United States of America v. Hicks, Muse, Tate & Furst Incorporated and Capstar Broadcasting Partners, Inc. and SFX Broadcasting, Inc.; Proposed Final Judgment and Competitive Impact Statement

DEPARTMENT OF JUSTICE

Antitrust Division

United States of America v. Hicks, Muse, Tate & Furst

Incorporated and Capstar Broadcasting Partners, Inc. and SFX

Broadcasting, Inc.; Proposed Final Judgment and Competitive Impact

Statement

Notice is hereby given pursuant to the Antitrust Procedures and

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

Stipulation and Order, and Competitive Impact Statement have been filed

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

York in United States v. Hicks, Muse, Tate & Furst Incorporated and

Capstar Broadcasting Partners, Inc. and SFX Broadcasting, Inc. Civil

Action No. 98-2422. The proposed Final Judgment is subject to approval

by the Court after the expiration of the statutory 60-day public

comment period and compliance with the Antitrust Procedures and

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

Plaintiff filed a civil antitrust Complaint on March 31, 1998,

alleging that the proposed acquisition of SFX Broadcasting, Inc.

(``SFX'') by Capstar Broadcasting Partners, Inc. (``Capstar'') would

violate Section 7 of the Clayton Act, 15 U.S.C. 18. The Complaint

alleges that Capstar or its related entity Chancellor Media

Corporation, (``Chancellor''), and SFX own and operate numerous radio

stations throughout the United States, and the proposed transaction

would give defendants or Chancellor a significant share of the radio

advertising market in Greenville, SC, Houston, TX, Jackson, MS,

Pittsburgh, PA and Suffolk County, NY. As a result, the combination of

these radio stations would lessen competition substantially in the sale

of radio advertising time in the Greenville, Houston, Jackson,

Pittsburgh and Suffolk areas.

The prayer for relief seeks: (a) An adjudication that Capstar's

proposed acquisition described in the complaint would violate Section 7

of the Clayton Act; (b) preliminary and permanent injunctive relief

preventing the consummation of the proposed transaction; (c) an award

to the United States of the costs of this action; and (d) such other

relief as is proper.

Shortly before this suit was filed, a proposed settlement was

reached that permits Capstar to complete its transactions with SFX, yet

preserves competition in the markets in which the transactions would

raise significant competitive concerns. A Stipulation and Order and a

proposed Final Judgment embodying the settlement were filed at the same

time the Complaint was filed.

Unless the plaintiff grants a time extension, the proposed Final

Judgment orders Capstar to divest either within six months after the

filing of the complaint or within five (5) business days after notice

of entry of the Final Judgment, whichever is later, radio stations

WESC-FM, WESC-AM, WJMZ-FM, WTPT-FM in Greenville, SC, KKPN-FM in

Houston, TX, WJDX-FM in Jackson, MS and WTAE-AM in Pittsburgh, PA. The

proposed Final Judgment also orders Capstar to divest either within

three months after the filing of the Complaint or within five (5)

business days after notice of entry of the Final Judgment, whichever is

later, radio stations WBLI-FM, WBAB-FM, WGBB-AM and WHFM-FM in Suffolk,

NY. If Capstar does not divest the stations described above within the

divestiture period, the Court shall, upon plaintiff's application,

appoint a trustee to sell the assets. The proposed Final Judgment also

requires Capstar to ensure that, until the divestiture mandated by the

Final Judgment has been accomplished, WESC-FM, WESC-AM, WJMZ-FM, WTPT-

FM, KKPN-FM, WJDX-FM, WTAE-AM, WBLI-FM, WBAB-FM, WGBB-AM and WHFM-FM

will be operated independently as a viable, ongoing business, and kept

separate and apart from defendants' other radio stations located in

those areas. Further, the proposed Final Judgment requires defendants

to give plaintiff prior notice regarding future radio station

acquisitions or certain agreements pertaining to the sale of radio

advertising time in the Greenville-Spartanburg, SC, Houston, TX,

Jackson, MS, Pittsburgh, PA and Suffolk County, NY areas.

A Competitive Impact Statement filed by the United States describes

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

private litigants.

Public comment is invited within the statutory 60-day comment

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

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

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

Division, 1401 H Street,

[[Page 18215]]

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

Copies of the Complaint, Stipulation and Order, proposed Final Judgment

and Competitive Impact Statement are available for inspection in Room

215 of the U.S. Department of Justice, Antitrust Division, 325 7th

Street, N.W., Washington, D.C. 20530 (telephone: (202) 514-2481) and at

the office of the Clerk of the United States District Court for the

Eastern District of New York, United States Courthouse, 2 Uniondale

Avenue, Uniondale, New York 11553.

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

payment of a copying fee.

Constance K. Robinson,

Director of Operations & Merger Enforcement, Antitrust Division.

United States District Court for the Eastern District of New York

United States of America, Plaintiff, v. Hicks, Muse, Tate &

Furst Incorporated, and Capstar Broadcasting Partners, Inc., and SFX

Broadcasting, Inc., Defendants. Hon. J. Seybert/M. Orenstein. Civil

Action No. CV 98 2422.

Stipulation and Order

It is stipulated by and between the undersigned parties, by their

respective attorneys, as follows:

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

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

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

New York.

(2) The parties stipulate that a Final Judgment in the form hereto

attached may be filed and entered by the Court, upon the motion of any

party or upon the Court's own motion, at any time after compliance with

the requirements of the Antitrust Procedures and Penalties Act (15

U.S.C. Sec. 16), and without further notice to any party or other

proceedings, provided that plaintiff has not withdrawn its consent,

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

Judgment by serving notice thereof on defendants and by filing that

notice with the Court.

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

proposed Final Judgment pending entry of the Final Judgment by the

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

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

date of the signing of this Stipulation by the parties, comply with all

the terms and provisions of the proposed Final Judgment as though the

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

(4) Defendant Capstar agrees that the transactions contemplated by

Letter Agreement dated February 20, 1998, between Chancellor and

Capstar, when consummated, will require Capstar to obtain from

Chancellor a commitment to be bound to the provisions of the Final

Judgment pursuant to Section III(B).

(5) The parties recognize that there could be a delay in obtaining

approval by or a ruling of a government agency related to the

divestitures required by Section IV of the Final Judgment,

notwithstanding the good faith efforts of the defendants and any

prospective Acquirer, as defined in the Final Judgment. In this

circumstance, plaintiff will, in the exercise of its sole discretion,

acting in good faith, give special consideration to forebearing from

applying for the appointment of a trustee pursuant to Section V of the

Final Judgment, or from pursuing legal remedies available to it as a

result of such delay, provided that: (i) Defendants have entered into

one or more definitive agreements to divest the Greenville Assets, the

Houston Assets, the Jackson Assets, the Pittsburgh Assets, and the SFX

Long Island Assets, as defined in the Final Judgment, and such

agreements and the Acquirer or Acquirers have been approved by

plaintiff; (ii) All papers necessary to secure any governmental

approvals and/or rulings to effectuate such divestitures (including but

not limited to FCC, SEC and IRS approvals or rulings) have been filed

with the appropriate agency; (iii) Receipt of such approvals are the

only closing conditions that have not been satisfied or waived; and

(iv) Defendants have demonstrated that neither they nor the prospective

Acquirer or Acquirers are responsible for any such delay.

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

amended proposed Final Judgment agreed upon in writing by the parties

and submitted to the Court.

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

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

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

appeals of any Court ruling declining entry of the proposed Final

Judgment, and the Court has not otherwise ordered continued compliance

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

parties are released from all further obligations under this

Stipulation, and the making of this Stipulation shall be without

prejudice to any party in this or any other proceeding.

(8) Defendants represent that the divestitures ordered in the

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

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

the Court to modify any of the divestiture provisions contained

therein.

Dated: March 31, 1998.

For Plaintiff United States of America

Asuncion Cummings (AC-1850),

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

H Street, N.W., Suite 4000, Washington, D.C. 20005.

