In Re Application of JOHN HAY WHITNEY (TRANSFEROR) AND DUN
& BRADSTREET, INC. (TRANSFEREE) For Transfer of Control of CORINTHIAN BROADCASTING
CORP., Parent of the Licensees of Station KOTV (Tulsa, Okla.); KXTV
(Sacramento, Calif.); KHOU-TV (Houston, Tex.); WISH-TV (Indianapolis, Ind.);
and WANE-TV (Fort Wayne, Ind.)
File
No. BTC-6201
FEDERAL COMMUNICATIONS COMMISSION
28 F.C.C.2d 736
RELEASE-NUMBER: FCC 71-420
April 23, 1971 Released
Adopted April 14, 1971
JUDGES:
BY THE COMMISSION: COMMISSIONER BARTLEY DISSENTING AND ISSUING A STATEMENT IN
WHICH COMMISSIONER JOHNSON JOINS. COMMISSIONER H. REX LEE DISSENTING
AND ISSUING A STATEMENT
OPINION:
[*736] 1.
Corinthian Broadcasting Corporation (Corinthian) owns all the stock of the
licensees of the following stations: KOTV (Tulsa, Oklahoma); KXTV (Sacramento,
California); KHOU-TV (Houston, Texas); WISH-TV (Indianapolis, Indiana); and
WANE-TV (Fort Wayne, Indiana). John Hay Whitney (Whitney) presently has
de facto control of Corinthian through his direct ownership of 32.1% of
Corinthian's outstanding shares and his ability to vote an additional 8.1% of
Corinthian's shares, a total of 40.2%. The referenced application
contemplates a merger of Corinthian and Dun & Bradstreet, Inc. (D & B),
and a resulting transfer of control of the licensees to D & B. After the
merger, Whitney and his associates would be in a position to vote approximately
7.1% of D & B's post-merger stock, the largest single block in D & B.
2. In addition to the
application, as amended, we have before us the following pleadings and
documents:
a. "Petition to Deny and
for Other Relief", filed by RJN Broadcasting, Inc. (RJN); an
"Opposition to 'Petition to Deny' and to Other Filings"; filed by the
applicants; RJN's "Reply"; and the applicants' "Contingent
Request for Leave to File Further Pleading".
b. "Petition to
Deny" filed by LVO Cable, Inc. (LVO); the applicants' "Opposition to
So-Called 'Petition to Deny' of LVO Cable, Inc."; LVO's "Petition for
Reconsideration [of the Commission's Order -- 22 FCC 2d 436 -- denying an
earlier request to extend the time for filing a petition to deny] and Motion
for Acceptance Out of Time"; and the applicant's opposition to the latter
petition and motion.
c. A "Reply to Opposition
of Anthony R. Martin-Trigona" (Martin-Trigona) filed by the applicants on
March 24, 1970; a letter from Anthony R. Martin-Trigona [*737]
dated March 27, 1970, to which is attached a copy of his "Opposition to
Proposed Transfer of Control"; a letter dated April 8, 1970 from
Martin-Trigona stating further objections to the application; the applicants'
opposition (a pleading filed jointly against the RJN objections and
Martin-Trigona's); a letter dated May 16, 1970 from Martin-Trigonia supporting
the LVO and RJN objections and replying, in effect, to the applicants'
opposition; a "Statement" of the applicants denying charges in the
previous item; a letter of July 7, 1970 from Martin-Trigona urging conglomerate
issues in view of the Penn-Central collapse; and the applicants' letter in
opposition to the previous item, and undated letter received August 5, 1970
from Martin-Trigona referring to a $6,000,000 jury verdict rendered against D
& B in certain court proceedings; and the applicants' reply to the previous
item.
d. Our letter of November 30,
1970, sent to the applicants following initial consideration of the application
and requesting new or additional information on (a) the "compelling public
interest showing" required under the Top-50 policy (12 RR2d 1501, 1507);
(b) competitive practices to be followed after merger; (c) a statement from the
Federal Trade Commission and the Department of Justice indicating the proposed
merger is not objectionable under any of the antitrust laws or policies of the
United States; (d) interlocking directorates and a statement of what policy
would be followed after merger to prevent use of such cross-directorships to
the competitive disadvantage of any D & B competitor; and (e) the nature
and extent of asserted improvements in the area of children's programming or
any other programming improvements contemplated by the applicants.
e. A letter of February 1,
1971 from Corinthian and D & B responding to points a, b, d, an d e of the
previous item; a letter of February 8, 1971 from Martin-Trigona commenting on
the applicants' February 1st response; a letter of February 16, 1971 from RJN
commenting on the applicants' February 1st response; and a letter of February
19 from the applicants replying to the RJN and Martin-Trigona comments.
f. A letter of February 19,
1971 from the Antitrust Division of the Department of Justice indicating the
Division's position on the proposed merger.
g. A letter of February 19,
1971 from the applicants setting forth their response -- based on the Antitrust
Division's position -- to point c of Item d, supra; a letter of March 1, 1971 from
Martin-Trigona commenting on the applicants' response to Point c; a letter of
March 3, 1971 from the applicants indicating no reply would be made to the
Martin-Trigona comments; a letter of March 8, 1971 from RJN commenting on the
applicants' response to Point c; and a letter of March 11, 1971 from the
applicants replying to the RJN comments.
h. Two letters on March 1,
1971 from Martin-Trigona, one setting forth a "Motion for Recuse and
Suggestion for Recuse", the other a "Motion to Strike and
Remove" the applicants' letter of February 19, 1971 setting forth their
response to Point c.
i. Two letters of March 4,
1971 from Martin-Trigona, one setting forth his "Reply to Amended
Community Service Filings by Applicants to Corinthian Merger", the other
setting forth a "Demand for Order on FCC Procedures in Dun &
Bradstreet/Corinthian Merger".
3. A brief recital of
background facts is necessary. Corinthian's major business is in
television broadcasting, although it does have certain non-broadcast subsidiaries.
D & B, one of America's oldest corporations, presently has three main lines
of business: business information services, publishing, and marketing.
The business information services includes a function popularly associated with
D & B -- furnishing business credit reports to manufacturers, banks,
wholesalers, etc., on a subscription basis. But this division also makes
economic studies and compiles information from ICC public records for use by
the transportation industry. Through its publishing division, D & B
puts out 18 professional and specialty journals (e.g., American Journal of
Medicine, Fire Engineering, Roads and Streets, etc.) which report new
developments in the medical, engineering and teaching professions.
[*738] This division also publishes Official Airline Guides; publishes
juvenile, college, trade and paperback books through its Thomas Crowell
subsidiary; publishes basic statistical and financial data through its Moody's
Investors Service Subsidiary; and publishes certain classified telephone
directories, sells classified directory advertising, and provides door-to-door
delivery of telephone directories. The marketing services division
includes the Reuben H. Donnelley subsidiary, which produces and processes mail
advertising for clients. Mailing lists are compiled and used to mail
coupons, samples and other direct mail advertising. Marketing activities
also include "Dunhs Market Identifiers", a roster of U.S. and
Canadian businesses used to serve the marketing needs of customers. The
applicants contemplate that Corinthian will become the fourth D & B
operating division after merger.
