return to its pre-LMA structure.\2\ Also under

the terms of the agreement, Chancellor will not acquire the radio

stations at issue. Finally, defendants have agreed that they and their

successors will not convey the radio assets in any way that would allow

the entity controlling WALK-FM to control either WBLI-FM or WBAB-FM or

the entity controlling either WBLI-FM or WBAB-FM to control WALK-FM.\3\

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\2\ Although Chancellor sought to acquire four radio stations

from SFX--WBLI-FM, WBAB-FM, WHFM-FM and WGBB-AM--in the transaction

at issue in this case, the competitive concern arose from the

proposed acquisition of WBLI and WBAB.

\3\ The proposed final Judgment does not prevent Chancellor or

another party from owning WHFM-FM and WGBB-FM as well as WALK-FM. As

previously noted, the competitive concern of the proposed

transaction arose from Chancellor's proposed acquisition of WBLI and

WBAB.

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The plaintiff and the defendants have stipulated that the proposed

Final Judgment may be entered after compliance with the APPA and that

they can fulfill their obligations under the Final Judgment. Entry of

the proposed final Judgment would terminate this action, except that

the Court would retain jurisdiction to construe, modify, or enforce the

provisions of the proposed Final Judgment and to punish violations

thereof.

II. The Alleged Violation

A. The Defendants

Chancellor is a Delaware corporation headquartered in Irving,

Texas. At the time this action was commenced in November 1997, it was

the second largest owner of radio stations in the

[[Page 17451]]

United States and owned 95 radio stations in 21 major U.S. markets,

including in each of the 12 largest markets. Chancellor owns two radio

stations in Suffolk County, WALK-FM and WALK-AM. Chancellor's revenues

in 1996 from WALK-FM and WALK-AM was approximately $13.3 million.

Virtually all of Chancellors revenues on Long Island were generated by

WALK-FM.

SFX is a Delaware corporation headquartered in New York, N.Y. SFX

owns or operates 85 radio stations located in 23 markets in the United

States, including WBLI-FM, WBAB-FM, WHFM-FM, and WGBB-AM in Suffolk

County, New York (hereinafter, ``the SFX stations''). In 1996, SFX had

revenues of approximately $11 million from its Suffolk County-based

radio stations.

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

Prior to July 1, 1996, the Chancellor and SFX radio stations in

Suffolk County were vigorous and direct competitors for advertisers

seeking to reach potential customers in Suffolk County, New York.

Competition among these stations was an essential element in keeping

down radio advertising prices for Suffolk County advertisers. In fact,

WALK's Director of Sales wrote that WALK was ``[f]ighting WBLI['s] and

WBAB['s] low `firesale' rates.'' On or about July 1, 1996, Chancellor

and SFX entered into an asset exchange agreement whereby SFX agreed to

exchange its four Suffolk County-based radio stations--WBLI-FM, WBAB-

FM, WHFM-FM, and WGBB-AM--for Chancellor's two Jacksonville, Florida

radio stations and an additional $11 million. In addition, at

approximately the same time, the defendants entered into an LMA where

Chancellor took over control of programming and advertising sales at

the SFX stations in Suffolk County, N.Y. The result of the LMA was to

place in Chancellor's hands control over SFX's radio stations on Long

Island. The proposed acquisition would have made that control over

SFX's stations complete.

In evaluating the proposed acquisition, Chancellor wrote that

``WALK, WBLI and WBAB combined own about 63% of a market with 36

million in net revenues.'' Chancellor's chief financial officer told

the board of directors, the acquisition ``will make Chancellor the

dominant radio broadcaster'' on Long Island. Chancellor's marketing

executives wrote that the proposed acquisition ``will result in less

competitive undercutting'' and that ``[r]ates will increase as a result

of the removal of competitive pressures.'' Chancellor's Director of

Sales and Chancellor's General Sales Manager told the General Manager

heading Chancellor's Long Island operations that the proposed

accusation means ``The War is Won.''

C. Anticompetitive Consequences of the Proposed Merger

1. The Sale of Radio Advertising Time in Suffolk County, N.Y.

The Complaint alleges that the provision of advertising time on

radio stations serving Suffolk, N.Y. constitutes a line of commerce and

section of the country, or relevant market, for antitrust purposes. It

is important to note that radio stations by their music mix, attention

to local community news and events, and promotions seek to attract

listeners who they then sell advertisers access to by radio. Radio's

unique characteristics as an inexpensive drive-time and workplace news

and entertainment companion has given it a distinct and special place

in our lives. Retailers, in an effort to reach potential customers have

resorted to a mix of electronic and print media to deliver their

advertising message. In so doing, they have learned that certain

mediums are more cost-effective than others in meeting their

advertising goals. Radio advertising is such a medium.