For Defendants Capstar Broadcasting Partners, Inc., and Hicks, Muse,

Tate & Furst, Incorporated

Neil Imus (NI-3536),

Vinson & Elkins, L.L.P., 1455 Pennsylvania Avenue, N.W., Washington,

D.C. 20004.

For Defendant SFX Broadcasting, Inc.

David A. Clanton (DC-2683),

Baker & McKenzie, 815 Connecticut Avenue, N.W., Washington, D.C. 20006-

4078.

SO ORDERED

Dated, ____________________, New York, 1998.

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

United States District Judge

Certificate of Service

I hereby certify that, on this 31st day of March, 1998, I caused to

be served by hand delivery a copy of the foregoing proposed Final

Judgment and Stipulation and Order upon the following:

David A. Clanton, Baker & McKenzie, 815 Connecticut Avenue, N.W.,

Washington, D.C. 20006-4078

Neil Imus, Vinson & Elkins, 1455 Pennsylvania Avenue, N.W., Washington,

D.C. 20004

Asuncion Cummings

United States District Court for the Eastern District of New York

United States of America, Plaintiff v. Hicks, Muse, Tate & Furst

Incorporated, and Capstar Broadcasting Partners, Inc., and SFX

Broadcasting, Inc., Defendants. Hon. J. Seybert/M. Orenstein. Civil

Action No. CV 98 2422.

Final Judgment

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

Complaint in this action on March 31, 1998, and plaintiff and

defendants by their respective attorneys, having consented to the entry

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

fact or law herein, and without the Final Judgment constituting any

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

of law or fact herein;

AND WHEREAS, defendants have agreed to be bound by the provisions

of this Final Judgment pending its approval by the Court;

[[Page 18216]]

AND WHEREAS, the purpose of this Final Judgment is prompt and

certain divestiture of certain assets to assure that competition is not

substantially lessened;

And whereas, plaintiff requires defendants to make certain

divestitures for the purpose of remedying the loss of competition

alleged in the Complaint;

And whereas, defendants have represented to plaintiff that the

divestitures ordered herein can and will be made and that defendants

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

asking the Court to modify any of the divestiture provisions contained

below;

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

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

consent of the parties hereto, it is hereby ordered, adjudged, and

decreed as follows:

I. Jurisdiction

This Court has jurisdiction over each of the parties hereto and

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

upon which relief may be granted against defendants Hicks, Muse, Tate &

Furst Incorporated (Hicks Muse), Capstar Broadcasting Partners, Inc.

(Capstar), and SFX Broadcasting, Inc. (SFX), as hereinafter defined,

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

II. Definitions

As used in this Final Judgment:

A. ``Capstar'' means defendant Capstar Broadcasting Partners, Inc.,

a Delaware corporation with its headquarters in Austin, Texas, and

includes its predecessors, successors and assigns, divisions,

subsidiaries, companies, groups, partnerships and joint ventures that

Capstar controls, directly or indirectly, and their directors,

officers, managers, agents and representatives, and their respective

successors and assigns.

B. ``Chancellor'' means Chancellor Media Corporation (successor in

interest to Chancellor Media Company, Inc.), a Delaware corporation

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

successors and assigns, divisions, subsidiaries, companies, groups,

partnerships and joint ventures that Chancellor controls, directly or

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

representatives, and their respective successors and assigns.

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

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

its predecessors, successors and assigns, divisions, subsidiaries,

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

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

and representatives, and their respective successors and assigns.

D. ``Hicks Muse'' means Hicks, Muse, Tate & Furst Incorporated, an

investment firm headquartered in Dallas, Texas, its domestic and

foreign parents, predecessors, divisions, subsidiaries, partnerships

and joint ventures that Hicks Muse controls, directly or indirectly,

and all directors, officers, employees, agents and representatives of

the foregoing.

E. ``Greenville Assets'' means all of the assets, tangible or

intangible, used respectively in the operation of the WESC 92.5 FM

radio station in Greenville, South Carolina; the WESC 660 AM radio

station in Greenville, South Carolina; the WJMZ 107.3 FM radio station

in Anderson, South Carolina; and the WTPT 93.3 FM radio station in

Forest City, North Carolina; including but not limited to: all real

property (owned or leased) used in the operation of each station; all

broadcast equipment, personal property, inventory, office furniture,

fixed assets and fixtures, materials, supplies and other tangible

property or improvements used in the operation of each station; all

licenses, permits and authorizations and applications therefor issued

by the Federal Communications Commission (``FCC'') and other

governmental agencies relating to that station; all contracts,

agreements, leases and commitments of defendants pertaining to that

station and its operations; all trademarks, service marks, trade names,

copyrights, patents, slogans, programming materials and promotional

materials relating to that station; and all logs and other records

maintained by defendants or that station in connection with its

business.

F. ``Houston Assets'' means all of the assets, tangible or

intangible, used in the operation of the KKPN 102.9 FM radio station in

Houston, Texas, including but not limited to: all real property (owned

or leased) used in the operation of that station; all broadcast

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

and fixtures, materials, supplies and other tangible property or

improvements used in the operation of that station; all licenses,

permits and authorizations and applications therefor issued by the FCC

and other governmental agencies relating to that station; all

contracts, agreements, leases and commitments of defendants pertaining

to that station and its operations; all trademarks, service marks,

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

promotional materials relating to that station; and all logs and other

records maintained by defendants or that station in connection with its

business.

G. ``Jackson Assets'' means all of the assets, tangible or

intangible, used in the operation of the WJDX 96.3 FM radio station in

Jackson, Mississippi, including but not limited to: All real property

(owned or leased) used in the operation of that station; all broadcast

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

and fixtures, materials, supplies and other tangible property or

improvements used in the operation of that station; all licenses,

permits and authorizations and applications therefor issued by the FCC

and other governmental agencies relating to that station; all

contracts, agreements, leases and commitments of defendants pertaining

to that station and its operations; all trademarks, service marks,

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

promotional materials relating to that station; and all logs and other

records maintained by defendants or that station in connection with its

business.

H. ``Pittsburgh Assets'' means all of the assets, tangible or

intangible, used in the operation of the WTAE 1250 AM radio station in

Pittsburgh, Pennsylvania, including but not limited to: All real

property (owned or leased) used in the operation of that station; all

broadcast equipment, personal property, inventory, office furniture,

fixed assets and fixtures, materials, supplies and other tangible

property or improvements used in the operation of that station; all

licenses, permits and authorizations and applications therefor issued

by the FCC and other governmental agencies relating to that station;

all contracts, agreements, leases and commitments of defendants

pertaining to that station and its operations; all trademarks, service

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

and promotional materials relating to that station; and all logs and

other records maintained by defendants or that station in connection

with its business.

I. ``The SFX Long Island Assets'' means all of the assets, tangible

or intangible, used in the operation of the SBLI 106.1 FM radio station

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

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

Southampton, Long Island, New York; and the WGBB 1240 AM radio station

in Freeport, New York; including but not limited to: all real property

(owned or leased) used in the operation of each station; all broadcast

equipment,

[[Page 18217]]

personal property, inventory, office furniture, fixed assets and

fixtures, materials, supplies and other tangible property or

improvements used in the operation of each station; all licenses,

permits, authorizations, and applications therefor issued by the FCC

and other governmental agencies related to each station; all contracts,

agreements, leases and commitments of defendants pertaining to each

station and its operations; all trademarks, service marks, trade names,

copyrights, patents, slogans, programming materials and promotional

materials relating to each station; and all logs and other records

maintained by defendants or each station in connection with its

business.

J. ``Greenville Area'' means the Greenville-Spartanburg, South

Carolina area, as identified by the Spring 1997 Arbitron Radio Market

Report for Greenville-Spartanburg.

K. ``Houston Area'' means the Houston, Texas area, as identified by

the Spring 1997 Arbitron Radio Market Report for Houston, Texas.