4. The reasons for the merger
are lengthy but they boil down to a single point -- the desire of the merger
parties to expand their activities within a framework which lends assurance the
Corinthian stations will continue their sound operations under the present
station management (as a subsidiary of D & B), and will be placed under a
responsible leadership as to whose integrity no question exists. The applicants
further believe the quality operation of the Corinthian stations can be
augmented by giving Corinthian access to D & B's greater personnel
resources and expertise in such fields as education, marketing, business and
professional information, general publishing, demographies, and computer
sophistication. The existing operations of each merger party are viewed
as closely complementary to and entirely compatible with the background and
operations of the other party. The applicants contend (Exhibit A-5, p. 8)
no "conglomerate" questions arise, since the merger does not bring
together diverse and unrelated operations, but rather, involves operations
bound by the common thread of communications, data and information services,
and marketing services. The applicants believe a merger will assure both
continuation of the present high-quality service offered by Corinthian stations
and ultimately even better performance and service to the public by the
Corinthian stations. Finally, the applicants note the merger affords the
most realistic opportunity for Corinthian shareholders to grow without exposing
the stations to risk. Technical limits on signals bar geographic
extension of present markets. Acquisition of additional broadcast
stations, they contend, is "... hemmed-in both by regulatory circumstances
and by the scarcity of quality outlets for purchase at an acceptable
rice." (Exhibit A-5, p. 9). Corinthian's relatively small size rules
out growth through a program of diversification. Ibid. Further in support
of the merger, Exhibit A-5 documents the extensive availability of competing
broadcast services in the markets in which Corinthian owns television stations.
5. All three petitioners deny
the merger would serve the public interest. Their common claim is that
the merger would have important anti-competitive effects. These alleged
anti-competitive effects are considered at length below. Suffice it to
note here that petitioners fear a "merged" Corinthian will gain a
"leg-up" on competitors through the confidential information
resources of D & B; that other [*739] D & B divisions will
be in a position to "throw" business to Corinthian stations; that the
merger involves "conglomerate" issues and action on the application
should be deferred until the pending conglomerate inquiry is completed; and
that the merger will lessen competition. The fears expressed by
petitioners have not been lessened by the applicants' response to our letter of
November 30, 1970. In fact, two of the petitioners -- RJN and Martin-Trigona
-- have renewed their objections on the basis of that response.
6. We turn now to the
pleadings. A threshold matter is Martin-Trigona's "Motion for Recuse
and Suggestion for Recuse", submitted in a letter of March 1, 1971.
Martin-Trigona asks that Chairman Burch and Commissioners Wells and Houser
disqualify themselves from participating in this matter, and he suggests that
Commissioner Robert E. Lee do the same. The implication is that these
Commissioners might have partisan links or indebtedness to a political
organization which makes disqualification imperative. The motion is
denied. Martin-Trigona filed a similar motion against participation by
Chairman Burch and Commissioner Wells in the original consideration of the
merger application, and the Commission denied that motion as being without
merit. Letter of November 25, 1970 to Martin-Trigona. The present
motion similarly lacks merit.
7. We consider next the matter
of petitioners' standing. RJN's UHF station (WLFI-TV, Lafayette, Indiana)
competes with Corinthian's Indianapolis station (WISH-TV), in a common area for
audience, and national, regional and local advertising revenues. RJN's
petition to deny is timely and there can be no serious question that it is a
"party in interest", D & B's contentions notwithstanding.
See Broadcast Enterprises, Inc. v. Federal Communications Commission, 390 F2d
483, 12 RR 2d 2001, mandating a generous attitude in approaching standing
questions where it is alleged a proposed assignee will be in a position to
compete more effectively.
8. LVO's petition to deny is
admittedly untimely. See Corinthian Broadcasting Corporation, 22 FCC2d
436, denying LVO's earlier request to extend the time in which to file a
petition to deny. In its "Petition for Reconsideration and Motion
for Acceptance Out of Time", LVO asks the Commission to reconsider its
denial of the time extension and to accept the petition. We are not
persuaded that reconsideration is in order. The fact remains there was
ample time to file a petition to deny -- witness RJN's timely petition which
thoroughly explores the issues -- but LVO chose to spend its time in
deliberating whether it even wanted to take a position on the
application. This vacillating position runs contrary to the "[orderliness],
expedition, and finality in the adjudicating process... which [have] authentic
claims" of their own in determining the public interest. Valley
Telecasting Co. v. Federal Communications Commission, 118 U.S. App. D.C. 410,
413; 336 F2d 914, 917, 2 RR 2d 2064, 2068. See also Spanish International
Broadcasting Co. v. Federal Communications Commission, 128 U.S. App., D.C. 93,
385 F2d 615, 9 RR 2d 2053, upholding denial of a waiver of the cut-off rule
involved here. In view of all this, we conclude that the petition for
reconsideration and motion for acceptance [*740] out of time must
be denied. Thus discussion of LVO's "standing" is unnecessary,
although we note that LVO's status as one of several partners in a mere
applicant for a CATV system in Tulsa would not give rise to
"standing". See WIBF Broadcasting Co., 17 FCC2d 876, 16 RR2d
263, and cases cited there. However, since the matters raised by LVO are
important, LVO's petition will be treated as an informal objection to the
application under Section 1.587 of the Rules. Indeed, D & B urges
that the merits of LVO's objections be reached through such procedures.
9. Anthony R. Martin-Trigona,
Chairman of Radio Free America, has filed an "Opposition to Proposed
Transfer of Control." Radio Free America is identified only as "... a
national organization which has been formed to operate as a public interest
watchdog at the Commission to see that the Commission vigorously adheres to its
statutory duty and awesome responsibilities." (Opposition to Proposed
Transfer of Control, p. 2). The opposition is otherwise silent regarding
Radio Free America. Where the group was formed, what its official
existence is, who its members are, and -- a matter crucial to standing -- how
the interests of Radio Free America and its members would be adversely affected
by the merger are all left to conjecture. Given petitioner's failure to
set forth "... specific allegations of fact sufficient to show that [it]
is a party in interest" (Section 309(d)(1), Communications Act of 1934, as
amended, 47 U.S.C. 309(d)(1), there is no basis for concluding its interests
would be adversely affected. Accordingly, Radio Free America has failed
to meet the explicit statutory requirements regarding "standing", and
its "Opposition to Proposed Transfer of Control" must be
dismissed. However, as with the LVO pleadings, Radio Free America's
pleadings and correspondence will be treated as informal objections to the
application.
10. For the most part,
petitioners raise identical objections. To avoid repetition, those
objections are grouped together. Several individualized objections will
be considered separately.
11. Concern that Corinthian
would gain a competitive advantage because of D & B's credit reporting and
business information services. All three petitioners advert to D &
B's credit reporting and business information services. RJN asserts
(petition to deny, p. 6) that this would give Corinthian a "leg-up"
over competing stations because Corinthian stations could offer prospective
advertisers a range of services and data not available from other
broadcasters. Radio Free America views the "... roles of credit
investigator and intelligence agent" as absolutely incompatible with
broadcast station ownership. (Opposition to proposed transfer of control,
p. 1). LVO expresses similar fears that Corinthian's access to D &
B's "... vast confidential information reserves" would unduly
advantage Corinthian stations over competing licensees and CATV systems.