When radio advertisers use radio as part of a ``media mix,'' they

often view the other advertising media (such as television or

newspapers) as a complement to, and not a substitute for, radio

advertising. Many advertisers who use radio as part of a multi-media

campaign do so because they believe that the radio component enhances

the effectiveness of their overall advertising campaign. They view

radio as giving them unique and cost-effective access to certain

audiences. They recognize that since radio is portable people can

listen to it anywhere especially in places and situations where other

media are not present, such as in the office and car. In addition, they

know that radio formats are designed to target listeners in specific

demographic groups. Defendants' documents clearly confirm these facts.

Their documents show that radio stations see other radio stations as

their principal competition. For example, one such document

acknowledged that ``pressure from other [radio] stations keep [sic] us

from selling new business at the rates we want to get.'' Another high

level management strategic document unearthed in the files of WBLI and

WBAB echoed the same sentiments by noting that ``WALK and WBZO are the

primary barriers to increasing rate[s].'' The quality and magnitude of

evidence such as this showing that radio stations constrain the price

of other radio stations in their efforts to charge higher prices to

advertising customers is powerful evidence supporting the allegation in

the Complaint that the sale of radio advertising time constitutes a

line of commerce for antitrust purposes.

2. Harm to Competition

The Complaint alleges that Chancellor's acquisition of SFX's Long

Island stations would join under single ownership the principal

stations serving Suffolk County, New York and give to Chancellor the

ability to raise radio advertising prices to its customers. Local and

national advertising placed on radio stations within Suffolk County,

N.Y. are aimed at reaching listening audiences in Suffolk County, and

radio stations located outside of Suffolk County do not provide cost-

effective access to this audience. Thus, if Chancellor were to impose a

small but significant non-transitory increase in radio advertising

prices on the radio stations it owns or controls in Suffolk County,

radio stations located outside of Suffolk County would not be able to

defeat it. In fact, defendants in marketing their radio stations to

Suffolk County radio advertisers emphasized the fact that New York City

radio stations do not provide cost-effective access to Suffolk County

customers. Defendants characterized New York City radio stations'

ability to reach the tri-state metropolitan area as ``waste'' to those

Suffolk County advertisers not seeking to attract customers from New

York City, New Jersey, or Connecticut to their local Suffolk County

establishments.

Defendants' documents further disclosed that when Chancellor's and

SFX's radio stations on Long Island operated independently, advertisers

obtained lower prices by ``playing off'' Chancellor's WALK-FM against

SFX's WBLI-FM and WBAB-FM. Advertisers used the threat to move their

business between the Chancellor and the SFX stations to get more

favorable prices and services at each. That documentary evidence is

corroborated by the testimony of local and regional advertisers who

testified how they feared the joining of WALK with WBLI and WBAB would

mean that Chancellor could raise prices to them. In short, advertisers

in Suffolk County paid less for radio advertising as a result of price

competition between the Chancellor and SFX radio stations. The proposed

acquisition would have ended that price

[[Page 17452]]

competition harming consumers on Long Island.

a. Advertisers Could Not Turn to Other Suffolk County Radio Stations to

Prevent Chancellor From Imposing an Anticompetitive Price Increase

Barnstable is the only company other than Chancellor and SFX that

generates more than five percent of the total radio revenues spent by

advertisers on Long Island-based radio stations that offer coverage of

Suffolk County (``Suffolk County stations''). Barnstable owns WBZO-FM,

the only other Suffolk County station that generates ratings and

advertising revenues comparable to the Chancellor and SFX stations.

Barnstable is not able to offer, individually or in combination with

any non-Chancellor owned or operated stations, enough listeners in the

Chancellor/SFX-dominated market to provide a non-Chancellor alternative

for many advertisers who want access to Suffolk County radio listeners.

