In re Application of WESTINGHOUSE
BROADCASTING CO., INC. For Renewal of License of Station KFWB,
File No. BR-8
FEDERAL COMMUNICATIONS COMMISSION
16 F.C.C.2d 1041 (1969)
RELEASE-NUMBER: FCC 69-267
MARCH 19, 1969
ACTION:
APPLICATION
[*1041] WESTINGHOUSE BROADCASTING CO., INC.,
GENTLEMEN:
This is to inform you that the Commission, upon a finding that the public
interest, convenience and necessity would be served thereby, granted your
application for renewal of license of station KFWB, Los Angeles, Calif., on
March 19, 1969.
This
grant is subject to the conditions, (a) that if and when there is a definitive
decision to effect the proposed merger between the licensee and MCA, Inc., the
Commission shall be immediately notified and, (b) that the Commission reserves
the right to take such further action (e.g., imposition of further appropriate
conditions, setting aside of this renewal action and designation for hearing)
as may be appropriate in light of the public interest considerations concerning
the said merger.
Commissioner
Bartley concurred in the result; Commissioners Cox and H. Rex Lee concurred and
issued a statement; Commissioner Johnson dissented
and issued a statement.
BY
DIRECTION OF THE COMMISSION, BEN F. WAPLE, Secretary.
Concurring
Statement of Commissioners H. Rex Lee and Kenneth A. Cox
We
concur in the letter to Westinghouse Broadcasting Company with respect to the
renewal of the license of station KFWB despite some questions about the
proposed merger between Westinghouse and MCA.
However, based upon present information, it would appear unlikely that
the proposed merger, in its present form, will be consummated. The condition attached to the renewal thus
permits the Commission flexibility to take such action as may be appropriate, in
the event we should be informed that the merger will be consummated and in
light of any new circumstances pertinent to the merger. This seems to us an orderly and sound way to
proceed, rather than the contrary course of present premature action upon a merger
which may or may not be consummated and may or may not be in the present
proposed form.
In
addition, Commissioner Cox would have liked to initiate a procedure which, in
certain stated circumstances, would require broadcast licensees who propose to acquire
substantial other businesses to file full details of such transactions with the
Commission promptly so that the agency would be in a position to take any
action it felt called for in the public interest, whether by way of considering
the matter in subsequent renewal proceedings or through any other steps which
might seem required.
DISSENTING OPINION OF COMMISSIONER NICHOLAS JOHNSON
The
Commission today renews the license of radio station KFWB,
The
Commission's standard for approving renewal applications is that "the
public interest, convenience, and necessity" will be served thereby. (47 U.S.C.
§ 309(a) (1964).) The standard
is the same for approving the sale of licenses. (47 U.S.C. § 310(b) (1964).) Whenever a license is
transferred or assigned the Commission must affirmatively find that the public
interest will be served before approval is given. [*1042] Thus,
significant changes in corporate structure, which involve changes in ownership
control of broadcast licenses, must come before the Commission for formal
scrutiny and approval.
Such is
not the case when significant corporate changes occur that do not evoke a
complete change in ownership control.
Mergers and acquisitions which do not involve a sale of licenses are
often simply ignored by the Commission.
This may be true even for mergers with great potential significance for
the public interest operations of the licensee, or mergers in direct
contravention of FCC policies.
This
anomaly has led to some disturbing and even embarrassing results for the
Commission.
The saga
of the Gannett Co., Inc., in
n1 The Commission's delegations to
the staff are so vague, and managerial insistence on standards and reports so
lax, that the Bureau felt no need to bring this matter to the attention of the
Commissioners.
n2 ABC-ITT Merger, 7 F.C.C. 2d
245, 278 (1966); 9 F.C.C. 2d 546, 581 (1967). For full chronology, see ABC-ITT
Merger, 9 F.C.C. 2d 546 at 639 (1967).
Since
the Howard Hughes' acquisition of KLAS-TV in Las Vegas (which I had urged
raised conglomerate problems at that time, Hughes Tool Co., F.C.C. 68-155
(1968)), the Hughes' organization has since acquired even more properties in
that city. And all of this is
sanctioned by the Commission without even the sketchiest examination during its
renewal process.
