In Re Application of E. D. MARTIN
AND R. E. MARTIN, JR. (TRANSFERORS), AND FUQUA INDUSTRIES, INC. (TRANSFEREE) For
Transfer of Control of Martin Theatres of Georgia, Inc., Licensee of WTVM-TV,
Columbus, Ga., and WTVC-TV, Chattanooga, Tenn.
File No. BTC-5729
FEDERAL COMMUNICATIONS COMMISSION
16 F.C.C.2d 478 (1969); 15 Rad. Reg.
2d (P & F) 626
RELEASE-NUMBER: FCC 69-119
February 7, 1969 Adopted
BY THE
COMMISSION: COMMISSIONERS BARTLEY AND JOHNSON
DISSENTING AND ISSUING STATEMENTS; COMMISSIONER COX DISSENTING;
COMMISSIONER H. REX LEE CONCURRING AND ISSUING A STATEMENT.
[*478] 1.
The Commission has before it for consideration the above captioned
application.
2. The proposed transferee or its principal, J.
B. Fuqua, controls a TV station in
n1 An application to assign
KTHI-TV,
3. Proposed programming for WTVM is -- News 7.3
percent; public affairs, 2.2 percent; all other -- 3.1 percent; and maximum
commercial matter -- 16 minutes. To
determine community needs transferee interviewed 46 community leaders in
4. Proposed programming for WTVC is News -- 5.7
percent; public affairs -- 2.0 percent; all other -- 8.3 percent; and maximum
commercial matter, 16 minutes. To
determine community needs transferee interviewed 31 businessmen,
representatives of charitable organizations, school officials, clergymen, and
other community leaders. Transferee
concluded there was a need for more local news and plans to increase personnel
and equipment, with regular news broadcasts covering such news during the
daytime. The transferee stated it would
attempt to recruit personnel from minority groups. It also noted that it plans to continue daily children's programs
which have children participating from all races and economic levels of the
coverage area.
Transferee
is financially qualified to acquire and operate the stations. No cash is required for the purchase, and
the stations have been running at a profit.
The Fuqua consolidated balance sheet shows a healthy financial position.
5. The acquisition of WTVM-TV,
FEDERAL
COMMUNICATIONS COMMISSION, BEN F. WAPLE, Secretary.
CONCURRING
OPINION OF COMMISSIONER H. REX LEE
I join
the majority decisions to approve the transfer of WTVM (TV), Columbus, Ga. and
WTVC (TV), Chattanooga, Tenn. to Fuqua Industries, Inc.; of WRTH, Wood River,
Ill. to Avco Broadcasting Co.; and KBIG, Avalon, Calif. and KBIG-FM, Los
Angeles, Calif. to Bonneville International Corp.
I take
such action because the proposed transfers conform to existing Commission laws,
regulations and public interest standards.
The FCC, through orderly procedure, has established rules and guidelines
in the realm of media concentration.
But these rules do not go far enough.
They do not specifically spell out the line of public interests which
broadcasters may serve in the fulfillment of substantial public objectives.
In view
of this situation, a hearing is not deemed necessary. The scope of questions addressed to media concentration is narrowly
confined by FCC multiple ownership rules.
In these cases, this results in neither the public interests nor the
interests of fairness in administrative due process being served by an
evidentiary hearing. Even in such an
examination, the lack of standards makes it difficult for the interested
parties, including the public, to present evidence, and [*486] for the Commission to make a sound
judgment. The argument is noted that
under existing Commission procedures, the hearing process is frequently the equivalent
of a denial -- if for no other reason than the amount of time and expense
consumed by it. It is hoped these two
hardships of the hearing process can be alleviated through the development of
new procedural standards which may be applied when needed.
Nevertheless,
there is concern in various quarters about the growth of media
concentration. The political, social,
and economic influence, concentrated in a few broadcast facilities, raises
fears -- a dimension of which cannot be dispelled by the Commission's multiple
ownership rules.
The
FCC's examination of this problem must keep pace with the changing complexion
of the broadcast industry. In this
period of change, the FCC is in transition between its existing rules and the
formulation of new standards. This
means that parties to Commission transfer proceedings also find themselves in a
difficult position. It is often
impossible for them to prior assess whether their transfer proposals will
constitute a prohibited media concentration.
