In Re Complaint by DAILY HERALD-TELEPHONE
AND SUNDAY HERALD-TIMES, BLOOMINGTON, IND. Concerning Broadcast Stations
Advertising Policy of Sarkes Tarzian, Inc. (WTTV(TV), WTTS and WTTV-FM).
FEDERAL COMMUNICATIONS COMMISSION
23 F.C.C.2d 221
RELEASE-NUMBER: FCC 70-180
FEBRUARY
18, 1970
OPINION:
[*221]
SARKES TARZIAN, INC., East Hillside Drive, Bloomington, Ind. 47401
GENTLEMEN: This
refers to the Commission's September 18, 1969, letter transmitting the complaint
of the Bloomington, Ind., Daily Herald-Telephone and Sunday Herald-Times, and
to your response, filed October 14, 1969.
Subsequent correspondence from complainant (hereinafter Herald), filed
October 30, 1969, and your reply, filed December 3, 1969, have been considered
in connection with Herald's complaint.
The
above-mentioned documents established that your wholly owned subsidiary, Lu-Mar
Newspapers, Inc. (hereinafter Lu-Mar), publishes a daily newspaper, the
Bloomington Courier Tribune, and a weekly newspaper, the Six County
Topics. Under a package rate plan,
advertisers in the latter newspaper who purchase a certain quantity of
advertising receive a "Certificate of Broadcast Credit" entitling them
to a credit applicable to any advertising they may purchase on broadcast
stations licensed to Sarkes Tarzian in Bloomington. The face value of the certificates is equal to one-half the
monthly billing for newspaper advertising space, and the certificates are redeemed
by Lu-Mar after presentation to any of your three Bloomington broadcast
stations, WTTV(TV), WTTS, or WTTV-FM.
Herald's
complaint asserted that the above-described package rate plan contravened the
antitrust laws, laws relating to unfair competition and "well-established
principles of the FCC." The Commission's decision in WFLI, Inc., 13 F.C.C.
2d 846 (1968) was cited in support of Herald's request that the Commission
request that you terminate the practice at issue. Your reply contested the applicability of the WFLI case and was
accompanied by letters from your Indianapolis and Washington counsel setting
forth their opinions, respectively, that your advertising practices do not
contravene the antitrust laws or laws relating to unfair trade practices, and
that the package rate plan does not violate any rule, regulation or policy of
this Commission.
[*222]
The Commission does not, of course, enforce the antitrust or other laws
relating to unfair trade practices n1
as such. United States v. Radio
Corporation of America, 358 U.S. 334 (1959); NTA Television Broadcasting
Corporation (WNTA-TV), 22 R.R. 273 (1961). The Commission does, however, take
cognizance of the policies expressed in Federal antitrust and unfair
competition laws in its application and definition of the public interest standard
of the Communications Act (title 47, U.S.C. secs. 303, 307, 309, 310, 311,
316). Lorain Journal Company v. United
States, 342 U.S. 143 (1951); National Broadcasting Company v. United States,
319 U.S. 190 (1943); Metropolitan Television Company v. Federal Communications
Commission, 289 F. 2d 874 (CA DC, 1961); Uniform Policy on Violation of Laws, 1
R.R. 91: 495 (1951). A licensee's use
of his exclusive broadcasting franchise as a trade weapon, or to gain a competitive
advantage, contravenes those policies.
Packaged Programs, Inc. v. Westinghouse Broadcasting Company, Inc., 255
F. 2d 522 (CA-3, 1958); Mansfield Journal Company v. Federal Communications
Commission, 180 F. 2d 28 (CA DC, 1950); see: United States v. Griffith, 334
U.S. 100 (1947); Philco Corporation v. Federal Communications Commission, 257
F. 2d 656 (CA DC, 1958); WFLI, Inc., supra. Also applicable to the case at hand
is the principle pervasive of communications law, that radio broadcast stations
must be operated in the public interest and that they may not, therefore, be
used to subserve the purely private interests of their licensees. Television Corporation of Michigan v.