L. ``Jackson Area'' means the Jackson, Mississippi area, as

identified by the Spring 1997 Arbitron Radio Market Report for Jackson,

Mississippi.

M. ``Pittsburgh Area'' means the Pittsburgh, Pennsylvania area, as

identified by the Spring 1997 Arbitron Radio Market Report for

Pittsburgh, Pennsylvania.

N. ``Suffolk Area'' means the Nassau-Suffolk area, as identified by

the Spring 1997 Arbitron Radio Market Report for Nassau and Suffolk

Counties in New York.

O. ``Hicks Muse Radio Station'' means any radio station owned,

operated, or controlled by Chancellor, Capstar, SFX or Hicks Muse and

licensed to a community in the Greenville, Houston, Jackson or

Pittsburgh areas, or broadcasting from a transmitter site located in

Nassau-Suffolk Area.

P. ``Non-Hicks Muse Radio Station'' means any radio station that is

licensed to a community in the Greenville, Houston, Jackson or

Pittsburgh Areas, or broadcasting from a transmitter site located in

the Nassau-Suffolk Area, and is not a Hicks Muse Radio Station.

Q. ``Acquirer'' means the entity or entities to whom defendants

divest the Greenville Assets, the Houston Assets, the Jackson Assets,

the Pittsburgh Assets, or the SFX Long Island Assets under this Final

Judgment.

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

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

1996 asset exchange agreement whereby SFX agreed to exchange its four

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

Florida radio stations and an additional $11 million.

III. Applicability

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

defendants, their successors and assigns, subsidiaries, their

directors, officers, managers, agents and employees, and all other

persons in active concert or participation with any of them who shall

have received actual notice of this Final Judgment by personal service

or otherwise.

B. Defendants shall require, as a condition of the sale or other

disposition of all or substantially all of the assets used in their

business of owning and operating radio stations in the Greenville area,

the Houston area, the Jackson area, the Pittsburgh area or the Nassau-

Suffolk area, that the respective acquiring party of parties agree to

be bound, as a successor or assign, by the provisions of this Final

Judgment, provided, however, that defendants need not obtain such an

agreement from an Acquirer.

C. The term ``sale or other disposition'' used in paragraph (B) of

this Section shall include in whole or in part, without limitation, any

agreement (such as Local Marketing Agreement or Joint Sales Agreement)

pursuant to which another entity has the right to operate, program or

sell advertising time on a radio station in the relevant Area.

IV. Divestitures

A. Hicks Muse and Capstar are hereby ordered and directed, in

accordance with the terms of this Final Judgment, within six (6) months

after the filing of the complaint in this action, or within five (5)

business days after notice of entry of this final judgment, whichever

is later, to divest the Greenville Assets, the Houston Assets, the

Jackson Assets, and the Pittsburgh Assets to one or more Acquirers

acceptable to plaintiff in its sole discretion.

B. Hicks Muse and Capstar are hereby ordered and directed, in

accordance with the terms of this Final Judgment, within three (3)

months after the filing of the complaint in this action, or within five

(5) business days after notice of entry of this final judgment,

whichever is later, to divest the SFX Long Island Assets to one or more

Acquirers acceptable to plaintiff in its sole discretion.

C. Defendants shall use their best efforts to divest the Greenville

Assets, the Houston Assets, the Jackson Assets, the Pittsburgh Assets,

and the SFX Long Island Assets, and to obtain all regulatory approvals

necessary for such divestitures, as expeditiously as possible.

Plaintiff, in its sole discretion, may extend the time period for the

divestitures for two (2) additional thirty (30)-day periods of time,

not to exceed sixty (60) calendar days in total.

D. In accomplishing the divestitures ordered by this Final

Judgment, defendants promptly shall make known, by usual and customary

means, the availability for sale of the Greenville Assets, the Houston

Assets, the Jackson Assets, the Pittsburgh Assets, and the SFX Long

Island Assets. Defendants shall inform any person making an inquiry

regarding a possible purchase that the sale is being made pursuant to

this Final Judgment and provide such person with a copy of the Final

Judgment. Defendants shall also offer to furnish to all prospective

purchasers, subject to customary confidentiality assurances, all

information regarding the Greenville Assets, the Houston Assets, the

Jackson Assets, the Pittsburgh Assets, and the SFX Long Island Assets

customarily provided in a due diligence process, except such

information subject to attorney-client privilege or attorney work-

product privilege. Defendants shall make available such information to

plaintiff at the same time that such information is made available to

any other person.

E. Defendants shall permit prospective purchasers of the Greenville

Assets, the Houston Assets, the Jackson Assets, the Pittsburgh Assets,

and the SFX Long Island Assets to have access to personnel and to make

such inspection of the assets, and any and all financial, operational

or other documents and information customarily provided as part of a

due diligence process.

F. Unless plaintiff otherwise consents in writing, the divestitures

pursuant to Section IV of this Final Judgment, or by the trustee

appointed pursuant to Section V, shall include all the Greenville

Assets, Houston Assets, Jackson Assets, Pittsburgh Assets, and SFX Long

Island Assets, and shall be accomplished in such a way as to satisfy

plaintiff, in its sole discretion, that the Greenville Assets, the

Houston Assets, the Jackson Assets, the Pittsburgh Assets, and the SFX

Long Island Assets can and will be used by an Acquirer or Acquirers as

viable, ongoing commercial radio businesses. The divestitures, whether

pursuant to Sections IV or V of this Final Judgment, shall be made (I)

to an Acquirer or Acquirers that in plaintiff's sole discretion, has or

have the capability and intent of competing effectively, and has or

have the managerial, operational and financial capability to compete

effectively as

[[Page 18218]]

radio station operators in the Greenville, Houston, Jackson, Pittsburgh

or Nassau-Suffolk Areas, as the case may be, and intends in good faith

to continue the operations of the radio station as were in effect in

the period immediately prior to the filing of the complaint in this

action (unless any significant change in the operations planned by the

acquirer is accepted by the plaintiff in its sole discretion); and (ii)

pursuant to agreements the terms of which shall not, in the sole

judgment of plaintiff, interfere with or otherwise diminish the ability

of the purchaser(s) to compete effectively against defendants.

G. Defendants shall not interfere with any efforts by any Acquirer

or Acquirers to employ the general manager or any other person working

at any of the Greenville, Houston, Jackson, Pittsburgh, or SFX Long

Island Assets.

V. Appointment of Trustee

A. In the event that defendants have not divested the Greenville

Assets, the Houston Assets, the Jackson Assets, the Pittsburgh Assets,

or the SFX Long Island Assets within the time specified in Section IV

of this Final Judgment, the Court shall appoint, on application of the

United States, a trustee selected by plaintiff to effect the

divestiture of the Greenville Assets, the Houston Assets, the Jackson

Assets, the Pittsburgh Assets, or the SFX Long Island Assets.

B. After the appointment of a trustee becomes effective, only the

trustee shall have the right to sell the Greenville Assets, the Houston

Assets, the Jackson Assets, the Pittsburgh Assets, or the SFX Long

Island Assets described in Section II of this Final Judgment. The

trustee shall have the power and authority to accomplish the

divestiture at the best price then obtainable upon a reasonable effort

by the trustee, subject to the provisions of Sections IV and VI of this

Final Judgment, and shall have such other powers as the Court shall

deem appropriate. Subject to Section V(C) of this Final Judgment, the

trustee shall have the power and authority to hire at the cost and

expense of defendants any investment bankers, attorneys, or other

agents reasonably necessary in the judgment of the trustee to assist in

the divestiture, and such professionals and agents shall be accountable

solely to the trustee. The trustee shall have the power and authority

to accomplish the divestiture at the earliest possible time to a

purchaser acceptable to the plaintiff, and shall have such other powers

as this Court shall deem appropriate. Defendants shall not object to a

sale by the trustee on any grounds other than the trustee's

malfeasance. Any such objections by defendants must be conveyed in

writing to plaintiff and the trustee within ten (10) calendar days

after the trustee has provided the notice required under Section VII of

this Final Judgment.