(Petition to Deny, p. 3).
12. The applicants deny these
charges. They note all of D & B's business information services
(credit reporting, etc.) are available to any Corinthian competitor who wishes
to subscribe to such services, and to other broadcasters (including RJN).
Corinthian's access to such services would be on a regular, billed basis and
Corinthian would not have access to any information not equally available to
other subscribers. [*741] (D & B Opposition to
"Petition to Deny and Other Filings"). D & B further
asserts there is no "mystery" to its business information services
and its past record is good. It gathers information for business credit
reports for use by banks, wholesalers, government agencies and others who
contemplate doing business with a subject of D & B reports. (D &
B Opposition, p.7). (Business credit information is distinct from
consumers credit, an area which is under a cloud because of current
Congressional investigations regarding consumer credit practices.) Strong
internal and external checks exist on the completeness, integrity and fairness
of D & B's reports. D & B has stringent standards for fact
finding, reporting and ratings. Where possible, the subject under
investigation is interviewed to obtain current information, and always when the
subject requests it, the entire report and proposed rating are made availble to
him. There is further a special National Rating Committee to review
disputed ratings. Moreover, subscribers provide a vigilant check on the
integrity of D & B reports because they have money "riding" on D
& B judgments and would not continue to subscribe if the reports were
unreliable. D & B also notes laws governing libel and dissemination
of business reports provide an external check. n1 (Opposition, pp. 7-8). D & B further points out
that its record has been built up over a century and it would be suicidal for D
& B to risk that reputation (essential to continued success of its
operations) to benefit the Corinthian stations. (Opposition, p. 8).
Finally, D & B seeks to dispel any lurking suspicions that it might
adversely slant business credit reports involving Corinthian competitors, or
that through its power to report and rate in the credit area, it might coerce
advertisers into purchasing time on Corinthian stations. On these points,
D & B notes (Opposition, pp. 10-11), that there is nothing factual to
justify these speculations. In this regard, D & B points out a number
of its present competitors in certain fields -- publishing, textbooks,
professional journal field, etc. -- have been the subjects of D & B credit
ratings. But even in the small total number of instances where such
competitors may disagree with a D & B rating, there is nothing to indicate
credit reports on D & B competitors have been distorted.
n1 D & B claims no
infallibility, admits it can err, and has been sued by persons disputing its
ratings. Recently a New York jury rendered a $6,000,000 verdict against D
& B in a libel suit arising out of D & B credit ratings. That
verdict is now the subject of post-trial motions.
13. In its letter of November
30, 1970 Point (b), the Commission requested a complete statement of
competitive practices to be followed after merger, noting that its particular
concern centered about the manner in which D & B's business information and
credit reporting services will be used and whether there was any possibility
that after merger, D & B would abuse its resources to the detriment of any
competing broadcast station. The applicants were requested specifically
to address themselves to the various objections which had been raised by the
petitioners. Essentially, the applicants' response (Letter of February 1,
1971, pp. 13 to 16) repeats the assurances made in oppositions to the petitions
to deny. Additionally, the applicants specifically state (Letter, p. 17)
that:
Dun and Bradstreet here and now represents to the Commission
that there shall never be any [abuse of its resources to the detriment of
competitors.] And this is [*742] not merely a statement of
volitional commitment on the part of present management; it is rather an
acknowledgement of the basic economic reality that any hint of lack of
integrity can severely damage or destroy Dun & Bradstreet's valuable credit
reporting business.
Further, D
& B cites its record in 1970 of downgrading the credit ratings of a number
of America's largest corporations, including many who were among D & B's
top customers for business information. This, it claims, establishes D
& B tells it as it is and confirms the integrity of its approach.
14. Notwithstanding the
foregoing, RJN continues to fear the combined resources of Corinthian and D
& B and insists an evidentiary hearing is needed on the application.
(RJN letter of February 16, 1971). Martin-Trigona reports his objections
respecting the potential for abuse of D & B's resources, claims even
AT&T must reflect before D & B's credit rating powers, suggests
(without further elaboration) that D & B showed less than total alacrity in
the recent Penn-Central collapse, and reiterates his demand for an evidentiary
hearing.
15. Petitioners' fear
respecting the potential for misuse of D & B's credit and financial
information to benefit Corinthian's competitors is grounded on sheer
speculation. The statutory framework governing petitions to deny requires
the presentation of specific allegations of fact raising substantial and
material question which could only be resolved by an evidentiary hearing.
There is nothing of a factual nature in the petitions regarding either
Corinthian's or D & B's credit and financial services to the disadvantage
of Corinthian station competitors. We are further convinced the internal
and external checks outlined above furnish safeguards against possible abuses
in this area. What petitioners ignore is that D & B is most popularly
identified with credit and financial reporting and derives a major share of its
revenues from these operations. It thus seems inherently improbable that
D & B would destroy its reputation in the credit reporting and business
information areas to benefit the Corinthian station. Moreover, such
conduct by D & B could result in the loss of all of the licenses which it
seeks, either by way of revocation or renewal hearings. Finally, the
applicants' response of February 1, 1971 in our judgment negatives any prospect
that the potential for abuse cited by the petitioners will materialize.
16. D & B's existing
advertising activities and claims that following merger, D & B (through
"outside" directors) can funnel business to the Corinthian
stations. D & B's publishing division puts out a number of
publications which carry advertising. Among these are 18 trade and
professional journals (e.g., American Journal of Medicine, Water and Wastes
Engineering, Textile Services Management, etc.). Seventeen of these
journals carry advertising and 16 are distributed domestically. n2 The circulation of these publications range from
625,000 for the monthly Electricity on the Farm the 13,000 for the monthly
American Journal of Cardiology. Additionally, D & B puts out the
Official Airline Guide, with a total circulation (national and international)
of [*743] 125,000 copies for the semi-monthly domestic edition, and
35,000 copies (national and international) for the monthly international
edition. These publications offer schedule and route information to
carriers, travel agents, and passengers. RJN disputes the applicants'
claim that these D & B operations do not give rise to any possible conflict
with broadcast operations. It asserts the sellers of goods and services
would presumably be solicited by the merged company to advertise in different
media and non-television media. (RJN petition to deny, pp. 7 to 8).
D & B denies this. It points out that any advertising in its specialty
magazines is directed to a special market and not a mass general television
audience. (D & B Opposition, p. 13). It further notes that
revenues for the Official Airline Guide come chiefly from subscriptions, with
only 25% of revenues coming from advertising. Moreover, this publication
is also directed to essentially a specialty market.
n2 One construction trade manual is
in Spanish and intended for Latin American construction engineers.
Another construction trade manual is in English but intended for construction
engineers in Europe, Asia and Africa. An annual compendium for the drug
trade carries no advertising. (D & B Opposition, affidavit of Richard
D. Simmons.)
17. D & B's Reuben H.
Donnelley Division is engaged in direct mail services. All three
petitioners suggest these operations may be in conflict with
broadcasting. (RJN petition to deny, pp. 5 and 7; LVO petition to deny p.