Federal Communications Commission, 294 F. 2d 730 (CA DC, 1961); KFKB Broadcasting
Association, Inc. v. Federal Radio Commission, 47 F. 2d 670 (1931); WFLI, Inc.,
supra; Deceptive Practices in the Broadcasting Media, 19 R.R. 1901 (1959).
n1 Sherman Anti-Trust Act (title 15,
U.S.C. secs. 1 and 2), Robinson-Patman Price Discrimination Act (title 15,
U.S.C. sec. 13), Clayton Act (title 15, U.S.C. sec. 14), and Federal Trade
Commission Act (title 15, U.S.C. sec. 45).
We find, on the
basis of the foregoing authorities, that the practices in question are
inconsistent with the public interest.
Instead of relying on direct competitive means in the newspaper field
(e.g., lower rates; better services; etc.), the licensee is clearly using the
leverage of the exclusive broadcasting franchises as a means of gaining an
advantage over a competitor in another field (here the newspaper field). The situation here could be paralleled by
other examples (e.g., a station owner who competes also in a manufacturing
field and offers broadcast discount certificates to induce potential customers
in the manufacturing field to deal with him).
The permit is given for operation in the public interest; it is simply
not bestowed upon an applicant to be used as a wedge in other competitive
endeavors. This principle is not
rendered inapplicable because the competition in the non-broadcast field is
well entrenched with a dominant share of the market.
The Commission
has received your counsel's letter dated February 16, 1970, stating that you
suspended the package sales practice in September 1969 until the Commission
could pass upon the merits of the matter, and that the licensee has decided it
will not reinstitute the practice.
[*223]
The Commission accepts counsel's letter of February 16 as the licensee's
statement of future compliance with the policies set forth herein.
Commissioners
Burch (Chairman), Bartley, Robert E. Lee and Cox concurred in the result;
Commissioner Johnson dissented and issued the attached opinion; Commissioners
H. Rex Lee and Wells dissented.
By direction of
the Commission. BEN F. WAPLE, Secretary.
Sarkes Tarzian,
Inc.
[Complaint of Daily Herald-Telephone and Sunday
Herald-Times, Bloomington, Ind., against Sarkes Tarzian, Inc., licensee of
Stations WTTV(TV), WTTS, and WTTV-FM, Bloomington, Ind.]
DISSENT:
DISSENTING
OPINION OF COMMISSIONER NICHOLAS JOHNSON
The Commission
majority in their letter to Sarkes Tarzian, Inc., licensee of WTTV(TV), WTTS,
and WTTV-FM, Bloomington, Ind., concludes that certain practices engaged in by
the licensee are "inconsistent with the public interest." His conduct
seems to be clearly proscribed by the many cases cited in the majority's
letter; and quite possibly he is in violation of the Sherman Act, the Clayton
Act, the Robinson-Patman Act, and the Federal Trade Commission Act, although
the majority prefers not to reach the issue of these violations relying instead
on the violation of the Communications Act's more general "public
interest" standard.
These are
serious findings by the Commission. The
licensee is judged to be derelict in serving the public interest, and his
actions raise serious questions about a possible violation of the antitrust
laws. But the majority elects merely to
inquire of the licensee what he intends to do about the continuation of these
practices.
I am troubled by
the severity of the charges against this licensee, and I am troubled by the
weakness of the majority's action. I
think that a hearing is needed to determine exactly what the facts are in these
alleged anticompetitive practices. The
Commission's information is unclear as to what the licensee has really done and
what the legal effect of his action is.
We are left in the position of forbidding the continuation of something
-- but we don't know exactly what or why.
I feel that a
hearing is also needed to determine if the licensee has engaged in other
practices which can be characterized as anticompetitive or whether this is an
isolated incident. We cannot escape our
responsibility toward the public by pretending that we are aware of all illegal
practices by our licensees. We have an
obligation to look more closely at those abuses we do find to ascertain the
extent of the abuses and to acquaint ourselves more fully with the practices of
the industry.