Moreover, if Chancellor were to impose a non-competitive price increase

on its Chancellor/SFX radio stations, Barnstable would not be able to

present itself as a credible alternative to those advertisers seeking

to escape the price increase on the Chancellor/SFX radio stations. That

is so, because an increase in demand for WBZO as a result of radio

advertisers trying to flee a price increase on the Chancellor/SFX

stations could undermine the attractiveness of WBZO to listeners who

would have to contend with a larger number of advertising commercials

and less music and news on WBZO. Recognizing that fact, WBZO would

likely increase its price to dampen the demand on its station in order

to maintain its attractiveness to listeners. Thus, a price increase on

the Chancellor/SFX stations would likely provide an opportunity for

Barnstable to increase its prices as well.

To the degree there are a number of other radio broadcasters on

Long Island, individually or in combination they are less able than

Barnstable to offer an alternative for those advertisers--especially

local and regional advertisers--who would have to deal with Chancellor

to gain access to Suffolk County radio listeners after the proposed

acquisition.

b. The Effect of the Acquisition Would Be Substantially To Lessen

Competition in the Relevant Market

As previously noted, Defendants' documents tell a compelling story

of how the proposed acquisition would enable Chancellor to increase

rates by stifling the ``competitive undercutting'' that went on among

the Chancellor/SFX stations. The dominant market share Chancellor would

have attained from the proposed acquisition would have the following

effects, among others:

a. Competition in the sale of radio advertising time for

coverage of Suffolk County would be substantially lessened;

b. Actual and potential competition between Chancellor and SFX

radio stations in the sale of advertising time--especially to

regional and local advertisers--would be eliminated;

c. Chancellor's share of the relevant market would have

increased from 33 percent to over 65 percent, whether measured by

radio advertising revenues or by listenership. Using a measure of

market concentration called the Herfindahl-Hirschman Index

(``HHI''), explained in Appendix A, the acquisition would yield a

post-merger HHI of at least 4975, representing an increase of 2085;

and

d. Prices for radio advertising for coverage of Suffolk County

would likely increase, and the quality of promotional services would

likely decline--especially to regional and local customers.

The proposed Final Judgment will remedy the competitive concerns

raised by the proposed acquisition.

III. Explanation of the Proposed Final Judgment

The proposed Final Judgment would preserve competition in the sale

of radio advertising time in Suffolk County, N.Y. It requires

Chancellor and SFX to terminate their LMA as soon as possible, but no

later than August 1, 1998. In addition, the proposed Final Judgment

provides that neither defendant, nor their successors, can own or

control at the same time WALK-FM and either WBLI-FM or WBAB-FM. This

relief will terminate the LMA and return the market pre-LMA structure.

If Chancellor had acquired the stations, it would have controlled about

65% of the Suffolk County radio market. Under the proposed Final

Judgment, Chancellor will return to it pre-LMA market shares of

approximately 35% while another party or parties will control the

approximately 30% of the market that WBLI-FM and WBAB-FM possess. The

proposed Final Judgment will preserve choices for advertisers. In

addition, the proposed Final Judgment will help insure that WALK's,

WBLI's and WBAB's radio advertising rates will be subject to the

``playing off'' by advertisers that they were subject to prior to the

LMA.

In addition to requiring the defendants to terminate the LMA and

prohibiting them from consummating the transaction, the proposed Final

Judgment requires Chancellor to preserve the assets of the SFX stations

until termination of the LMA. Specifically, the proposed Final Judgment

requires that Chancellor maintain the stations as viable entities,

including the obligation that Chancellor work to increase the sale of

advertising and maintain promotional and marketing levels for the SFX

stations. The proposed Final Judgment also contains provisions to

ensure that Chancellor will not divert resources from the SFX stations

to its own radio stations during the course of the LMA. To determine

and secure compliance with the proposed Final Judgment, the United

States has the authority to monitor and review the activities of the

stations. Nothing in this proposed Final Judgment is intended to limit

the plaintiff's ability to investigate or bring actions, where

appropriate, challenging other past or future activities of defendants

in Suffolk County or any other markets, including their entry into an

LMA or any other agreements related to the sale of advertising time.

IV. Remedies Available to Potential Private Litigants

Section 4 of the Clayton Act, 15 U.S.C. 15, provides that any

person who has been injured as a result of conduct prohibited by the

antitrust laws may bring suit in federal court to recover three times

the damages the person has suffered, as well as costs and reasonable

attorneys' fees. Entry of the proposed Final Judgment will neither

impair nor assist the bringing of any private antitrust damage action.