C. The trustee shall serve at the cost and expense of defendants,

on such terms and conditions as the Court may prescribe, and shall

account for all monies derived from the sale of the assets sold by the

trustee and all costs and expenses so incurred. After approval by the

Court of the trustee's accounting, including fees for its services and

those of any professionals and agents retained by the trustee, all

remaining money shall be paid to defendants and the trust shall then be

terminated. The compensation of such trustee and of any professionals

and agents retained by the trustee shall be reasonable in light of the

value of the divested assets and based on a fee arrangement providing

the trustee with an incentive based on the price and terms of the

divestiture and the speed with which it is accomplished.

D. Defendants shall use their best efforts to assist the trustee in

accomplishing the required divestiture, including best efforts to

effect all necessary regulatory approvals. The trustee and any

consultants, accountants, attorneys, and other persons retained by the

trustee shall have full and complete access to the personnel, books,

records, and facilities of the assets to be divested, and defendants

shall develop financial or other information relevant to the assets to

be divested customarily provided in a due diligence process as the

trustee may reasonably request, subject to customary confidentiality

assurances. Defendants shall permit prospective acquirers of the assets

to have reasonable access to personnel and to make such inspection of

physical facilities and any and all financial, operational or other

documents and other information as may be relevant to the divestiture

required by this Final Judgment.

E. After its appointment, the trustee shall file monthly reports

with the parties and the Court setting forth the trustee's efforts to

accomplish the divestiture ordered under this Final Judgment; provided,

however, that to the extent such reports contain information that the

trustee deems confidential, such reports shall not be filed in the

public docket of the court. Such reports shall include the name,

address and telephone number of each person who, during the preceding

month, made an offer to acquire, expressed an interest in acquiring,

entered into negotiations to acquire, or was contacted or made an

inquiry about acquiring, any interest in the assets to be divested, and

shall describe in detail each contact with any such person during that

period. The trustee shall maintain full records of all efforts made to

divest the assets to be divested.

F. If the trustee has not accomplished such divestiture within six

(6) months after its appointment, the trustee thereupon shall file

promptly with the Court a report setting forth (1) the trustee's

efforts to accomplish the required divestitures, (2) the reasons, in

the trustee's judgment why the required divestitures have not been

accomplished, and (3) the trustee's recommendations; provided, however,

that to the extent such reports contain information that the trustee

deems confidential, such reports shall not be filed in the public

docket of the Court. The trustee shall at the same time furnish such

report to the parties, who shall each have the right to be heard and to

make additional recommendations consistent with the purpose of the

trust. The Court shall enter thereafter such orders as it shall deem

appropriate in order to carry out the purpose of the trust which may,

if necessary, include extending the trust and the term of the trustee's

appointment by a period requested by plaintiff.

VI. Preservation of Assets

Until the divestitures of the Greenville Assets, the Houston

Assets, the Jackson Assets, the Pittsburgh Assets and the SFX Long

Island Assets, as required by Section IV of the Final Judgment, have

been accomplished:

A. Prior to the consummation of Capstar's acquisition of SFX,

defendants shall maintain the independence of their respective radio

station operations in the Areas, and following the consummation of

Capstar's acquisition of SFX, defendants shall take all steps necessary

to operate the Greenville Assets, the Houston Assets, the Jackson

Assets, and the Pittsburgh Assets as separate, independent, ongoing,

economically viable and active competitors to defendants' other

stations in the Greenville, Houston, Jackson, or Pittsburgh Areas,

respectively, and shall take all steps necessary to insure that, except

as necessary to comply with Section IV and paragraphs B and C of this

Section of the Final Judgment, the management of said Assets, including

the performance of decision-making functions regarding marketing and

pricing, will be kept separate and apart from, and not influenced by,

defendants.

[[Page 18219]]

B. Defendants shall use all reasonable efforts to maintain and

increase sales of advertising time by the Greenville, Houston, Jackson,

and Pittsburgh Assets, and shall maintain at 1997 or previously

approved levels for 1998, whichever are higher, promotional

advertising, sales, marketing and merchandising support for said

stations.

C. Defendants shall take all steps necessary to ensure that the

assets used in the operation of the Greenville, Houston, Jackson, and

Pittsburgh Assets, are fully maintained. Sales and marketing employees

shall not be transferred or reassigned to any other station, except for

transfer bids initiated by employees pursuant to defendants' regular,

established job posting policies, provided that defendants give

plaintiff and Acquirer ten (10) days' notice of any such transfer.

D. Defendants shall use their best efforts, consistent with their

rights and obligations under the LMA, to cause the SFX Long Island

Assets to be operated in a manner consistent with the obligations in

paragraphs B and C of this Section; provided, however, that, in the

event the LMA is terminated, paragraphs A, B and C of this Section

shall apply fully to the operation of the SFX Long Island Assets by or

on behalf of defendants.

E. Defendants shall not, except as part of a divestiture approved

by plaintiff, in its sole discretion, or a transfer to a trust approved

by the FCC, also approved by plaintiff, in its sole discretion, sell

any Greenville Assets, Houston Assets, Jackson Assets, Pittsburgh

Assets or SFX Long Island Assets.

F. Defendants shall take no action that would jeopardize the sale

of the Greenville Assets, the Houston Assets, the Jackson Assets, the

Pittsburgh Assets, or the SFX Long Island Assets.

G. Defendants shall appoint a person or persons to oversee the

Assets to be held separate and who will be responsible for defendants'

compliance with Section VI of this Final Judgment.

VII. Notification

Within two (2) business days following execution of a definitive

agreement, contingent upon compliance with the terms of this Final

Judgment, to effect, in whole or in part, any proposed divestitures

pursuant to Section IV or V of this Final Judgment, defendants or the

trustee, whichever is then responsible for effecting the divestitures,

shall notify plaintiff of the proposed divestitures. If the trustee is

responsible, it shall similarly notify defendants. The notice shall set

forth the details of the proposed transaction and list the name,

address and telephone number of each person not previously identified

who offered to, or expressed an interest in or a desire to, acquire any

ownership interest in the Greenville Assets, the Houston Assets, the

Jackson Assets, the Pittsburgh Assets, or the SFX Long Island Assets,

as the case may be, together with full details of same. Within fifteen

(15) calendar days of receipt by plaintiff of such notice, plaintiff

may request from defendants, the proposed purchaser or purchasers, or

any other third party, additional information concerning the proposed

divestitures and the proposed purchaser. Defendants and the trustee

shall furnish any additional information from them within fifteen (15)

calendar days of the receipt of the request, unless the parties shall

otherwise agree. Within thirty (30) calendar days after receipt of the

notice or within twenty (20) calendar days after plaintiff has been

provided the additional information requested from defendants, the

proposed purchaser or purchasers, and any third party, whichever is

later, plaintiff shall provide written notice to defendants and the

trustee, if there is one, stating whether or not it objects to the

proposed divestiture. If plaintiff provides written notice to

defendants and the trustee that it does not object, then the

divestiture may be consummated, subject only to defendants' limited

right to object to the sale under Section V(B) of this Final Judgment.

Absent written notice that plaintiff does not object to the proposed

purchaser or upon objection by the plaintiff, a divestiture proposed

under Sections IV or V may not be consummated. Upon objection by

defendants under the provision in Section V(B), a divestiture proposed

under Section V shall not be consummated unless approved by the Court.

VIII. Financing

Defendants are ordered and directed not to finance all or any part

of any purchase by an Acquirer made pursuant to Sections IV or V of

this Final Judgment, without the prior written consent of plaintiff.