Violations of
the "public interest" standard, and probably infringements of the
antitrust laws, should not be excused by a simple warning against doing again
whatever was done. The public is
entitled to have the facts developed in a hearing, and the licensee is entitled
to [*224] have the opportunity to clear his record and establish why his
actions were in the public interest. If
he cannot, the Commission is obliged to consider the possible revocation of his
license.
The conduct
involved appears to be relatively straightforward: Sarkes Tarzian, Inc., is the
licensee of the only broadcast stations in Bloomington, Ind., a town with a
population of 42,000. Sarkes Tarzian's
wholly owned subsidiary, Lu-Mar Newspapers, Inc., publishes two newspapers in
the Bloomington area. A competing
newspaper -- the dominant medium in Bloomington based on advertising revenues
-- alleged that advertisers in the Sarkes Tarzian newspapers were issued
certificates equal in value to one-half the cost of their advertising in those
newspapers. The certificates were used
to pay for advertising on the Sarkes Tarzian broadcast stations.
I. Licensee Misconduct
A. The
antitrust laws
This practice,
admitted by Sarkes Tarzian, Inc., may be in violation of the antitrust laws,
although the licensee concludes that it is not. He bases his conclusion that he is not engaged in an illegal
"tying" operation under section 3 of the Clayton Act upon the fact
that the section deals only with tying arrangements involving commodities, not
services. He concludes -- probably
correctly -- that advertising is a service rather than a commodity. And he correctly recognizes that tying
arrangements of services can only be dealt with under sections 1 and 2 of the
Sherman Act. For a tying to be per se
illegal (not requiring an inquiry into the actual effect of the tie-in) under
the Sherman Act, the licensee, relying on Times-Picayune v. U.S., 345 U.S. 594
(1953), feels that two tests must be met: The seller must have "a
monopolistic position in the market for the 'tying' product" and "a
substantial volume of commerce in the 'tied' product" must be "restrained."
Id. at 608-09. Since the licensee has only 15 percent of the newspaper market,
he concludes that there was no per se violation and that a full inquiry into
the effects of the tie-in would show that it was not anticompetitive.
The licensee is
correct as far as his reasoning goes.
But he has neglected to consider a case decided by the Supreme Court on
April 7, 1969, Fortner Enterprises, Inc. v. United States Steel Corp., 394 U.S.
495 (1969). In that decision the Supreme Court departed from the test
established in Times-Picayune, returning to its reasoning in an earlier case,
International Salt Co. v. U.S., 332 U.S. 392 (1947). In dealing with whether a
substantial amount of commerce is restrained, the Court in Fortner said that
the consideration is not the market shares of the firms in the industry but
only whether the amount restrained is "substantial enough in terms of
dollar-volume so as not to be merely de minimis * * *" 394 U.S. at 501.
The Court concluded that the $200,000 involved in that case was
"substantial." As to the need for monopoly power over the tying
product, the Court stated that: This standard does not "require that the
defendant have a monopoly or even a dominant position throughout the market for
the tying product. Our tie-in cases
have made unmistakably clear that the economic
[*225] power over the tying
product can be sufficient even though the power falls far short of dominance
and even though the power exists only with respect to some of the buyers in the
market." 394 U.S. at 503.
I conclude then
that there would be no difficulty in finding that an established tying
arrangement involving the market situation before us was per se illegal. I am not, however, convinced that the facts
show a tying arrangement in the classical sense. It may rather be simply a situation where discounts are given to
certain people. If so, the conduct
could be a violation of the Robinson-Patman Act, but it would depend on a
number of facts and factual interpretations: Whether "commodities"
are involved, whether the discounts are "cost-related," whether the
discounts are reasonable and pro-competitive, and so forth. My point is that I have not definitely
concluded that an antitrust violation exists, and that without a hearing it is
impossible for anyone to conclude one way or the other.