More
recently, the Commission was perfectly willing to renew the NBC licenses in
The
remedy for this state of affairs is readily available. The principle is simple. All structural changes in the business
organization of Commission licensees (mergers, acquisitions, new divisions,
changes in officers, directors, or principal stockholders) which do not raise
questions under the transfer provisions of the act, easily could be -- and I
would urge, must be -- evaluated by the Commission at the next renewal of a
broadcast license associated with that business entity. Renewal
[*1043] applications would
reflect these corporate changes, n3 and the Commission's renewal proceedings could be
changed accordingly. It is only through
the renewal mechanism that the Commission can evaluate broadcast company
acquisitions outside of broadcasting: the growing multimedia companies
(combines of print and electronic media, etc.), local media monopolies, and
regional or other undue concentrations of control over the mass media that grow
not by acquisitions of broadcasting properties but through acquisition by
broadcasting corporations of other ventures.
n3 It would be useful if these
ownership patterns could be accurately portrayed in the Commission's ownership
files.
However,
the present Commission files, which do not systematically require this
information, are in such disarray, with inconsistent application forms,
ownership reports, and lack of file centralization (despite promises to a
congressional committee that improvements would be made), that it is really now
hopeless to suggest additional data accumulation. The problem is compounded by the Commission's notice of inquiry
into conglomerates which remains, to this day, without staff, funds, or dates
for the filing of comments.
The
principle just enunciated is directly relevant to the case now before the
Commission. This is the first
Westinghouse broadcasting license renewal application to arise since the
announcement of the proposed merger between Westinghouse Electric and MCA,
Inc. It is the position of the parties
that the merger does not violate the antitrust laws and that there will be no
transfer of broadcast licenses. The
official position of the
A review
of the two companies will demonstrate the important implications of this merger
for the national economy, and -- what should be of even greater significance to
the FCC -- for the full and free functioning of our country's system of mass
communications. Westinghouse is the
19th largest industrial corporation in the
Westinghouse
is engaged in major research efforts on integrated circuits, electric power,
computerized educational materials, super strength metals, sonar systems,
computer controlled rapid transit
[*1044] systems, and deep sea
exploration. The full extent of
Westinghouse's present and proposed foreign holdings is not known. But Business Week for February 8, 1969
(p.76) reports that Westinghouse is seeking control of the French electrical
system "Societe Jeumont-Schneider" and that it has "plans to buy
majority shares in its
Westinghouse
Broadcasting Co. is one of the largest and most powerful multiple station
owners in
In
addition to all these stations Westinghouse also owns a broadcast station
representatives subsidiary, and another subsidiary that engages in substantial
amounts of nonnetwork television program production and syndication. (For example, its "Mike Douglas"
show was carried on 163 stations.)
MCA,
Inc., is a diversified conglomerate corporation with assets of more than $266
million. MCA's 1967 revenues were about
40 percent from television film exhibition; 27 percent from theatrical film
exhibition; 18 percent from phonograph records, music publishing, and related
activities; and 15 percent from other activities including real estate
development, banking (Columbia Savings & Loan Association of Colorado),
magnetic recording equipment and components (Gauss Electro-physics, Inc., and
Saki Magnetics), and small consumer products (Spencer Gifts).
The
activities of MCA in the production and distribution of films are particularly
relevant for Commission examination in light of its policies now under review
in the television program procurement proceeding (docket No. 12782), and for
the Commission's expressed policy of furthering the diversity of sources for
television programming. MCA owns
Universal Pictures and Revue Productions, owns 1,962 sound theatrical films,
5,657 television films, and is now producing for the networks the following
major series: "Dragnet," "Adam 12," "Ironside,"
"The Outsider," "It Takes a Thief," "The
Virginian," and "The Name of the Game." Universal Television is
also producing 14, 2-hour feature films for television distribution. In addition, MCA produced 25 theater films
in 1967 and expected to produce more in 1968.