Under the provisions of Section 5(a) of the Clayton Act, 15 U.S.C.

16(a), the proposed Final Judgment has no prima facie effect in any

subsequent private lawsuit that may be brought against defendants.

V. Procedures Available for Modification of the Proposed Final

Judgment

The plaintiff and the defendants have stipulated that the proposed

Final Judgment may be entered by the Court after compliance with the

provisions of the APPA, provided that the United States has not

withdrawn its consent. The APPA conditions entry upon the Court's

determination that the proposed Final Judgment is in the public

interest.

The APPA provides a period of at least sixty (60) days preceding

the effective date of the proposed Final Judgment within which any

person may submit to the United States written comments regarding the

proposed Final Judgment. Any person who wishes to comment should do so

within sixty (60) days of the date of publication of this Competitive

Impact Statement in the Federal Register. The United States will

evaluate and respond to the comments.

[[Page 17453]]

All comments will be given due consideration by the Department of

Justice, which remains free to withdraw its consent to the proposed

Final Judgment at any time prior to its entry. The comments and the

response of the United States will be filed with the Court and

published in the Federal Register.

Any such written comments should be submitted to: Craig W. Conrath,

Chief, Merger Task Force, Antitrust Division, United States Department

of Justice, 1401 H Street, N.W., Suite 4000, Washington, D.C. 20530.

The proposed Final Judgment provides that the Court retains

jurisdiction over this action, and the parties may apply to the Court

for any order necessary or appropriate for the modification,

interpretation, or enforcement of the Final Judgment.

VI. Alternatives to the Proposed Final Judgment

The plaintiff considered, as an alternative to the proposed Final

Judgment, a full trial on the merits of its complaint against

defendants. The plaintiff is satisfied, however, that the termination

abandonment of the proposed and other relief contained in the proposed

Final Judgment will preserve viable competition in the sale of radio

advertising time in the Suffolk County, N.Y. area. Thus, the proposed

Final Judgment would achieve the relief of the Government would have

obtained through litigation, but avoids the time, expense and

uncertainty of a full trial on the merits of the complaint.

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

The APPA requires that proposed consent judgments in antitrust

cases brought by the United States be subject to a sixty (60) day

comment period, after which the court shall determine whether entry of

the proposed Final Judgment ``is in the public interest.'' In making

that determination, the court may consider--

(1) The competitive impact of such judgment, including

termination of alleged violations, provisions for enforcement and

modification, duration or relief sought, anticipated effects of

alternative remedies actually considered, and any other

considerations bearing upon the adequacy of such judgment;

(2) the impact of entry of such judgment upon the public

generally and individuals alleging specific injury from the

violations set forth in the complaint including consideration of the

public benefit, if any, to be derived from a determination of the

issues at trial.

15 U.S.C. 16(e). As the United States Court of Appeals for the D.C.

Circuit recently held, this statute permits a court to consider, among

other things, the relationship between the remedy secured and the

specific allegations set forth in the government's complaint, whether

the decree is sufficiently clear, whether enforcement mechanisms are

sufficient, and whether the decree may positively harm third parties.

See United States versus Microsoft, 56 F.3d 1448, 1461-62 (D.C. Cir.

1995).

In conducting this inquiry, ``[t]he Court is nowhere compelled to

go to trial or to engage in extended proceedings which might have the

effect of vitiating the benefits of prompt and less costly settlement

through the consent decree process.'' \4\ Rather,

---------------------------------------------------------------------------

\4\ 119 Cong. Rec. 24598 (1973). See United States v. Gillette

Co., 406 F. Supp. 713, 715 (D. Mass. 1975). A ``public interest''

determination can be made properly on the basis of the Competitive

Impact Statement and Response to Comments filed pursuant to the

APPA. Although the APPA authorizes the use of additional procedures,

15 U.S.C. 16(f), those procedures are discretionary. A court need

not invoke any of them unless it believes that the comments have

raised significant issues and that further proceedings would aid the

court in resolving those issues. See H.R. Rep. 93-1463, 93rd Cong.

2d Sess. 8-9 (1974), reprinted in U.S.C.C.A.N. 6535, 6538.