IX. Affidavits

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

Judgment and every thirty (30) calendar days thereafter until the

divestitures have been completed whether pursuant to Section IV or

Section V of this Final Judgment, defendants shall deliver to plaintiff

an affidavit as to the fact and manner of their compliance with Section

IV or V of this Final Judgment. Each such affidavit shall include,

inter alia, the name, address and telephone number of each person who,

at any time after the period covered by the last such report, made an

offer to acquire, expressed an interest in acquiring, entering into

negotiations to acquire, or was contacted or made an inquiry about

acquiring, any interest in the Greenville Assets, the Houston Assets,

the Jackson Assets, the Pittsburgh Assets, and the SFX Long Island

Assets, and shall describe in detail each contact with any such person

during that period. Each such affidavit shall also include a

description of the efforts that defendants have taken to solicit a

buyer or buyers for the Greenville Assets, the Houston Assets, the

Jackson Assets, the Pittsburgh Assets, or the SFX Long Island Assets,

as the case may be.

B. Within twenty (20) calendar days of the filing of the complaint

in this action, defendants shall deliver to plaintiff an affidavit

which describes in reasonable detail all actions defendants have taken

and all steps defendants have implemented on an on-going basis to

preserve Greenville, Houston, Jackson, and Pittsburgh Assets, and the

SFX Long Island Assets, pursuant to Section VI of this Final Judgment.

Defendants shall deliver to plaintiff an affidavit describing any

changes to the efforts and actions outlined in their earlier

affidavit(s) filed pursuant to this Section within fifteen (15)

calendar days after such change is implemented.

C. Defendants shall preserve all records of efforts made to

preserve the assets to be divested and effect the divestitures.

X. Notice

A. Unless such transaction is otherwise subject to the reporting

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

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

defendants, without providing advance notification to the plaintiff,

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

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

in any Non-Hicks Muse Radio Station, or would transfer the power to

market or sell advertising time or to establish advertising prices for

Hicks Muse Radio Stations in an Area to any other owner or operator of

Non-Hicks Muse Radio Station.

B. Defendants, without providing advance notification to the

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

understanding (including a Local Marketing Agreement (``LMA'') or Joint

Sales Agreement (``JSA'')), that would allow defendants to market or

sell advertising time or to

[[Page 18220]]

establish advertising prices for any Non-Hicks Muse Radio Station.

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

(E) of this Section X shall not apply to defendants with respect to an

Area at such time as there are no Hicks Muse Radio stations in that

Area, provided that the provisions of Section III have been complied

with.

D. Notification described in Section X (A) and (B) or (E) shall be

provided to the United States Department of Justice in the same format

as, and per the instructions relating to the Notification and Report

Form set forth in the Appendix to Part 803 of Title 16 of the Code of

Federal Regulations as amended, except that the information requested

in Items 5-9 of the instructions must be provided only with respect to

radio stations owned or operated by defendants in the Area or Areas in

which the notifiable transaction takes place. Notification shall be

provided at least thirty (30) days prior to acquiring any such interest

covered in (A) or (B) above, and shall include, beyond what may be

required by the applicable instructions, the names of the principal

representatives of the parties to the agreement who negotiated the

agreement, and any management or strategic plans discussing the

proposed transaction. If within the 30-day period after notification,

representatives of the Department make a written request for additional

information, defendants shall not consummate the proposed transaction

or agreement until twenty (20) days after submitting all such

additional information. Early termination of the waiting periods in

this paragraph may be requested and, where appropriate, granted in the

same manner as is applicable under the requirements and provisions of

the HSR Act and rules promulgated thereunder.

E. Hicks Muse shall notify plaintiff in writing (or arrange for

Chancellor to provide such notification) ten (10) days prior to (I)

consummation of any direct or indirect acquisition of a Non-Hicks Muse

Radio Station by Chancellor, or (ii) entry into force of any agreement

or understanding (including an LMA or JSA), that would allow Chancellor

to market or sell advertising time or to establish advertising prices

for any Non-Hicks Muse Radio Station.

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

uncertainty regarding the filing of notice under this Section shall be

resolved in favor of filing notice.

XI. Compliance Inspection

For the purpose of determining or securing compliance with the

Final Judgment and subject to any legally recognized privilege, from

time to time:

A. Duly authorized representatives of the United States Department

of Justice, including consultants and other persons retained by the

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

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

reasonable notice to defendant made to their principal offices, shall

be permitted:

(1) Access during office hours of defendants to inspect and copy

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

records and documents in the possession or under the control of

defendants, who may have counsel present, relating to the matters

contained in this Final Judgment; and

(2) Subject to the reasonable convenience of defendants and without

restraint or interference from them, to interview, either informally or

on the record, directors, officers, employees and agents of defendants,

who may have counsel present, regarding any such matters.

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

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

defendants' principal offices, defendants shall submit such written

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

contained in the Final Judgment as may be requested.

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

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

of plaintiff to any person other than a duly authorized representative

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

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

proceedings), or for the purpose of securing complinance with this

Final Judgment, or as otherwise required by law.

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

defendant to plaintiff, and such defendant represents and identifies in

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

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

Rules of Civil Procedure, and such defendant marks each pertinent page

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

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

notice shall be given by plaintiff to such defendant prior to divulging

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

proceeding) to which such defendant is not a party.

XII. Retention of Jurisdiction

Jurisdiction is retained by this Court for the purpose of enabling

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

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

appropriate for the construction or carrying out of this Final

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

enforcement of compliance herewith, and for the punishment of any

violations hereof.

XIII. Termination

Unless this Court grants an extension, this Final Judgment will

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

XIV. Public Interest

Entry of this Final Judgment is in the public interest.

Dated: ____________________ 1998.

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

United States District Judge

United States District Court for the Eastern District of New York

United States of America, Plaintiff, v. Hicks, Muse, Tate &

Furst Incorporated, and Capstar Broadcasting Partners, Inc., and SFX

Broadcasting Partners, Inc., Defendants. Hon. J. Seybert/M.

Orenstein. Civil Action No. CV 98 2422.

Competitive Impact Statement

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

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

this Competitive Impact Statement relating to the proposed Final

Judgment submitted for entry in this civil antitrust proceeding.

I. Nature and Purpose of the Proceeding

The plaintiff filed a civil antitrust Complaint on March 31, 1998,

alleging that a proposed acquisition of SFX Broadcasting, Inc.

(``SFX'') by Capstar Broadcasting Partners, Inc. (``Capstar'') \1\

would violate Section 7 of the Clayton Act, 15 U.S.C. 18. The complaint

alleges that Capstar, or its related entity, Chancellor Media

Corporation (``Chancellor''), and SFX own and operate several radio

stations throughout the United States, and that the transaction will

combine radio

[[Page 18221]]

station assets such that defendants would control stations that have

approximately 74 percent of the radio advertising revenue in

Greenville-Spartanburg (``Greenville''), SC, 41 percent in Houston, TX,

49 percent in Jackson, MS, 45 percent in Pittsburgh, PA, and 65 percent

in Suffolk County, NY.\2\ This acquisition would give defendants the

majority of the most competitively significant radio signals in the

Greenville, Houston, Jackson, Pittsburgh and Suffolk markets, and a

significant share of radio advertising in these markets. As a result,

this acquisition would substantially lessen competition in the sale of

radio advertising time in the Greenville, Houston, Jackson, Pittsburgh

and Suffolk markets.

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\1\ Capstar is wholly owned by Hicks, Muse, Tate & Furst,

Incorporated (``Hicks Muse''). Hicks Muse is also the largest and

controlling shareholder of Chancellor Media Corporation.

\2\ Following the acquisition, defendants and Chancellor would

own eight radio stations in the Greenville area (6 FMs and 2 AMs),

nine radio stations in the Houston area (6 FMs and 3 AMs), six radio

stations in the Jackson area (4 FMs and 2 AMs) seven radio stations

in the Pittsburgh area (5 FMs and 2 AMs) and six radio stations in

the Suffolk area (4 FMs and 2 AMs).

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

proposed acquisition of the radio stations from SFX would violate

Section 7 of the Clayton Act; (b) preliminary and permanent injunctive

relief preventing the consummation of the proposed acquisition; (c) an

award to the United States of the costs of this action; and (d) such

other relief as is proper.