15; Radio Free America letter dated April 8, 1970, p. 3) D & B points out
the direct mail activities are of two kinds: distribution of "price-off"
coupons or free samples of products, and highly localized (e.g., neighborhood
or very small areas) mail distribution or promotional material specifically
tailored for local dealers of a national company (e.g., material for a local "ESSO"
filling station, mailed in a few blocks' radius of the station). D &
B argues that by their very nature, direct mail techniques are not competitive
with television advertising, since this is not the kind of advertising in which
television stations engage, (D & B opposition, p. 14). With respect
both to advertising in D & B specialty journals (including the Official
Airline Guide) and direct mail advertising, D & B notes that tie-ins,
package rates, forced buying or similar practices are (a) illegal under antitrust
principles and contrary to Commission policy, (b) there is neither fact nor
even a hint that either D & B or Corinthian has a record of, or inclination
toward, such practices, and (c) that it cannot be assumed either applicant
would in the future engage in such activities. (D & B Opposition, pp.
15 to 16).
18. RJN states (RJN Petition
to Deny, p. 5) that a D & B director (J. R. Newman) is also a director of
General Foods, one of America's largest television advertisers. RJN
implies that after merger, this relationship might be beneficial to Corinthian
through the ability to influence decisions in placing television
advertising. (Ibid, p. 6). The response to the Commission's letter
requesting information on all cross-directorships indicates that additionally,
D & B directors also serve on the boards of three other major television
advertisers -- Kraftco, Bristol-Myer, and Gulf Oil. (Response of February
1, 1971, pp. 32 to 36). The applicants note first that
cross-directorships exist as to a number of the largest broadcasters (CBS, NBC,
ABC, Capital Cities, Avco, Cowles Communications, etc.), and this practice is
not unique to broadcasting. With respect to the potential for funneling
business to the Corinthian stations, the applicants point out this would be
contrary to well-recognized legal and moral obligations to stockholders; that
decisions to place advertising are generally made at several removes
[*744] below the Board level, and in most cases by the advertising
agency; and that decisions to place advertising turn on obtaining maximum
exposure per dollar rather than on favoritism. To allay any doubts in
this area, D & B directors (both on a pre-and post-merger basis) have
written letters, similar in form, assuring that no service by such director on
the board of another company would be "misused to the competitive
disadvantage of any Dun & Bradstreet competitor". (Attachments,
February 1st Response).
18. Martin-Trigona and RJN
consider the response inadequate. Martin-Trigona (Letter of February 8,
1971) views cross-directorships as inherently bad and insists that all must be
abolished. RJN (Letter of February 16, 1971) points to the similarity of
the directors' letters and claims that an evidentiary hearing is needed to
elicit hard facts on the cross-directorships. The need for a hearing is
reiterated in RJN's letter of March 11, 1971. The applicants have replied
to these objections.
19. The claims respecting D
& B's present advertising activities and common directorships between D
& B and potential advertisers rest on the premise Corinthian would have --
as RJN puts it -- a "leg-up" on competitors after the merger.
We have examined petitioners' claims and the applicants' response to Point (d)
of our November 30th letter with special care because the charges are
serious. But as with the allegations respecting a potential conflict
between D & B's credit reporting activities and broadcasting, the
allegations here are speculative to say the least. We agree with D &
B that its direct mail activities and broadcasting are not in conflict because
they involve entirely different advertising techniques. One depends on
promotion through mail or door-to-door distribution of tangibles
("price-off" coupons or product samples), while the other promotes
products or services through radio-transmitted visual images. In the
nature of things, television stations cannot use the techniques available to
direct mail advertisers. Similarly with advertising in D & B's
specialty journals. It seems obvious advertising in these journals is
directed to limited audiences with interests in specialized products such as
medical equipment, prescription drugs, municipal sewage systems, highway
construction equipment, etc. Advertising for these specialized products
and services is quite different from the advertising of consumer products and
services on television, which must have mass appeal for a large, general
audience. As for interlocking directorates, the Communications Act does
not specifically prohibit such directorates in the broadcast field, unlike the
specific statutory prohibitions set out in Title II of the Act. See
Section 212 of the Communications Act of 1934, as amended, 47 U.S.C., 212. And
as the applicants point out, cross-directorships while not unique to
broadcasting exist with respect to a number of broadcasters and the Commission
has thus far had no occasion to formulate policies respecting the same.
On the whole, we think the realities here -- the management levels at which
decisions to place advertising are made and the crucial fact that placement
decisions turn on obtaining maximum value for the client's advertising dollar
-- militate against D & B's directors using their positions on other
corporate boards to throw business to the Corinthian stations. And this
conclusion is buttressed by the specific written assurances given by the D
& B [*745] directors. We conclude, therefore, that there
is no essential conflict between D & B's existing activities and
broadcasting n3 and the cross-directorships
referred to.
n3 We also note other broadcasters
(such as Metromedia, Inc.) have direct mail sidelines, and the Commission has
never considered this to be incompatible with broadcasting.
20. Contention that the merger
would violate Section 7 of the Clayton Act. LVO argues at length that the
merger would violate Section 7 of the Clayton Act. (LVO Petition to Deny,
pp. 4 to 16). Its petition is replete with analyses of the appropriate
"product market" for Section 7 enforcement purposes, "geographic
market delineation", oligopolistic markets and case law dealing with
antitrust principles. The applicants take issue with this line of
argument. (D & B Opposition to LVO petition, pp. 5 to 8).
21. It is unnecessary to
decide whether the merger violates Section 7 of the Clayton Act because this
issue lies in an area forbidden to the Commission. The "...
Commission was not given the power to decide antitrust issues at such."
United States v. Radio Corporation of America, 358, U.S. 334, at 346.
That case puts it beyond argument that Congress did not intend to confer power
on the Commission to adjudicate antitrust issues and left enforcement of the
laws in this area to other agencies of the government, and exceptions to this
principle (primary jurisdiction where a pervasive rate scheme is involved) have
no application here. The wisdom of the RCA case is fully apparent here;
the Commission has neither staff resources to develop the facts on which the
alleged violation of Section 7 is claimed to rest nor expertise in interpreting
and applying the highly complicated principles of law which have evolved in the
antitrust field. This has been the longstanding policy of the Commission,
and one antedating the RCA case. See footnote 18 of the RCA case, at 358
U.S. 350.
22. Consideration of various
competitive factors under the public interest standard of the Communications
Act. But though the Commission cannot decide antitrust questions as such,
it can appropriately consider Federal antitrust policy under the public
interest standard. RCA case, supra (358 U.S. at 351-2). We consider here
various arguments that the merger would have anticompetitive effects. LVO
contends the merger would reduce existing and potential competition.
Essentially, its arguments existing competition would be lessened rest on the
premise D & B and Corinthian are present competitors. The LVO
arguments thus parallel similar arguments by RJN -- the claim that the combined
resources of D & B and Corinthian would give the merger company a
"leg-up" on competitors -- which have already been considered and
found wanting in substance. The plain fact is there is nothing to
indicate that D & B and Corinthian are presently in competition, or that
after merger, they would engage in anticompetitive practices.