For example,
assume, as the licensee seems to, that the facts establish a tying
arrangement. Relying upon what I
believe to be overruled authority, he concludes that there is no per se
violation of the Sherman Act. Even
assuming that he is right -- that his conduct is not per se illegal -- a
hearing is still needed to inquire into the reasonableness of the
arrangement. The court-established
doctrine of a per se violation is to allow a court to avoid an unnecessary hearing
by issuing a summary judgment against the defendant. But the absence of a per se violation does not excuse further
inquiry; rather it compels further inquiry.
For a violation of the antitrust laws may well be established after a
full hearing, even though it has been determined that a per se violation does
not exist. See Fortner Enterprises v.
United States Steel Corp., 394 U.S. 495, 499-500 (1969).
Therefore, even
if the facts and law were as the licensee claims, a hearing would still be
needed to decide the legality of his conduct under the Sherman Act. And a determination of whether other
antitrust laws have been violated requires the development of the facts and law
much more fully. I know of no other way
for this Commission to get the information it needs to make an intelligent
decision than through a hearing. The
hearing need not be a punitive measure -- although I recognize that most
licensees have come to interpret it as such.
With the cooperation of all parties, the hearing need not be burdensome
or expensive. Rather, through the
development of reasonable, summary procedures, it can become solely a means for
this Commission to get the information necessary to understand the operations
of its licensees.
B. The
"public interest" standard
Of course, this
Commission technically need not concern itself with establishing a violation of
a specific antitrust statute. Using the
rationale of the antitrust laws, and analogizing to a Government-issued patent,
we can decide that this behavior is wrong under the "public interest"
standard of the Communications Act. The
essence of any illegal conduct of this licensee is the extension of monopoly
power in one field (broadcasting) into a related field (newspapers). This conduct [*226] is analogous to
the illegal activity of the holder of a patent in seeking to restrain
competition in an industry related to his patent. WFLI, 13 F.C.C. 2d 846 (1968). For example, the holder of a
patent for a light bulb filament might seek to monopolize the light bulb
industry, through the licensing of only those companies controlled by him.
The
determination has been made that the public interest will best be served in the
broadcast industry by the granting of Government franchises to operate
broadcasting outlets. These franchises
guarantee some degree of monopoly power in the holder. Most everyone would agree that this monopoly
power is not desirable, but it was thought to be technologically necessary for
the development of broadcasting. Until
promised technological developments can be effectively realized, there is
probably no alternative to some Government-protected monopoly power. But that does not mean that we cannot, and
should not, take every step possible to prohibit the extension of this power
from broadcasting into related fields.
If the licensee
in this case had given "discounts" to the advertising customers in
his newspapers by reducing the prices charged to them for advertising space,
the action would be purely competitive and desirable. But what he seems to have done was to give discounts to his
newspaper advertisers by reducing the monopoly profits of his broadcast outlets
-- monopoly profits given to him and protected by a Government franchise. Such a system of discounts could easily
develop into a scheme of cross-subsidization, where a monopoly in one market is
used to destroy competition in another market.
When the Government has established the monopoly in the first market, it
carries a special responsibility for assuring that competition is not weakened
in the second.
The Commission
majority has decided not to reach some of the specific antitrust issues in this
case, by concluding that the behavior is wrong under the "public
interest" standard. To me the
enforcement of this standard is equally as essential to the health of this
Nation as the enforcement of the antitrust laws, and should be enforced with
equal vigor. If I believed that my
colleagues agreed with me, I would feel no need to argue for additional
statutory standards. But it seems apparent
to me that the majority of this Commission simply uses the "public
interest" standard as an escape from the rigorous thinking and exhaustive
fact-finding required to establish an antitrust violation. As a general rule, therefore, I think that
it is useful to determine whether a licensee is in violation of the antitrust
laws rather than merely relying on the Communications Act. Such an inquiry is clearly contemplated as a
part of FCC regulation.