Shortly before this suit was filed, a proposed settlement was

reached that permits Capstar to complete its acquisition of SFX, yet

preserves competition in the markets for which the transaction would

raise significant competitive concerns. A Stipulation and proposed

Final Judgment embodying the settlement were filed at the same time the

Complaint was filed.

The proposed Final Judgment orders Capstar and Hicks Muse to divest

WESC-FM, WESC-AM, WJMZ-FM and WTPT-FM in Greenville; KKPN-FM in

Houston; WJDX-FM in Jackson and WTAE-AM in Pittsburgh, WBLI-FM, WBAB-

FM, WHFM and WGBB-AM in Suffolk (the ``divestiture stations''). Unless

the United States grants an extension of time, Capstar and Hicks Muse

must divest these radio stations within six months after the filing of

the Final Judgment (three months in the case of the Suffolk stations).

If the parties do not divest these stations within the divestiture

period, the Court shall appoint a trustee to sell the assets. The

proposed Final Judgment also requires the defendants to ensure that,

until the divestitures mandated by the Final Judgment have been

accomplished, the divestiture stations will be operated independently

as viable, ongoing businesses, and kept separate and apart from the

other radio stations of Capstar, Chancellor and SFX in the Greenville,

Houston, Jackson, and Pittsburgh areas.\3\ The proposed Final Judgment

also requires that the divestitures be made to an acquirer or acquirers

that have the capability and intent to compete effectively as radio

station operators in the Greenville, Houston, Jackson, Pittsburgh and

Suffolk markets.

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\3\ In Suffolk County, the Chancellor and SFX stations are

currently being operated together by Chancellor under a local

marketing agreement. Under the terms of another proposed Final

Judgment, the parties have agreed to terminate this agreement on or

before August 1, 1998, after which time, the parties must operate

the Chancellor and SFX stations as separate entities, pending the

divestiture required by this Final Judgment.

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

The plaintiff and the defendants have stipulated that the proposed

Final Judgment may be entered after compliance with the APPA. Entry of

the proposed Final Judgment would terminate this action, except that

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

provisions of the proposed Final Judgment and to punish violations

thereof.

II. The Alleged Violation

A. The Parties

Defendant Capstar is a Delaware corporation headquartered in

Austin, Texas. Capstar currently owns and operates approximately 245

radio stations in 60 markets in the United States. In 1997, its

revenues were approximately $190 million. In Greenville, Capstar

currently owns WJMZ-FM, WTPT-FM, WESC-FM and WESC-AM. In Jackson,

Capstar owned WJMI-FM, WKXI-FM, WOAD-AM and WKXI-AM, until a recent

sale made in anticipation of this lawsuit. Capstar is wholly owned by

Hicks Muse.

Defendant Hicks Muse is an investment firm headquartered in Dallas,

Texas. Hicks Muse, through investment funds it controls, owns all the

stock of Capstar and has a significant ownership interest in

Chancellor.

Chancellor is a Delaware corporation headquartered in Irving,

Texas. In 1997, it was the second largest owner of radio stations in

the United States and owned 97 radio stations in 22 major U.S. markets,

including in each of the 12 largest markets. Chancellor revenues in

1997 were approximately $582.1 million. In Houston, Chancellor owns

KLDE-FM, KKBQ-FM, KLOL-FM, KTRH-AM and KKBQ-AM. In Pittsburgh,

Chancellor owns WWSW-FM and WWSW-AM. In Suffolk, Chancellor owns WALK-

FM and WALK-AM. Chancellor is a Hicks Muse-related company. Hicks Muse

owns a significant portion of Chancellor stock and Hicks Muse

management and owners influence or control Chancellor competitive

behavior to such an extent that Chancellor/Capstar ownership of

otherwise competing radio stations would substantially lessen

competition.

Defendant SFX is a Delaware corporation headquartered in New York,

New York. SFX owns and operates approximately 85 radio stations located

in 23 markets in the United States. SFX revenues in 1997 were

approximately $322 million. In Greenville, SFX owns WSSL-FM, WTPT-FM,

WYMI-FM, WROQ-FM and WGVL-AM. In Houston, SFX owns KKPN-FM, KODA-FM,

KKRW-FM and KQUE-AM. In Jackson, SFX owns WMSI-FM, WJDX-FM, WSTZ-FM,

WKTF-FM, WZRX-AM and WJDS-AM. WJDX-FM was recently acquired by SFX, in

1996. In Pittsburgh, SFX owns WDVE-FM, WVTY-FM, WXDX-FM, WJJJ-FM and

WTAE-AM. In Suffolk, SFX owns WBAB-FM, WBLI-FM, WHFM-FM and WGBB-AM.

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

On or about August 24, 1997, Capstar agreed to purchase SFX for

approximately $2.1 billion. Capstar or Chancellor and SFX own or

operate radio broadcast stations in five overlapping markets in which

there would be a lessening of competition: Greenville, Jackson,

Houston, Pittsburgh and Suffolk. As a result of this transaction,

defendants and Chancellor would control stations that have

approximately 74 percent of radio advertising revenue in Greenville, 41

percent in Houston, 49 percent in Jackson, 45 percent in Pittsburgh and

65 percent in Suffolk. Prior to the agreement, the Capstar/Chancellor

and SFX stations in the Greenville, Houston, Jackson, Pittsburgh and

Suffolk markets were vigorous competitors of each other. The proposed

acquisition of SFX by Capstar, and the threatened loss of such

competition that would be caused thereby, precipitated the Government's

suit.

C. Anticompetitive Consequences of the Proposed Merger

1. Sale of Radio Advertising Time In Greenville, Houston, Jackson,

Pittsburgh and Suffolk

The Complaint alleges that the sale of advertising time on radio

stations

[[Page 18222]]

serving the Greenville, Houston, Jackson, and Pittsburgh Metro Service

Areas (``MSA'') each constitute a line of commerce and section of the

country--or relevant market--for antitrust purposes. The Greenville MSA

includes four counties: Anderson, Greenville, Pickens and Spartanburg.

The Houston MSA includes eight counties: Brazoria, Chambers, Fort Bend,

Galveston, Harris, Liberty, Montgomery and Waller. The Jackson MSA

includes three counties: Hinds, Madison and Rankin. The Pittsburgh MSA

includes six counties: Allegheny, Beaver, Butler, Fayette, Washington

and Westmoreland. The relevant market for Suffolk County is Suffolk

County. Local and national advertising that is placed on radio stations

within Greenville, Houston, Jackson, Pittsburgh and Suffolk markets is

aimed at reaching listening audiences in each of these markets, and

radio stations located outside of Greenville, Houston, Jackson,

Pittsburgh and Suffolk do not provide effective access to these

audiences. Thus, if there were a small but significant nontransitory

increase in radio advertising within one of these markets, advertisers

would not buy enough advertising time from radio stations located

outside the Greenville, Houston, Jackson, Pittsburgh and Suffolk

markets to defeat the increase.

The defendants' radio stations, like most commercial radio

stations, generate almost all their revenues from the sale of

advertising time. In general, radio stations attract listeners, and

then sell access to those listeners (that is, advertising time) to

businesses who wish to advertise their products.

Radio stations price their advertising time in large part on the

basis of the number of listeners that they reach. Traditionally, this

is expressed on a cost-per-thousand (CPM) basis. When buying radio

advertising time, advertisers consider the CPM and the overlap of the

number and demographic characteristics of a radio station's listeners

with the advertisers' likely customers. If a station individually or

number of stations in combination efficiently reach an advertiser's

likely customers (target audience), the advertiser has a choice in how

to reach its potential customers. This choice creates competition

between radio stations and results in lower prices and better services.

