FOR IMMEDIATE RELEASE AT
THURSDAY, FEBRUARY 27, 1997 (202) 616-2771
TDD (202) 514-1888
JUSTICE DEPARTMENT REQUIRES AMERICAN RADIO SYSTEMS CORP. TO
DIVEST RADIO STATIONS IN CALIFORNIA AND NORTH CAROLINA
Action Marks Fourth Challenge to Radio Mergers since
Passage of the Telecom Act
WASHINGTON, D.C.-- The Department of Justice reached a
settlement today with Boston-based American Radio Systems Corp.
allowing the company to go forward with its $655 million merger
with EZ Communications as long as American Radio divests two
radio stations--one in Sacramento, California and the other in
Charlotte, North Carolina.
The Department also said that proposed station swaps between
Fairfax, Virginia-based EZ and other radio owners in Charlotte
were abandoned in the face of antitrust concerns raised by the
Department.
"The Telecommunications Act of 1996 envisioned a great deal
of consolidation in radio, and that's going forward," said Joel
I. Klein, Acting Assistant Attorney General in charge of the
Department's Antitrust Division. "We only get involved in cases
such as this one where the proposed deal could hurt consumers,
such as small businesses that rely on competition to keep prices
low for radio advertising. Where we see that happening, we'll
move vigorously to stop it."
The Department's action arises out of a series of proposed
acquisitions by American Radio and EZ, culminating in the
American Radio/EZ merger. In Charlotte, these transactions,
without restructuring, would have resulted in American Radio
having 55 percent of Charlotte's radio advertising revenues.
Under the proposed settlement, American Radio must divest WRFX-
FM, Charlotte's leading rock station. After the restructuring,
American Radio will own seven radio stations in the Charlotte
area, which together account for about 40 percent of Charlotte's
radio advertising revenues.
In Sacramento, the merger between American Radio and EZ,
together with other proposed acquisitions, would have given
American Radio control over six of the 12 class B FM radio
signals operating in the Sacramento area. The merger would have
given American Radio 36 percent of Sacramento's radio advertising
revenues.
The proposed settlement requires American Radio to divest
KSSJ-FM, a new age contemporary station in the process of being
upgraded to class B status. In addition, in the event KSSJ-FM is
not upgraded to class B status by December 31, 1997, the
Department has the option to designate an additional Sacramento
class B FM station for divestiture. The sale of KSSJ-FM will
reduce American Radio's control over Sacramento's class B FM
signals, which are the strongest, and therefore the most
competitively significant, radio broadcasting signals in
Sacramento. Following the restructuring, American Radio will own
a total of seven radio stations in the Sacramento area, which
together account for about 33 percent of Sacramento's radio
advertising revenues.
In Charlotte, EZ and other radio station owners had
previously announced plans to swap radio stations. The swaps
would have eliminated existing competition and resulted in EZ
controlling the country format--and the listeners it appeals to-
-and SFX Broadcasting Inc. controlling the rock format--and the
listeners it appeals to. These transactions were abandoned
following the Department's investigation into whether the swaps
were a device to allocate Charlotte's advertisers in such a way
as to lessen competition between the two station groups.
The Department's Antitrust Division filed two civil suits
today in U.S. District Court in Washington, D.C. At the same
time, the Department filed proposed settlements that, if approved
by the court, would resolve both suits.
The first suit was filed to block the original deal between
American Radio and EZ on the ground that the merger would lessen
competition in the Sacramento radio market. The proposed
settlement requires American Radio to divest a new age
contemporary station in Sacramento.
The second suit was filed to block EZ's original acquisition
of six radio stations in Charlotte from Texas-based Evergreen
Media Corp., on the ground that the acquisition would lessen
competition in the Charlotte radio market. The proposed
settlement requires American Radio to divest the largest rock
station in Charlotte since following consummation of the merger
between American Radio and EZ, American Radio will, as EZ's
successor, become a party to the EZ/Evergreen action, and will be
required to fulfill EZ's divestiture obligation.
Including today's lawsuits the Department's Antitrust
Division has filed five cases to restructure radio deals since
passage of the Telecommunications Reform Act of 1996. The
Department said that the radio industry is in the midst of rapid
consolidation following passage of the Act, which relaxed
previous limits on radio station ownership. Although the Act
removed certain limits, it did not "modify, impair, or supersede
the applicability of any of the antitrust laws."
Klein said that "our actions today strike the right balance.
They preserve competition without impeding benign consolidation.
We don't have a problem with consolidation that doesn't threaten
competition."
American Radio owns 75 radio stations located in 14
metropolitan areas in the U.S. Its 1996 revenues were
approximately $270 million.
EZ owns 23 radio stations located in seven metropolitan
areas in the U.S. Its 1996 revenues were $118 million.
As required by the Tunney Act, the two proposed consent
decrees will be published in the Federal Register, together with
the Department's competitive impact statements. Any person may
submit written comments concerning the proposed consent decrees
during a 60 day comment period to Craig W. Conrath, Chief, Merger
Task Force, Antitrust Division, U.S. Department of Justice, Suite
4000, 1401 H Street, N.W., Washington, D.C. 20005, telephone
(202) 307-0001.
###
97-090