23. But LVO goes
further. It suggests the merger would have a chilling effect in the Tulsa
market (LVO's main concern) on potential competition from others in the
area. Elsewhere in its petition LVO suggests that if D & B wishes to enter
broadcasting, it should acquire one of the dormant UHF stations available in
Corinthian markets. [*746] In this argument, LVO is joined by
Radio Free America, which also suggests that if Corinthian is interested in
nonbroadcast activities of the kind D & B engages in, it should enter such
business by routes other than merger. (Letters of March 27, 1970, p. 2
and April 8, 1970, p. 3.) The thrust of these arguments is that under antitrust
principles, D & B and Corinthian are potential new entrants into business fields
they do not presently occupy, and that a merger would have anticompetitive
effects because the potential competition they could offer by de novo entry
will be lost. The applicants deny that they are potential de novo
entrants into new fields under the principles set out in the case law relied on
by LVO (e.g., Procter & Gamble v. Federal Trade Commission, 386 U.S. 568;
United States v. Penn-Olin Chemical Co., 378 U.S. 158, etc.) D & B asserts
it has not had and would not have any interest in entering broadcasting without
experienced broadcasting management such as Corinthian can provide.
Corinthian asserts the argument it could enter non-broadcast fields by other
than the merger route is irrelevant, and there are no facts showing Corinthian
has the necessary know-how or meets the various tests laid out in the cases
noted above. As to the dissuasive effects a merger might have on CATV
operations in the Tulsa area, the applicants point out the combined assets of
the two general partners in LVO Cable -- Livingston Oil and the Williams
Brothers Company -- exceed $520,330,000, more than double the combined
post-merger assets of Corinthian and D & B. They further note LVO is
itself a division of a diversified conglomerate, and that in view of these
circumstances, claims LVO might be dissuaded from future competition are
nonsense.
24. In addition to the alleged
loss of new entrant competition, RJN asserts that under the Commission's
statutory mandate, the issue before us is whether approval of the application
will foster competition in broadcasting. In RJN petition to deny, p. 5.)
In RJN's responsive pleadings, it is argued that applicants must make an
affirmative showing that competition will be enhanced by the merger. (RJN
reply, pp. 8 to 11.) The applicants contend RJN is in error, that approval of
the merger does not require a showing of enhanced competition. Rather,
this competitive issue becomes relevant only if it is first shown that the
merger carries a threat that competition will be substantially reduced, which
threat is nonexistent here. (D & B opposition, pp. 16 to 17.)
Additionally, RJN asserts it is a marginal UHF operator fighting for survival,
and for the Commission to strengthen its strongest competitor -- Corinthian --
would be a death blow. (RJN petition to deny, p. 9.) RJN continues to
express fears concerning the combined potential of Corinthian and D & B
(Letter of February 16, 1971), and this fear is renewed in its letter of March
11, 1971. Similarly, Martin-Trigona's letter of February 8, 1971 makes
extravagant claims that the merger would give D & B "... unparalleled
power over company and corporate life in America," would increase the
market domination of the Corinthian stations and would have important
anticompetitive consequences.
25. These various allegations
respecting competitive consequences prompted the Commission to require the
applicants to obtain a statement from the Federal Trade Commission and the
Department of [*747] Justice that the proposed merger was not
objectionable under any antitrust laws or policies. On invoking the
proper procedures, the applicants were informed that these two agencies do not
duplicate each other's efforts, and that the matter would be handled by the
Antitrust Division of the Department of Justice. Following this, the
applicants made available to the Division the complete application, including
all of the objections raised by petitioners and the applicants' responses
thereto. On February 19, 1971, the Antitrust Division notified the
Commission that under its Business Review Procedures, it had concluded
... that
the Department does not presently intend to initiate an antitrust action should
the parties proceed with their proposed merger.
On February
19, 1971, the applicants filed their response to Point (c) of the Commission's
letter of November 30, 1970, which had requested the statement referred to
above.
26. The referral of this
matter to obtain the views of the Antitrust Division and the applicants'
response of February 19, 1971, were variously received. Martin-Trigona
from the outset considered the referral improper because he viewed it as an
attempt by the Commission to avoid making the necessary public interest
determination. He took an appeal to the U.S. Court of Appeals for the
District of Columbia (Martin-Trigona v. Federal Communications Commission, Case
No. 24886), which was dismissed on the motions of the applicants and the
Commission on February 26, 1971. n4
n4 In dismissing, the Court relied
on the Commission's representations that the application and Martin-Trigona's
pleadings would be fully considered when information on the antitrust aspects
of the application was received from the Department of Justice.
Following dismissal of his appeal,
he wrote the Commission on March 4, 1971, transmitting a "Demand for Order
on FCC Procedures in Dun & Bradstreet/Corinthian Merger," demanding a
formal advance statement from the Commission as to what procedures will be used
in evaluating his pleadings so that all parties and the Court would have a
basis for determining the Commission's action. n5 In the same letter, he objects to the Antitrust
Division's letter as "... little more than a naked conclusion without any
supporting data or evidence of meaningful inquiry." In another letter to
the Commission (Letter of February 8, 1971), Martin-Trigona attacks the
referral of the antitrust aspects to the Antitrust Division as involving
"... secret representations to the Department of Justice" which must
be evaluated, although this charge is not documented by any facts. And in
two letters of March 1, 1971, Martin-Trigona attacks the Antitrust Division's
Business Review Letter and the applicant's response to Point (c). The
"Motion to Strike and Remove" the Business Review Letter charges the
Antitrust Division's action involved no "independent investigation"
but rather "... a studied attempt to invoke political pressure and
clearance, and to resolutely block public participation in the
proceeding." (Letter of March 1, 1971.) In this matter to strike the
Business Review Letter, Martin-Trigona also charges the Antitrust Division's
conclusion "... is the product [*748] of collusion",
nothing that the Division's letter and the applicants' response commenting
thereon bear the same date -- February 19, 1971. Martin-Trigona believes
this identical date means some one must have "tipped off" the
applicants as to the Division's position. Martin-Trigona further asks that
the Division's letter be stricken until the Department of Justice reopens the
proceeding and gives all parties the right to submit evidence and conduct
cross-examination. Charges of a similar vein are continued in the second
letter of March 1, 1971, commenting on the applicants' response to Point
(c). References are made to "political pressure... behind closed
doors for political rubber-stamping of the merger," to the alleged comic
subservience of the Justice Department to the applicants, to an alleged violation
of the Freedom of Information Act by the Division in not permitting
participation by Martin-Trigona, n6
to "sanitized" financial figures in the material submitted to the
Department of Justice by the applicants (i.e., the use of blank spaces to avoid
disclosing confidential financial data), and to the alleged concentration of to
much power in the hands of too few which would result from approval of the
merger.
n5 The "Demand for Order,
etc." is denied. The Commission's rules make no provision for the
subject demand. Apart from this, Martin-Trigona's pleadings have and will
be carefully considered.
n6 It appears from one of the
attachments that Martin-Trigona has invoked the Freedom of Information Act (5
U.S.C. 552) to obtain reopening of the Business Review Letter. At this
writing, we have not been informed of any action taken by the Department of
Justice on this request.