In Greenville, Houston, Jackson, Pittsburgh and Suffolk, the

defendants' radio stations compete to serve a single distinct

geographic area. When the Capstar/Chancellor and SFX stations operate

independently, they are good substitutes for each other. The stations

compete head-to-head to reach listeners. Many local and regional

advertisers seeking to reach listeners in Greenville, Houston, Jackson,

Pittsburgh and Suffolk can reach a target efficiently by purchasing

time on Capstar and Chancellor or SFX stations or by using a

combination of Capstar, Chancellor, SFX and other stations in the

market. However, other stations, either alone or in combination with

other stations, cannot offer a sufficient number of listeners in

demographic groups to be an effective substitute for Capstar,

Chancellor and SFX.

When the Capstar and SFX stations operate independently,

advertisers can obtain lower prices by ``playing off'' Capstar-owned or

Chancellor-owned stations against SFX stations. Advertisers use the

threat to move their business between the Capstar/Chancellor and the

SFX stations to get more favorable prices and services at each.

Advertisers in Greenville, Houston, Jackson, Pittsburgh and Suffolk

have paid less for advertising as a result of price competition between

the Capstar/Chancellor and SFX radio stations.

2. Harm to Competition

The Complaint alleges that Capstar's acquisition of the SFX will

give defendants the ability to raise price to many advertisers--

especially local and regional advertisers. Price increases made

possible by the acquisition are likely to be profitable. Radio stations

see other radio stations as their principal competition. Moreover, for

many advertisers, other media do not serve as substitutes for radio

advertising. Radio enjoys unique access to certain audiences. A radio

is portable; people can listen to radio anywhere especially in places

and situations where other media are not present, such as in the car.

In addition, radio formats can target listeners in specific

demographics. These features make is a more effective means for many

advertisers to achieve what the advertising industry refers to as

``frequency.''

Many advertisers who purchase time on radio stations consider such

purchases preferable to purchases of other media to meet their specific

needs. When these advertisers use radio as part of a ``media mix,''

they often view the other advertising media (such as television or

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

advertising.

Radio stations also provide certain value-added services or

promotional opportunitites--such as contests, disc jockey endorsements,

live remote broadcasts and greater flexibility in ad placement--that

many advertisers significantly value, and which many advertisers cannot

exploit as effectively using other media.

For many advertisers, radio advertising is more cost effective than

other media, like television and newspapers, in reaching their likely

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

campaign do so because they believe that the radio component enhances

the effectiveness of their overall advertising campaign. Many

advertisers, especially local and regional advertisers, would not

switch their radio advertising purchases to other media if radio prices

rose a small but significant amount in relation to other media prices.

Because radio stations in Greenville, Houston, Jackson, Pittsburgh

and Suffolk would be able to charge higher prices to these customers

without losing the business of other advertisers, a small but

significant price increase would be profitable. This is because Capstar

will be able to raise price selectively without losing a significant

amount of business. Radio stations know a great deal about how likely

an advertiser is to turn to an alternative. In the negotiation process,

for example, radio stations obtain significant information about an

advertiser's objectives. As a result, radio stations know that some

advertisers are more likely than others to turn to alternatives.

Because prices are set through individual negotiation, station can

charge higher prices to advertisers that are less likely to use

alternatives, while charging lower prices to those advertisers that

would more readily switch. Consequently, defendants will be able to

raise price profitably to the many advertisers that would readily

switch between Capstar and Chancellor and SFX long before they would

consider other alternatives.

Accordingly, the complaint alleges that the relevant product market

within which to assess the competitive effects of this acquisition is

the sale of radio advertising time in the Greenville, Houston, Jackson,

Pittsburgh and Suffolk markets.

Using a measure of market concentration called the Herfindahl-

Hirschman Index (``HHI''), explained in Appendix A annexed hereto, the

transaction would substantially increase concentration in the

Greenville, Houston, Jackson, Pittsburgh and Suffolk radio advertising

markets.

a. Greenville. After the proposed transaction, defendants' share of

the Greenville market will be 74 percent, measured by radio advertising

revenues. The acquisition would yield a post-merger HHI of 5836,

representing an increase of 2571. Post-merger,

[[Page 18223]]

defendants will own and operate WSSL-FM and WESC-FM, the only two

successful country stations in the market. Accordingly, advertisers who

desire to target country listeners will not be able to buy around

defendants' stations.

b. Houston. In Houston, after the acquisition, defendants and

Chancellor together would have a 41 percent market share, measured by

radio advertising revenues. The acquisition would yield a postmerger

HHI of 2330, representing an increase of 765.

c. Jackson. In Jackson, defendants' share of the market would be 49

percent, measured by radio advertising revenues. After the acquisition,

there would be an HHI of 3320; it would have been significantly higher,

if certain stations had not already been sold by defendant Capstar in

anticipation of this lawsuit. Furthermore, the prior acquisition of

WJDX-FM by defendant SFX previously had increased the HHI by 1080. That

acquisition substantially lessened competition and resulted in a market

in which defendants would own three out of the four top-rated stations.

d. Pittsburgh. In Pittsburgh, after the acquisition, defendants and

Chancellor together would have a 45 percent market share, measured by

radio advertising revenues. The acquisition would yield a post-merger

HHI of 3162, representing an increase of 626. The ownership of some

Pittsburgh stations by Chancellor and others by defendants would

substantially lessen competition because of the relationship between

Chancellor and defendants Capstar and Hicks Muse.

e. Suffolk. In Suffolk, Chancellor and SFX are the number one and

number two radio companies. After the proposed acquisition, defendants

and Chancellor together would control over 65 percent of the radio

advertising market. A previous attempt to combine the Chancellor and

SFX stations in Suffolk was the subject of an earlier lawsuit, United

States v. Chancellor Media Co. and SFX Broadcasting, Inc., CV 97-6497.

A proposed final judgment in that matter also was field today, pursuant

to which that transaction will be abandoned.

For the reasons outlined above, the Department of Justice concludes

that the acquisition of SFX by Capstar would substantially lessen

competition in the sale of radio advertising time in Greenville,

Houston, Pittsburgh and Suffolk, and result in increased prices and

reduced quality of service for radio advertising time in each of these

overlapping markets, and that the prior acquisition of WJDX in Jackson

similarly substantially lessened competition, all in violation of

Section 7 of the Clayton Act.

III. Explanation of the Proposed Final Judgment

The proposed Final Judgment would preserve competition in the sale

of radio advertising time in Greenville, Houston, Jackson, Pittsburgh

and Suffolk. It requires the divestiture of several radio stations in

the affected markets. This relief-will reduce the market share Capstar

would have achieved through the acquisition in the overlapping markets.

The divestitures will preserve choices for advertisers, preserve

competition among these radio stations, and help ensure that radio

advertising rates do not increase and that services to do not decline

in the overlapping markets as a result of the acquisition.

The diverstitures will ensure that the affected markets will remain

competitive. First, no firm will dominate the competitively

significantly radio signals in any market. Second, advertisers will

have sufficient alternatives to the merged firm in reaching groups of

radio listeners most affected by the transaction; that is, advertisers

can reasonably efficiently reach such audiences (``buy around'')

without using the merged firm. Third, the ownership structure in each

market is such that it allows for the possibility of at least three

significant competitors who may compete for advertisers' business.

Unless the United States grants an extension of time, the parties

must divest the divestiture stations within six months after the Final

Judgment has been filed (three months in Suffolk). Until the

divestitures take place, these stations will be maintained as

independent competitors to the other stations in Greenville, Houston,

Jackson, Pittsburgh and Suffolk. If the parties fail to divest any of

the divestiture stations and their respective Assets within the time

period specified in the Final Judgment, or extension thereof, the

Court, upon application of the United States, shall appoint a trustee

nominated by the United States to effect the required divestiture or

divestitures. If a trustee is appointed, the proposed Final Judgment

provides that the defendants will pay all costs and expenses of the

trustee and any professionals and agents retained by the trustee. The

compensation paid to the trustee and any persons retained by the

trustee shall be both reasonable in light of the value of the

divestitures stations, and shall be based on a fee arrangement

providing the trustee with an incentive based on the price and terms of

the divestitures and the speed with which they are accomplished. After

appointment, the trustee will file monthly reports with the plaintiff,

the defendants and the Court, setting forth the trustee's efforts to

accomplish the divestitures ordered under the proposed Final Judgment.