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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.), cert. denied, 454 U.S. 1083

(1981); see also Microsoft, 56 F. 3d at 1460-62. Precedent requires

that

the balancing of competing social and political interests affected

by a proposed antitrust consent decree must be left, in the first

instance, to the discretion of the Attorney General. The court's

role in protecting the public interest is one of insuring that the

government has not breached its duty to the public in consenting to

the decree. The court is required to determine not whether a

particular decree is the one that will best serve society, but

whether the settlement is ``within the reaches of the public

interest.'' More elaborate requirements might undermine the

effectiveness of antitrust enforcement by consent decree.\5\

---------------------------------------------------------------------------

\5\ Bechtel, 648 F. 2d at 666 (citations omitted) (emphasis

added); see BNS, 858 F. 2d at 463; United States v. National Broad.

Co., 449 F. Supp. 1127, 1143 (C.D. Cal. 1978); Gillette, 406 F.

Supp. at 716. See also Microsoft, 56 F. 3d at 1461 (whether ``the

remedies [obtained in the decree are] so inconsonant with the

allegations charged as to fall outside of the `reaches of the public

interest' '') (citations omitted).

The proposed Final Judgment, therefore, should not be reviewed under a

standard of whether it is certain to eliminate every anticompetitive

effect of a particular practice or whether it mandates certainty of

free competition in the future. Court approval of a final judgment

requires a standard more flexible and less strict than the standard

required for a finding of liability. ``[A] proposed decree must be

approved even if it falls short of the remedy the court would impose on

its own, as long as it falls within the range of acceptability or is

`within the reaches of public interest.' '' \6\

---------------------------------------------------------------------------

\6\ United States v. American Tel. and Tel. Co., 552 F. Supp.

131, 151 (D.D.C. 1982), aff'd. sub nom. Maryland v. United States,

460 U.S. 1001 (1983) (quoting Gillette Co., 406. F. Supp. at 716

(citations omitted)); United States v. Alcan Aluminum, Ltd., 605 F.

Supp. 619, 622 (W.D. Ky. 1985).

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In this case, the proposed Final Judgment reflects the Defendants

desire to abandon the proposed acquisition and end the LMA. Moreover,

it insures that the present and any future owner of WALK-FM may not own

either WBLI-FM or WBAB-FM. In sum, the Final Judgment represents every

objective the government sought through bringing its action.

VIII. Determinative Documents

There are no determinative materials or documents within the

meaning of the APPA that were considered by the United States in

formulating the proposed Final Judgment.

Respectfully submitted,

Allee A. Ramadhan,

(AR 0142).

Seth E. Bloom,

(SB 3709).

Theresa H. Cooney,

(TC 4933).

Merger Task Force, U.S. Department of Justice, Antitrust Division, 1401

H Street, N.W., Suite 4000, Washington, D.C. 20530, (202) 307-0001.

Dated: March 30, 1998.

Appendix A--Herfindahl-Hirschman Index Calculations

``HHI'' means the Herfindahl-Hirschman Index, a commonly accepted

measure of market concentration. It is calculated by squaring the

market share of each firm competing in the market and then summing the

resulting numbers. For example, for a market consisting of four firms

with shares of

[[Page 17454]]

thirty, thirty, twenty, and twenty percent, the HHI is 2600

(302+302+202+202=2600). The

HHI takes into account the relative size and distribution of the firms

in a market and approaches zero when a market consists of a large

number of firms of relatively equal size. The HHI increases both as the

number of firms in the market decreases and as the disparity in size

between those firms increases.

Markets in which the HHI is between 1000 and 1800 points are

considered to be moderately concentrated, and those in which the HHI is

in excess of 1800 points are considered to be concentrated.

Transactions that increase the HHI by more than 100 points in

concentrated markets presumptively raise antitrust concerns under the

Horizontal Merger Guidelines issued by the U.S. Department of Justice

and the Federal Trade Commission. See Merger Guidelines Sec. 1.51.

Certificate of Service

I hereby certify that, on this 30th day of March 1998, I caused to

be served via hand delivery a copy of the foregoing Competitive Impact

Statement upon the following:

Edward P. Henneberry, Esq., Roxann E. Henry, Esq., Howrey & Simon, 1299

Pennsylvania Avenue, N.W., Washington, D.C. 20004.

Howard Adler, Jr., Esq., David J. Laing, Esq., Baker & McKenzie, 815

Connecticut Avenue, N.W., Washington, D.C. 20006.

Seth E. Bloom.

[FR Doc. 98-9373 Filed 4-8-98; 8:45 am]

BILLING CODE 4410-11-M