In fact, there is virtually no way of knowing what is or is not
prohibited. These difficulties are
magnified because the FCC lacks adequate standards by which to judge the nature
of these new developments. This not
only creates problems for the Commission, but causes confusion within the
broadcasting industry.
Therefore,
I am pleased that the Commission is issuing a public notice of inquiry. It is hoped that the inquiry will result in
the formulation of more precise standards which will better serve the public interest,
as well as afford the broadcasting industry an opportunity to see where it
stands.
The
Commission should consider the findings which emerge from such an inquiry in
processing normal filings. For
certainly, if standards are derived by which a more meaningful test of public
benefits can be proved, the course of future actions will be carefully
distinguished. In sum, I stress that I
intend to examine future cases very carefully to determine what public benefits
will result.
DISSENTING
STATEMENT OF COMMISSIONER ROBERT T. BARTLEY
The
showing made in the application is inadequate for me to make an affirmative
determination that the transfer can be expected to bring about an improvement
in the general structure of broadcasting.
I believe
that serious public interest questions arise from the transfer of these two
television stations to a conglomerate corporation, publicly owned and traded on
the New York Stock Exchange, and a multiple owner, with its president, of seven
additional broadcast stations (its president has held and disposed of interests
in three other broadcast stations).
Accordingly,
I vote for an evidentiary hearing to determine how the transfer would, in fact,
serve the public interest, convenience, and necessity.
In the absence
of rules prohibiting continuing concentration of the broadcasting structure,
the only alternative is through the hearing process where case law can be
applied. The mere pendency of an
inquiry will not serve to halt the present trend. In the interim, I believe we should institute hearings where
concentration is increased.
[*480] DISSENTING OPINION OF COMMISSIONER NICHOLAS
JOHNSON
The
Commission has before it an assignment and transfer case. The principal stockholders of
n2 As in most of its opinions
approving the acquisition of broadcast properties by conglomerates, the
majority's opinion leaves a great deal to be desired. Beginning with the understatement of the day, that the Fuqua
consolidated balance sheet shows a healthy financial position, the opinion goes
on to state:
"The acquisition of WTVM-TV,
I have
explored elsewhere today the inadequacy of such analysis. In re application of John Poole Broadcasting
Co., Inc., F.C.C. 69-118 (1969).
There
are a number of troublesome trends in the media ownership pattern in this
country, many of which I have detailed elsewhere: local monopolies, regional
concentrations of control, national chain owners, multimedia corporations, and
conglomerate corporations' ownership of media.
These are the "pure" cases; in reality, more than one of these
characteristics may be present in a single instance. So it is with Fuqua.
Fuqua
Industries is acquiring two stations simultaneously in the same region of the
country; it is already a multiple-station owner; the theater operation raises
the problems of multimedia ownership; and it is a significant conglomerate
corporation. Some of these
characteristics standing alone are sufficient to warrant a hearing; taken
together they certainly are.
REGIONAL
CONCENTRATION
J. B. Fuqua
already possesses significant political power in the State of
J. B.
Fuqua has been chairman of the Georgia State Democratic Party. Fuqua's headquarters are in
n3 No license for a television
broadcast station shall be granted * * * if the grant * * * would result in a
concentration of control of television broadcasting in a manner inconsistent
with public interest, convenience, or necessity. In determining whether there is such a concentration of control,
consideration will be given to the facts of each case with particular reference
to such factors as the size, extent, and location of area served, the number of
people served, and the extent of other competitive service to the areas in
question. 47 C.F.R. § 73.636 (1968).
MULTIPLE-STATION
OWNERSHIP
Fuqua is
no novice at buying and selling broadcast properties. It is presently a substantial multiple owner. Fuqua owns WJBF-TV in
Fuqua
acquired KTVE-TV,
n4 Fuqua explains:
At the end of September 1965, Mr.
Fuqua was thus personally in debt in the amount of $4.5 million * * *. Anticipated cash income from Claussen's
[Bakery, a subsidiary] thus did not develop and this was not a source from
which any of the indebtedness of Fuqua National could be paid * * *.
* * *
This
stock note was renewed periodically with the understanding that it would be
retired by the end of 1967 since the banks did not wish to carry a
nonamortizing note indefinitely.