27. In a more temperate vein,
RJN notes that no affirmative showing has been made before the Department of
Justice that the merger is in the public interest, and that the limited
conclusion of the Division falls short of the affirmative finding requisite to
our approval. RJN also suggests that an inadvertent claim by the
applicants that Corinthian's Indianapolis station (WISH-TV) served Lafayette,
Indiana -- where RJN's competing station is located -- involves an
inconsistency which is open to question.
28. In view of the critical
importance of the Antitrust Division's views on the antitrust aspects of the
merger, we consider first Martin-Trigona's "Motion to Strike and
Remove" that letter. That motion is denied. We see nothing
improper in our having directed the applicants to obtain from those branches of
the government directly concerned with enforcement of the antitrust laws, a
statement that the merger is not objectionable under any such laws. We
think this action was entirely proper, especially in view of the numerous and
repeated objections made by the petitioners, charging that the merger was
questionable under the antitrust laws and had important anticompetitive
consequences. Having thus directed the applicants to obtain the requested
position statement, it would be the height of foolishness to strike that
statement as Martin-Trigona now requests. The intemperate charges made by
Martin-Trigona in his motion and other letters concerning the Antitrust
Division's actions are utterly without factual support, and are rejected.
n7 Nor do we think the Antitrust
Division's statement is defective because it does not rest on an evidentiary
hearing. Objections to procedures followed in issuance of Business Review
Letters should more properly be referred to the Department of Justice, and we
note (see footnote 6) that Martin-Trigona [*749] has in effect
sought Departmental review of the latter by invocation of the Freedom of
Information Act. We note also, however, that all of the pleadings and
papers filed by the petitioners up to the time of our initial consideration of
the application were furnished to the Division. (Applicants' letter of
February 19, 1971, p. 2.)
29. In view of the Antitrust
Division's consideration of the application and other documents submitted to
it, we are satisfied from its statement that the proposed merger raises no
significant antitrust problems. With this in mind, we turn to the various
allegations involving competitive factors raised by the petitioners.
While the position of the Antitrust Division would appear to be largely
dispositive of any claims that the merger has significant anticompetitive
consequences, we will nevertheless consider these claims so that our position
will be on the record.
n7 Needless to say, the request for
a position statement did not amount to referring the application to the
Department of Justice for decision. The necessary public interest
determination on the merger remains ours, as evidenced by this very
consideration here.
30. Competitive factors are
appropriately to be considered under the public interest standard, even though
competition as such may not be considered the single or controlling reliance
for safeguarding the public interest. ABC-ITT Merger, 9 FCC 2d 546, at
548. As to the claim the applicants are potential de novo entrants into
business fields they do not now occupy, we are unable to see how competition
would be lost or lessened here as a result of the merger. Competition
afforded by de novo entry rather than acquisition or merger with a going
concern is relevant only where there is a substantial likelihood of such
entry. For a discussion of the cases relied on by LVO, see ABC-ITT
Merger, 9 FCC 2d 546, 549 to 552. On the other hand, where there is no
factual showing evidencing an interest or likelihood of entry into new lines of
business and where merger applicants deny they have either the inclination or
capabilities for de novo entry, then there is no factual predicate for
concluding that a potential for competition exists. That principle
governs here. We hasten to added that there might well be situations in
which a merger threatening lessened competition would require a different
result under the public interest standard. But all we decide here is that
the barebones contentions of the petitioners are not supported by specific
facts which warrant a conclusion of loss of potential competition.
31. We consider next RJN's
argument the Commission must find competition will be fostered before it can
approve the merger. Despite what RJN says, the statutory mandate contains
no requirement for explicit findings respecting enhanced competition as an
indispensable prerequisite to approval. Of course, in particular
situations enhanced competition can be an important ingredient under the public
interest standard in considering a merger proposal, and indeed, the bolstered
competitive positive of ABC vis-a-vis other networks was one of the
considerations leading to Commission approval of the ABC-ITT merger. But
in relying on the ABC-ITT merger decision -- its principal source for
contentions respecting enhanced competition -- RJN ignores that this was only
one of many factors considered in balancing detriments and benefits under the
public interest standard. See particularly 9 FCC 2d 579, for a resume of
these factors. Nothing in that decision makes approval of a merger turn
on a finding of enhanced competition. In fact, analysis suggests the
fallacy inherent in RJN's [*750] line of argument -- enhanced
competition might well be so destructive that it would raise valid antitrust
problems.
32. This leads us to a point
made several times by RJN -- that the merger will so enhance Corinthian's
resources that it threatens RJN's continued existence. n8 Under Section 309(d)(1), the need for a hearing
rests on whether there are specific allegations of fact, supported by proper
affidavits, which raise substantial and material questions of fact. RJN's
petition is fatally defective in this respective. Its arguments that
approval of the merger would deal a death blow to RJN are made without
supporting affidavits. But there are no allegations of fact here or
elsewhere in the petition tending to suggest destruction or significant
crippling, of RJN's UHF station. See Cosmos Broadcasting Corp., 18 RR 2d
541. There is nothing to suggest, for example, that present advertisers over
WLFI-TV will abandon that station for WISH-TV as a result of the merger.
And the prospect of this happening is remote, because while the two stations
presently enjoy a common service area in some degree, they serve essentially
different markets. Advertisers wishing to cover WLFI-TV's service area would
find WISH-TV could not cover this full area. Nor is there any showing of
a threatened loss of network affiliation. In fact, both stations are
affiliated with CBS, which suggests, under prevailing industry affiliation
practices, that the competitive situation between the two stations is not
acute. Apart from this, the management of the Corinthian stations will
remain essentially unchanged under D & B ownership, and no claim is made
this management will engage in destructive competitive practices. On the
contrary, as we have already pointed out, the applicants are fully aware that
following merger, any utilization of Corinthian's expanded resources under
coercive practices (tie-ins, package deals, etc.), would be illegal and
contrary to Commission policy. Thus, RJN's petition lacks specific
allegations of fact raising a UHF impact issue. While the merger will
undoubtedly leave the Corinthian stations with greater resources, claims that
this strengthened position will lessen competition in the Corinthian station markets,
or have a chilling effect on the emergence of new competitive services, or will
be used in a manner detrimental to petitioners' interests lie entirely in the
realm of speculation.
n8 Needless to say, this argument
seems to undercut the RJN claim a merger must enhance competition.
33. Contentions that D &
B's program proposals are slanted to favor D & B non-broadcast interests,
and that D & B will be partial in presenting controversial issues.
RJN notes that D & B has an indirect relation with the trucking industry
(through its transportation publications), and with health care and education
(through trade journals published in these fields). D & B's
ascertained community needs of the WISH-TV area include the need for improving
roads and health care and education. RJN contends a hearing is needed to
determine the position espoused by various D & B clients in these
fields. (RJN petition to deny, pp. 8 to 9.) Radio Free America argues in
a similar vein. It claims that most of Corinthian's prime time
programming is network originated and its locally produced programs present
essentially [*751] the corporate viewpoint. Little time is
devoted to programs for students, antiwar groups, migrant workers, etc., and
when time is devoted to these subjects, Corinthian weeds out reformist ideas
hostile to its point of view. (Letter of April 8, 1970, p. 4.) The
applicants deny these charges. (D & B opposition, pp. 28 to 30.) D
& B further notes the application states it will continue Corinthian's
present policy of fairness in presenting controversial issue programming, and
that undertaking is reaffirmed.