The FCC in
administering its public interest standard must be cognizant of the antitrust
laws. Although the FCC itself does not,
and could not, actually "administer" the antitrust laws, it must take
these laws into consideration in performing its regulatory functions. The FCC "should administer its regulatory
powers with respect to broadcasting in the light of the purposes which the
[antitrust laws were] designed to achieve." National Broadcasting Co. v.
U.S., 319 U.S. 190, 223 (1943). "[Once] an antitrust violation is
established, [*227] this alone will normally constitute
substantial evidence that the agreement is 'contrary to the public interest,'
unless other evidence in the record fairly detracts from the weight of this
factor." Federal Maritime Comm. v. Aktiebolaget Svenska Amerika Linien,
390 U.S. 238, 245-46 (1968).
II. Necessity of the Inquiry
The courts of
this Nation have for years been aware of the necessity of a competitive
media. The Supreme Court in 1953 said:
"A vigorous and dauntless press is a chief source feeding the flow of
democratic expression and controversy which maintains the institutions of a
free society." Times-Picayune v. U.S., 345 U.S. 594, 602 (1953), citing
Associated Press v. U.S., 326 U.S. 1, 20 (1945). The Court of Appeals for the
District of Columbia has placed an affirmative duty upon the FCC to encourage
competition. In Joseph v. FCC, 404 F.
2d 207, 211 (D.C. Cir. 1968), the court said: "The public welfare requires
the Commission to provide the 'widest possible dissemination of information
from diverse and antagonistic sources' * * *."
In an important
recent decision, Judge Edward A. Tamm, after discussing the necessity of a free
and competitive press, and the FCC's responsibility for its maintenance, went
on to write: "It is also becoming increasingly obvious that application of
antitrust doctrines in regulating the mass media is not solely a question of
sound economic policy; it is also an important means of achieving the goals
posited by the first amendment." Hale v. FCC, F. 2d (D.C. Cir.,
Feb. 16, 1970) (concurring opinion). He
quoted Judge Learned Hand who wrote, in rejecting a claim that the first
amendment provided protection for anticompetitive practices of a news service:
[Neither]
exclusively, not even primarily, are the interests of the newspaper industry
conclusive; for that industry serves one of the most vital of all general
interests: the dissemination of news from as many different sources, and with
as many different facets and colors as is possible. That interest is closely akin to, if indeed it is not the same
as, the interest protected by the First Amendment; it presupposes that right
conclusions are more likely to be gathered out of a multitude of tongues, than
through any kind of authoritative selection.
To many this is, and always will be, folly; but we have staked upon it
our all. ( U.S. v. Associated Press, 52
F. Supp. 362, 372 (S.D.N.Y. 1943), aff'd.
326 U.S. 1 (1945).)
The enforcement
of the antitrust laws is not a trivial matter.
In their application to the mass media, vigorous enforcement is needed
to promote the competition which is absolutely essential to our system of
government. For a democracy can only
survive when supported by an informed electorate. Without information the people cannot exercise their right of
participation, and the Government becomes remote and seemingly
unresponsive. Democracy will have
failed, if ever the people, as Judge Tamm wrote, "feel that they are being
cheated out of the vigorous marketplace of ideas promised by the first
amendment." F. 2d .
To some, this
case may seem like a minor matter, hardly deserving of the time I have given
it. But I do not agree. The application of antitrust principles to
the structure of the broadcast industry, and the prohibition of anticompetitive
practices in the broadcast media,
[*228] must be among the primary
responsibilities of this Commission.
The courts have seen the absolute necessity of a competitive media, and
no other Government agency seems to have the time or inclination to devote
substantial resources to the study and regulation of the media industries. Congress has given this Commission the
mandate to act. If we balk or refuse,
the Congress and the people have the right to be told.
The allegations
in this case are serious. The facts are
unclear. Their relationship to the
conflicting law is even more confusing.
The conduct of this licensee may have been perfectly legal. Or it may have been a flagrant flaunting of
the antitrust laws requiring a more severe sanction than a simple warning
against continuing violations. The
point is: We don't know. I dissent to
the refusal of the majority to order a hearing to determine the best action for
this Commission to take.