Because of the tight money, market conditions in 1967 and because of the
limited cash flow in Fuqua National, it was not practical to refinance the note
plus the unpaid balance of the $2.5 million note and there was no alternative
other than liquidation of some asset of Fuqua National. It should be pointed out that no part of the
stock of Fuqua Industries, Inc., owned by Fuqua National, while listed on the
New York Stock Exchange, could be sold without a full SEC registration. Even though the stock had very substantially
enhanced in value, this would not have been practical since a sale of stock by
the chief executive officer would have had a very bad effect on the market
value of all Fuqua Industries shares.
* * *
The KTVE
sale was completed the last week in December 1967, and the obligations to the
banks were discharged in accordance with prior agreements. Had Mr. Fuqua died at any point during this
interval of several years, since the banks held all the stock of Fuqua National
and all of the stock of the public company, Fuqua Industries, Inc., the only
liquidity in his estate then or in the foreseeable future would be a nominal
amount of life insurance. There would
have been no way to pay the estate taxes other than a liquidation of some of
the assets of Fuqua National and obviously KTVE would have been sold by Mr.
Fuqua's executors, since it was the only readily marketable asset owned by
Fuqua National. (Emphasis added.)
The
Commission's traditional concern in ownership of broadcast properties has been
exercise of control. One area
substantially ignored has been the influence of credit arrangements. Here banks at one time held all the stock of
the licensee, in other situations an equipment manufacturer may be the creditor
of up to half or more of the value of an ownership transfer. The Commission ought to reexamine the
ownership questions posed by this application and in addition include questions
involving joint ventures by competing licensees, influence of creditors, and
other contract relationships entered into by licensees. Fuqua owns two stations
it simply leases -- a peculiar arrangement under which it is not even the
formal Commission licensee.
Fuqua
has also recently disposed of another station with a somewhat checkered
history. KTHI-TV,
MULTIMEDIA
Ownership
of motion picture theaters in the same region in which one controls the major
VHF television stations does not, of course, constitute a local monopoly in the
marketplace of ideas. It is not the
same as common ownership of all newspapers, broadcast properties, cable
television systems and motion picture theaters in a single community. Motion pictures are, nonetheless, an
important medium for the communication of information and ideas, and the
ownership of theaters is of relevance to the Commission in this context. Moreover, because of the current reliance of
television stations and networks upon motion pictures for television
programming (7 nights at the movies), there are significant antitrust issues
involved in common ownership of competing outlets for the movie-maker's
product.
CONGLOMERATE
CONTROL OF MEDIA
Fuqua
Industries is, finally, a conglomerate corporation. The problem with conglomerate corporate ownership of the mass
media is quite simple. It imposes an
added burden, and an unnecessary risk, upon the [*483] integrity of the
information presented to the American people.
It creates a situation in which the incentives are almost irresistible
for the holding company to view the mass media subsidiary as but a part of its
advertising, public relations, and public information program for its more
predominant and profitable industrial subsidiaries. The risk, of course, is that, whether through overt corporate
policy or through unspoken understandings, the media subsidiary will select the
information to be presented, and the way in which it's presented, so as to put
the economic interests of the corporate family (and its suppliers and
customers) in the best possible light.
In an age when what the American people don't know can, quite literally,
kill them, such risks are matters of serious national consequence.
A
conglomerate can exist at any geographical level: a "company town"
where the company owns the single television station raises conglomerate
problems of the same kind as when a large national conglomerate seeks to
acquire a network.
Fuqua is
such a conglomerate. It was recently
the subject of a special story in The National Observer by Harold H. Brayman,
under the title "Assembling a Huge Conglomerate: How Mr. Fuqua Puts
Together a Diverse and Profitable Empire." (Jan. 6, 1969, p. 9.) After
itemizing Fuqua's present interests the author reports:
Fuqua
expects to enter more areas. While the company
has established no specific goals it will discuss, Mr. Fuqua's comments
indicate he's aiming higher, maybe to 1969 sales of $500 million. The company has merger investigations going
with 25 companies now, and tentative agreements pending on several that Mr.
Fuqua won't identify.
Mr.
Fuqua is quoted as saying, "The theory behind a conglomerate company --
it's a right interesting one -- is that the sum of the parts exceeds the total
of each of the parts operating by themselves."
A recent
report issued by a Presidential committee takes a somewhat different view:
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.