If the trustee has not accomplished the divestitures within three (6)

months after its appointment, the trustee shall promptly file with the

Court a report setting forth (1) the trustee's efforts to accomplish

the required divestitures, (2) the reasons, in the trustee's judgment,

why the required divestitures have not been accomplished, and (3) the

trustee's recommendations. At the same time, the trustee will furnish

such report to the plaintiff and defendants, who will each have the

right to be heard and to make additional recommendations consistent

with the purpose of the trust.

The proposed Final Judgment requires that defendants maintain each

of the divestiture stations separate and apart from their other

stations, pending divestiture of those stations, in the Greenville,

Houston, Jackson and Pittsburgh areas. The Judgment also contains

provisions to ensure that these stations will be preserved, so that

they will remain viable, aggressive competitors after divestiture. The

defendants, without providing advance notification to the plaintiff,

may not acquire any assets in any Non-Hicks Muse Radio Stations. Also,

the defendants may not, without providing advance notice to the

plaintiff, enter into any agreement (including a Local marketing

agreement or a Joint Sales Agreement), that would allow defendant to

market or sell advertising time or to establish adverting prices for

any Non-Hicks Muse Radio Station.

The Judgment requires that the defendants or the trustee notify the

plaintiff of any proposed divestitures, within two (2) days following

the execution of a definitive agreement. Within fifteen (15) days of

receipt by plaintiff of notice, the plaintiff may request additional

information regarding the proposed divestiture and the proposed

purchaser. The defendants and the trustee must furnish the additional

information within fifteen (15) days of the receipt of the request.

Within thirty (30) days after receipt of the notice, or within twenty

days after plaintiff has been provided the additional information

requested from the defendants, the proposed purchaser or purchasers,

and any third party, plaintiff will provide written notice to the

defendants or the trustee stating whether or not it objects to the

proposed divestiture. Absent written notice that plaintiff does not

object to the proposed

[[Page 18224]]

divestiture, a divestiture may not be consummated.

The relief in the proposed Final Judgment is intended to remedy the

likely anticompetitive effects of the proposed acquisition of SFX by

Capstar. Nothing in this Final Judgment is intended to limit the

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

challenging other past or future activities of defendants in

Greenville, Houston, Jackson, Pittsburgh and Suffolk or any other

markets, including their entry into any JSAs. LMAs, or any other

agreements related to the sale of advertising time.

IV. Remedies Available To Potential Private Litigants

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

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

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

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

attorney's fees. Entry of the proposed Final Judgment will neither

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

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

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

subsequent private lawsuit that may be brought against defendants.

V. Procedures Available For the Modification of the Proposed Final

Judgment

The plaintiff and the defendants have stipulated that the proposed

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

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

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

determination that the proposed Final Judgment is in the public

interest.

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

the effective date of the proposed Final Judgment within which any

person may submit to the United States written comments regarding the

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

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

Impact Statement in the Federal Register. The United States will

evaluate and respond to the comments. All comments will be given due

consideration by the Department of Justice, which remains free to

withdraw its consent to the proposed Final Judgment at any time prior

to its entry. The comments and the response of the United States will

be filed with the Court and published in the Federal Register.

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

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

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

The proposed Final Judgment provides that the Court retains

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

for any order necessary or appropriate for the modification,

interpretation, or enforcement of the Final Judgment.

VI. Alternatives To The Proposed Final Judgment

The plaintiff considered, as an alternative to the proposed Final

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

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

of the divestiture stations and other relief contained in the proposed

Final Judgment will preserve viable competition in the sale of radio

advertising time in Greenville, Houston, Jackson, Pittsburgh and

Suffolk. Thus, the proposed Final Judgment would achieve the relief the

Government would have obtained through litigation, but avoids the time,

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

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

The APPA requires that proposed consent judgments in antitrust

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

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

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

that determination, the court may consider--

(1) The competitive impact of such judgment, including

termination of alleged violations, provisions for enforcement and

modification, duration or relief sought, anticipated effects of

alternative remedies actually considered, and any other

considerations bearing upon the adequacy of such judgment;

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

generally and individuals alleging specific injury from the

violations set forth in the complaint including consideration of the

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

issues at trial.

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

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

other things, the relationship between the remedy secured and the

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

the decree is sufficiently clear, whether enforcement mechanisms are

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

See United States v. Microsoft, 56 F.3d 1448, 1461-62 (D.C. Cir. 1995).

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

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

effect of vitiating the benefits of prompt and less costly settlement

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

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

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

determination can be made properly on the basis of the Competitive

Impact Statement and Response to Comment filed pursuant to the APPA.

Although the APPA authorizes the use of additional procedures, 15

U.S.C. 16(f), those procedures are discretionary. A court need not

invoke any of them unless it believes that the comments have raised

significant issues and that further proceedings would aid the court

in resolving those issues. See H.R. Rep. 93-1463, 93rd Cong., 2d

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

[a]bsent a showing of corrupt failure of the government to discharge

its duty, the Court, in making it public interest finding, should .

. . carefully consider the explanations of the government in the

competitive impact statement and its responses to comments in order

to determine whether those explanations are reasonable under the

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circumstances.

United States v. Mid-American Dairymen, Inc., 1977-1 Trade Cas.

para.61,508, at 71,980 (W.D. Mo. 1977).

Accordingly, with respect to the adequacy of the relief secured by

the decree, a court may not ``engage in an unrestricted evaluation of

what relief would best serve the public.'' United States v. BNS, Inc.,

858 F.2d 456, 462 (9th Cir. 1988), citing United States v. Bechtel

Corp., 648 F.2d 660, 666 (9th Cir.,), cert. denied, 454 U.S. 1083

(1981); see also Mircosoft, 56 F.2d at 1460-62. Precedent requires that

the balancing of competing social and political interests affected

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

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

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

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

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

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

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

interest.'' More elaborate requirements undermine the effectiveness

of antitrust enforcement by consent decree.\5\

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

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

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

Gillette, 406 F. Supp. at 716. See also Microsoft, 56 F.3d at 1461

(whether ``the remedies [obtained in the decree are] so inconsonant

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

the public interest' '') (citation omitted).

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

[[Page 18225]]

standard of whether it is certain to eliminate every anticompetitive

effect of a particular practice or whether it mandates certainty of

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

requires a standard more flexible and less strict than the standard

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

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

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

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

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

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

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

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

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

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This is strong and effective relief that should fully address the

competitive harm posed by the proposed acquisition.

VIII. Determinative Documents

There are no determinative materials or documents within the

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

formulating the proposed Final Judgment.

Respectfully submitted,

Asuncion Cummings (AC-1850),

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

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

Dated March 31, 1998.

Appendix A--Herfindahl-Hirschman Index Calculations

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

accepted measure of market concentration. It is calculated by

squaring the market share of each firm competing in the market and

then summing the resulting numbers. For example, for a market

consisting of four firms with shares of thirty, thirty, twenty, and

twenty percent, the HHI is 2600

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

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

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

large number of firms of relatively equal size. The HHI increases

both as the number of firms in the market decreases and as the

disparity in size between those firms increases.

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

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

is in excess of 1800 points are considered to be concentrated.

Transactions that increase the HHI by more than 100 points in

concentrated markets presumptively raise antitrust concerns under

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

Justice and the Federal Trade Commission. See Merger Guidelines

Sec. 1.51.

Certificate of Service

I hereby certify that, on this 31st day of March 1998, I caused to

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

Statement upon the following:

David A. Clanton, Baker & McKenzie, 815 Connecticut Avenue, N.W.,

Washington, D.C. 20006-4078

Neil Imus, Vinson & Elkins, 1455 Pennsylvania Avenue, N.W., Washington,

D.C. 20004

Asuncion Cummings

[FR Doc. 98-9800 Filed 4-13-98; 8:45 am]

BILLING CODE 4410-11-M