[*1045]
MCA also produces and distributes records under the Decca, Coral,
There
are numerous characteristics of this merger, and issues they raise, that are
worthy of examination by the FCC.
(1)
There is a significant combination of assets, further increasing the growing
economic concentration of assets in the economy -- a circumstance warned
against by congressional committees and regulatory authorities in the field.
(2) The merger
has significant conglomerate aspects -- a subject now under study by the FCC,
the FTC, the Justice Department, the
The
maintenance of vigorous competition is essential to the effective operation of
preservation of our free enterprise system.
We have shown earlier that competition policy has a direct bearing on
our goals of rapid economic growth, price stability, and full employment. It also reflects important social values,
particularly those associated with a system of decentralized financial and
political power. For these reasons,
where competition fails to place adequate constraints on private discretionary
power, we must employ corrective measures to invigorate competition or apply
more direct forms of social control to private decisionmaking.
* * *
The
recent surge of conglomerate mergers has increased sharply the share of
financial resources and, potentially, the economic power held by a relatively
few large industrial firms. Further
merger-achieved centralization of economic power and decisionmaking may seriously
impair the proper functioning of our competitive, free enterprise economy, as
well as threaten the social and political values associated with a
decentralized economic system * * *.
Studies
by the staff of the Cabinet Committee on Price Stability, pp. 83-5 (1969).
(3) A
significant owner and producer of television films and series shows is joining
a major television broadcaster who also engages in television film production
for independent, nonnetwork distribution.
A significant proportion of MCA's business is with networks (for
example, MCA supplied 39 of the 57 (68 percent) movies presented by NBC between
September 1967 and September 1968).
Will Westinghouse-MCA have an incentive to concentrate on production for
networks, and cut back (or not expand) independent production? What will be the
effect of this merger on other actual or potential nonnetwork program
competitors? What will be the vertical integration effects of the merger of a
major program supplier with a major television broadcaster?
(4) What
are the possibilities that the larger corporate interests of Westinghouse in
the resolution of controversial issues such as thermal pollution, household
product safety and warranty, savings and loan regulation, nuclear electric
power, disarmament, and space expenditures will affect the content of
MCA-Westinghouse productions?
(5) What
are the effects of linking numerous record companies to a major radio
broadcaster?
(6) How
will the merger between Westinghouse and MCA affect the positions taken by the
companies before the FCC on the numerous policy issues where they might
formerly have urged divergent views?
These
are but a few of the important issues which the Commission must evaluate if it
is to perform its regulatory responsibilities.
It is simply irresponsible to suggest that the Commission's review
function under its "public interest" standard can be delegated to the
U.S. Department [*1046] of Justice and its much more limited
concerns under the antitrust laws. The
former Chief of the Antitrust Division, Professor Turner, made the point most
succinctly:
* * * It
has been my assumption that the Federal Communications Commission's
responsibilities with regard to amalgamation of media subject to their
jurisdiction do not begin and end with the question as to whether there is an
antitrust violation. It seems to me
quite appropriate for the Commission at least to consider -- with regard to a
particular acquisition of a license by somebody already owning another license
or by somebody who already owns newspapers in the town -- given the
Commission's functions and public interest considerations that they are charged
with protecting, whether even though a particular acquisition does not rise to
the level of an antitrust violation it should be stopped in the public interest
for other reasons.
If, for
example, you have an acquisition which simply could not be attacked under
section 7 because there is not substantial elimination of competition involved,
it seems to me that the Commission certainly has the power, and it would be
appropriate for it to say, "Well, there is nothing much good that can be
said for this, and it does remove one other independent voice in the community,
and therefore, it is not in the public interest to permit it."
So, to
sum up, it seems to me that the antitrust laws do not define the outermost
limits of what the Commission should take into account in deciding whether to
approve or disapprove media mergers of this kind.
Hearings
before the Senate Judiciary Subcommittee on Antitrust and Monopoly pursuant to
S. Res. 233 on S. 1312, The Failing Newspaper Act, 90th Cong. second sess. p.
3123 (1968). This is such a case.