34. As with earlier
objections, the charges rest on pure conjecture. Moreover, the facts
refute any substantial links between D & B's other business interest and
ascertained needs. D & B's relation to the trucking industry is
limited to two publications (Trinc and The Dun & Bradstreet Reference Book
of Transportation). Neither carries advertising and both are merely
compilations of information from ICC public records distributed to those who do
business with the trucking industry. Its professional journals in the
health field (devoted to medicine, surgery and cardiology) are highly technical
and are limited in circulation to specialized audiences. The suggestions
these publications might espouse a "viewpoint" which might influence
future programming is without merit. Similarly with Radio Free America's
charges regarding the potential for slanting programming. Conjecture is
insufficient to support charges of slanting. Indeed, extrinsic evidence
of slanting, as opposed to mere allegations, is needed to justify an inquiry,
let alone hold a hearing. See CBS Program "Hunger in America,"
20 FCC 2d 143 at 150, which indicates the stringent standards in this area are
designed to avoid bogging down the Commission in mass allegations respecting
program judgments.
35. Contentions that overlap
between WANE-TV and WISH-TV requires denial of application. There is
Grade B overlap between the signals of two Corinthian stations -- WANE-TV (Fort
Wayne) and WISH-TV (Indianapolis). Under rules for calculating overlap in
effect when the application was filed, the overlap area covered 28 square miles
with a population of 890. Under amended procedures adopted April 3, 1970
in Docket No. 17253, the overlap area embraces 83 square miles with a
population of 4,756. Under further changes for calculating Grade B
overlap proposed in Docket 16004, there would be no calculated overlap.
RJN and Radio Free America contend the existence of this overlap requires
denial of the application. (RJN petition to deny, pp. 9 to 10, and RJN
reply, pp. 12 to 13; Radio Free America letter of April 8, 1970, p. 3.) Radio
Free America suggests in the same letter that overlap may be aggravated by carriage
of WANE-TV over CATV systems in the area affected. It claims competition
would be improved by putting the stations under separate ownership. The
applicants contend the overlap is de minimis and cite precedents involving for
greater overlap, both in terms of increased overlap ( Main Radio &
Television Co., 5 RR 2d 672) and the creation of new overlap ( WIBF
Broadcasting Co., 17 FCC 2d 876). They point out the overlap population
calculated under the amended procedures of April 13, 1970 amounts to 1/4 of 1%
of the population in WISH-TV's Grade B contour and less than 4/5ths of 1% of
the total population in WANE-TV's Grade B contour. There are 4 to 6
other [*752] Grade B or better services in the overlap area.
As to CATV, the applicants note the merger would have no effect on any carriage
of Corinthian stations and such carriage is not in the applicants' control.
36. In determining whether
Section 73.636(a)(1) of the rules should be waived, we look first to the policy
objectives underlying the multiple ownership rules. The Report and Order
adopting fixed overlap standards states the multiple ownership rules are
grounded on diversifying ownership to promote more effective competition, and a
desire to reduce the chances that any one person or group would have an
inordinate effect in shaping of public opinion through political, editorial or
similar programming. The Report and Order placed particular emphasis on
the latter policy aspect. See 2 RR 2d 1588 and 1591-92. Applying these
principles, there is nothing to suggest the miniscule overlap area has an
adverse effect on competition between WANE-TV and WISH-TV. It is to
Corinthian's self-interest to promote each station fully, and there are no
contrary facts to suggest this has not and will not be done. Nor is this
conclusion altered by carriage of WANE-TV's signal over CATV systems. See
WIBF Broadcasting Co., supra. As for the second policy basis of the rule, we
find it inconceivable that the minimal overlap involving only insignificant
fractions of total Grade B areas and populations could give the Corinthian
stations any potential for dominating public opinion in the overlap area.
Apart from the existence of abundant competing television service, the overlap
population enjoys numerous other broadcast services (AM and FM) and other mass
media (newspapers, magazines of general circulation, etc.) with which the
Corinthian stations have no association. In view of these circumstances,
a waiver would clearly not be incompatible with the policy objectives of the
rule.
37. We recognize the Report
and Order adopting the fixed overlap standards stated in footnote 12 "A
request for waiver of the rule showing, on its face, that application of the
rule would be inappropriate would be entitled to a hearing." (2 RR 2d at
1594.) But recognition of a right to a hearing was not intended to mean a
hearing was mandatory on all waiver requests where application of the rule
would be inappropriate. That footnote must be read in light of practical
considerations which dictate the need for a hearing -- the resolution of
disputed facts or questions of law or policy. Just as the mere filing of
a waiver request does not invariably require a hearing ( United States v.
Storer Broadcasting Co., 351 U.S. 192, referred to in footnote 12), neither
must every waiver request be subject to a hearing before it can be
granted. The need for administrative flexibility is recognized both in
footnote 12 and the Storer case, supra. Where the facts are not in
dispute, the overlap involves inconsequential areas and population and carries
no threat of any kind to the policies underlying our multiple ownership rules,
and a waiver is entirely consistent with prior precedent, a hearing would be
wasteful and serve no useful purpose. Accordingly, we hold that the
applicants are entitled to a waiver of Section 73.636(a)(1), and such waiver is
granted.
38. Applicability of the
Top-50 Policy. None of the petitioners originally raised the question of
the applicability of the Top-50 policy to the merger. However, on initial
consideration of the application, the [*753] Commission considered
the policy applicable and in its letter of November 30, 1970 (Point (a)), it
stated it was not satisfied the applicants had made the necessary "compelling
public interest showing" (12 RR 2d 1501 at 1507). Accordingly, the
applicants were requested to furnish additional information on how -- under the
standard referred to -- the merger would serve the public interest. The
applicants argue at length (response of February 1, 1971) that the policy is
inapplicable. Martin-Trigona contends the policy applies and that the
necessary showing has not been made. RJN argues similarly, and cites our
recent decision in the Triangle-Capital Cities application.
39. We agree with petitioners
that the Top-50 policy applies to this merger. We are not impressed by D
& B's arguments that the policy has no application because there is no
change in the number of Top-50 stations, n9
or any increase in audiences within the Top-50 markets. As we noted in
our Triangle decision, our concern was with substance and not mere form.
See Triangle Publications, Inc., FCC 71-209, released February 26, 1971.
Focusing on substance, D & B in one fell swoop will increase its Top-50
audience from zero to a combined net weekly circulation of 2,011,452.
Obviously, were D & B to acquire these stations piecemeal, once it had
acquired the initial triggering interests, it would be subject to the
policy. We see no sound reason why the transaction here should escape
scrutiny under the Top-50 test merely because the applicants have chosen the
merger approach. A contrary holding would be untenable because it would
lead to substantial evasion of the Top-50 policy.
n9 The three stations in the Top-50
television markets involved here are Indianapolis (20th market), Houston (21st)
and Sacramento (23rd).