We have
seen that modern technological requirements generally do not dictate high
market concentration and huge enterprises that prevent effective
competition. On the contrary, in many
industries the opportunities for competition appear to be greater today than in
decades past. Although technological
requirements generally do not pose a threat to competition, other developments
do, particularly the massive industrial restructuring resulting from the
current conglomerate merger movement.
It is imperative that Federal programs strive to reinforce and nurture
vigorous competition.
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
[*484] competitive, free
enterprise economy, as well as threaten the social and political values
associated with a decentralized economic system * * *. n5
n5
Studies by the staff of the cabinet committee on price stability, pp. 83-5
(1969). The Commission's own inquiry
into conglomerate broadcast holdings also suggests some agency uncertainty as
to ultimate evaluation of mergers such as approved here. I have discussed the legal significance of
that uncertainty for this case in my dissenting opinion in another conglomerate
acquisition approved today, In re application of John Poole Broadcasting Co.,
Inc., F.C.C. 69-118 (1969).
The case
before us today involves a conglomerate corporation adding to its holdings by
acquiring two television stations. The
conglomerate seeks Commission approval.
I object to the Commission's grant.
In
Fuqua's own words, "Fuqua Industries, Inc., is a multimarket manufacturing
and service company with operations principally in the areas of broadcasting,
power lawnmowers, land clearing and tillage implements, mobile homes, and motor
freight." A chart prepared for a prospectus issued in connection with
Fuqua's acquisition of Interstate Motor Freight System offers indication of the
relative importance of the various enterprises. It highlights what a small proportion of the parent's income is
represented by broadcasting. n6 Fuqua has disposed of its
construction products and warehousing enterprises. It has also acquired additional companies, mobile homes
manufacturers and makers of metal tanks since the chart was completed. The National Observer article indicates
Fuqua's growth, and future hopes -- from a profitless $14 million in sales in
1965 to $200 million in sales and $8 million in profits in 1968. For the future, 1969 sales of $500 million,
merger investigations with 25 companies, and a foreign investment program.
n6 See the following tables:
1967
[Percent]
Net
sales Net income
Broadcasting 3 2
Photographic processing 6 9
Grain storage equipment 6 13
Power lawnmowers 8 19
Metal buildings 12 7
Land clearing and tillage 5 10
Motor freight 51 35
Construction products 8 4
Warehousing 1 1
As a result of this merger and one
proposed with Pacemaker Corp. the relative shares would have been as follows
for 1967:
1967
[Percent]
Net
sales Net income
Broadcasting 4 7
Photographic processing 5 8
Grain storage equipment 4 10
Power lawnmowers 6 16
Metal buildings 9 6
Land clearing and tillage 4 8
Motor freight 38 29
Motion picture theaters 10 9
Power boats 13 3
Construction products 6 3
Warehousing 1 1
[*485]
These statistics offer some interesting insights. While the two TV stations to be acquired add
only 1 percent to net sales they add 5 percent to net income. (Exhibit 3 of the application indicates that
the television properties represent less than 10 percent of the combined assets
(book value) and less than 13 percent of gross revenues and contribute less
than one-third of the net income to the combined income of the three [Martin]
companies.) But in any case broadcasting is to be a small part of the
operations of this company. The
Commission has steadfastly refused to consider the impact of conglomerate
ownership of broadcast properties. But
ownership of stations by a company to whom the stations are only 4 percent of
sales is a far cry from the concept of local community ownership and
management. Does this change in
structure of ownership, in this case and throughout the Nation, offer no
questions or issues to be explored before the Commission abets the surge of
conglomerate mergers? Is there no concern about performance of broadcasters
owned by conglomerates, in quality of local service, in willingness to put
public interest above profit, in courage to treat controversial issues, or in
scrupulous objectivity in decisions about program content, especially in the
news and public affairs area? The
paltry promises of improved service achievable supposedly only by this merger
pale before consideration of these more important issues. If these were the first stations Fuqua was
to acquire (and no movie theaters were included), these issues would still be
relevant. But, as we have seen, there
are additional complexities in the case.
I would
hope the need for a hearing in this case would be abundantly clear to anyone
who would consider the facts and issues I have attempted to sketch in this
brief statement. I regret that it is
not.
I
dissent.