But
there are other problems with the merger.
First, despite the protestations by Westinghouse and MCA, the
combination in all probability violates the 1962 consent decree final judgment,
United States v. MCA, Inc., entered Oct. 18, 1962 in United States District
Court for the Southern District of California (Central Division) (Civil No.
62-942-WM). n4 This judgment provides that for 7
years MCA shall not enter into a merger or acquisition of a major television
production or distribution company, or any major theatrical motion picture
company. Westinghouse now denies that
it is a major television production or distribution company -- which ought to
come as something of a surprise to a Commission that has been assured the
contrary for so many years. The consent
decree gives examples of companies with which acquisition or merger would be
barred, and Westinghouse is clearly comparable.
n4 Defendant MCA is hereby
enjoined and restrained from:
* * *
(2)
Making, at any time during the period of 7 years from the date of this
judgment, future acquisitions of or mergers with any major television production
or distribution company or any major theatrical motion picture production or
distribution company or any major phonograph record production or distribution
company (other than of or with Decca and/or Universal and/or their respective
subsidiaries), unless MCA either obtains and files herein the written consent
of the Department of Justice thereto, or, after reasonable notice to the
Department of Justice, establishes to the satisfaction of the court that any
such acquisition or merger will not unduly restrain or substantially lessen
competition in the television, theatrical motion picture, or phonograph record
industries in the United States.
A
"major television production or distribution company," for the
purposes of this subparagraph (2) shall mean Four Star Television, Screen Gems,
Inc., Walt Disney Productions, Seven Arts Associated Corp. or Desilu
Productions, Inc. (including as part of such companies their respective
subsidiaries and affiliates), or companies of comparable size to the foregoing
as presently constituted. United States v. MCA, Inc., final judgment entered
Oct. 18, 1962, (U.S.D.C. S.D. Calif., Cent. Div., Civil No. 62-942-WM).
[*1047]
Secondly, there may in fact be a transfer of control of the Westinghouse
broadcast licenses. MCA will be
acquired by an exchange of one share of MCA stock for 0.677 shares of
Westinghouse preferred stock. These
shares are directly convertible on a one-for-one basis for Westinghouse common
stock. There are about 7.8 million
shares of MCA stock, but it is not a widely held corporation -- the two leading
stockholders together hold 2.99 million shares of MCA or about 38.4
percent. Converted into Westinghouse
common, this would give these two MCA stockholders about 1.970 million
Westinghouse shares or about 4.5 percent of the Westinghouse outstanding common
stock. This is an extremely significant
holding in a widely held corporation such as Westinghouse. The combined holdings of the Westinghouse
Electric board of directors are 70,156 shares -- adding those of the officers
and directors of Westinghouse Broadcasting Co. makes the total about 155,000
shares. Thus, two MCA stockholders will
have over 28 times the control of the entire Westinghouse Electric board of
directors, and 12.7 times the total owned by all the directors and officers of
the Westinghouse Electric and Westinghouse Broadcasting! Without further investigation this
Commission simply cannot conclude that the MCA shareholders won't be in a position
to exercise negative, if not total, control over Westinghouse.
It is
incredible that the Commission would continue to renew Westinghouse licenses
without reviewing its acquisition of MCA.
There is nothing to be served by adding to the growing series of
application grants made subject to some sort of vague and unredeemed promise
for future action. The Commission
should get on with the serious business before it and begin to reevaluate its
own permissive sanction of the growing concentration of control of broadcasting
in this country. n5
n5 Since the preparation of this
opinion, the renewal action for the Westinghouse station in
Even
later have I now been informed the majority believes that "based upon present
information, it would appear unlikely that the proposed merger, in its present
form, will be consummated." I simply do not understand what is going on
here. Until the Commission hears to the
contrary from the parties most directly involved there is a proposed merger
pending before us that has direct bearings on the public interest
considerations attendant this renewal.
Until those considerations are evaluated I do not believe we properly
can make the requisite public interest finding to grant renewal, regardless of
how artful may be our "conditions."