40. The applicants argue,
however, that even if the policy applies, the required "compelling public
interest showing" of public benefits weighed against possible detriment to
the public interest has been made. They refer here to the substantial
strengthening of the Corinthian stations which would be made possible by
addition of D & B's personnel, financial, and other resources. And in
response to Point (e) of our letter of November 30, 1970, the applicants have
now furnished specific details on improvements in the area of children's
programs at the Corinthian stations, and other proposed program
improvements. Using the resources of its Thomas Y. Crowell subsidiary
(which publishes children's books), D & B plans a new program series
entitled "Let's Find Out," directed to 5 to 8-year olds. This
color series would consist of 26 half-hour programs to be broadcast by all
Corinthian stations and would cover 26 related topics. The programs would
be aired at hours suitable for children's viewing, and Corinthian will promote
the programs and later consider possible syndication so such programs could be
made available to other stations. The plans for this series have been
firmed up, and plans for a similar series directed to older children are under
consideration. D & B further notes that the resources of two other D
& B subsidiaries -- the Life Extension Institute and the Reuben H.
Donnelley Corporation -- are available for other programs. A series of 65
3 to 5-minute programs concerned with health and preventive medicine have been
planned, and are in direct response to ascertained [*754] community
needs in the Corinthian markets. Through the Reuben H. Donnelley Corporation's
various publications, Corinthian stations will obtain expertise of persons in a
number of different areas. The applicants note, for example, that
pollution is a community problem in all Corinthian markets, and D & B
expertise obtained through publishing Water and Waste Engineering (dealing with
water supply and waste water matters) would be ideally suited for programs on
pollution. Similarly, personnel of Control Engineering (traffic systems
controls) and Urban Roads (road construction and maintenance) could be used for
programs on ascertained needs respecting transportation, streets and
highways. Other D & B publications lending themselves to program
production are Fire Engineering (ambulance systems and services, an ascertained
need in Houston), What's New in Home Economics (women's programming in general)
and the Journals of Cardiology, Surgery and Medicine (health problems).
Presently, no detailed plans have been made for such programs, but these
resources will be available. And to coordinate interchange of ideas, an
official of Donnelley Corporation will be designated as liaison officer to
Corinthian after merger.
41. RJN quarrels with these
proposed program improvements, contending these "limited types of new
programming" are irrelevant because there is no basis for assuming such
programming could not be made available without the merger. (RJN letters
of February 16, 1971 and March 11, 1971). Martin-Trigona (Letter of
February 8, 1971) dismisses the programming improvements as "meaningless,"
because Corinthian merely commits itself to more kinds and amounts of
programming which will be expected of every licensee in the future.
Martin-Trigona also argues the applicants have not shown how the additional
prime time which will become available once the prime-time rules go into effect
will be used, and whether programs for such additional time will be locally
produced or syndicated. The applicants contend the "opinions"
of RJN and Martin-Trigona in this are not entitled to weight, and they rest on
their compelling public interest showing. (Applicants' letter of February
19, 1971.)
42. We are of the opinion that
the applicants have made the necessary "compelling public interest
showing" required under the Top-50 policy. The planned improvements
in the area of children's programs and the area of health and preventive
medicine are significant. And the prospect for extension of the
"Let's Find Out" format to older children, and plans for additional
programming made possible by D & B's expertise obtained through publication
of its various trade and technical journals look to further significant program
improvements. In our judgment, such improvements -- coupled with the
potential for strengthening the Corinthian stations by the addition of D &
B's resources (expert personnel, finances, etc.) -- constitute a
"compelling public interest showing" that on balance, approval of the
merger would be in the public interest. We are not persuaded by
petitioners' dismissal of these improvements as irrelevant and
meaningless. And Martin-Trigona is in error when he claims Corinthian is
merely doing what it will be required to do in the future. The Commission
does not dictate to licensees on matters of program content or specific
[*755] programs, and this applies to licensee judgments on how additional
prime-time hours will be filled when the new rules go into effect. See
Section 326 of the Communications Act of 1934, as amended, 47 U.S.C. 326.
43. Miscellaneous contentions
of Martin-Trigona.
(a) Martin-Trigona makes several
contentions which can be answered briefly. He contends the merger will
shift control of the Corinthian stations to out-of-state directors quartered
mainly in New York City and Chicago (Letter of April 8, 1970) and that following
merger, diluted attention will be paid to station operations (Ibid., p.
1). These contentions are baseless. The Corinthian stations will
continue under essentially the same management as present, except that they
will be placed under a subsidiary of D & B. The D & B board of
directors will be expanded to include four present Corinthian directors, and
Whitney and his associates, who now have de facto control of Corinthian will
own or have the power to vote the largest single block of post-merger D & B
stock. (Exhibits A-5 and A-11, application.) Commission standards do not
regulate the geographical distribution of directors, and the facts establish
that attention to the stations will not be diluted.
(b) Martin-Trigona contends a merger
is justified only for compelling financial reasons (Letter of April 8, 1970)
and that Corinthian should first be required to offer its stations for sale to
local groups (Letter of March 9, 1970). The charge that it is
"illegal" for Corinthian not to have made an effort to sell the
stations to local interests before proposing a merger with D & B is
repeated in Martin-Trigona's letter of February 8, 1971. While financial
necessity can be an important factor, neither the Communications Act nor
Commission policy conditions approval of mergers on financial need. As
for sales to local groups, this proposal is completely inconsistent with
Commission policy. The Commission has never required that stations must
first be offered for sale to local owners before a sale to non-local owners can
be approved.
(c) Martin-Trigona suggests
Corinthian is trafficking in licenses (Letter of April 8, 1970).
Martin-Trigona repeats these trafficking charges. He notes he has
received calls from a New York broker (who remains unidentified), who claims to
know of major investments in Corinthian stock and who flatly represented
Corinthian would be worth less without merger (Letter of February 8,
1971). All this, he asserts, requires the Commission to investigate
"trafficking" and whether undue influence has been used to secure
approval of the merger. These statements are without factual
support. While it is true Whitney and his associates have over the years
sold stock interests in Corinthian under public offerings and their aggregate
interests have gone from de jure to de facto control, the fact remains
Corinthian's stockholders will continue to have ownership interests in the
stations via D & B, and station management will remain intact.
(d) Martin-Trigona asserts the
merger has "Penn-Central" implications. (Undated letter
received July 7, 1970.) Penn-Central is mentioned again in Martin-Trigona's
letter of February 8, 1971, in [*756] which petitioner asserts --
without any explanation or substantiating facts -- that D & B showed
"... less than total alacrity" in the Penn-Central financial
collapse. The Commission is aware of the problem here and it would reject
any merger proposal which put stations in a position where their assets and
their continuing ability to serve the public were threatened with plundering or
diversion. The prospect of this is not present here. Both merger
partners are financially solid and there is nothing in D & B's background
to suggest its ends are piratical.
(e) Radio Free America brings to our
attention press accounts of a $6,610,000 verdict rendered against D & B in
the New York courts, arising out of D & B's credit reporting
activities. Martin-Trigona again brings these matters to our
attention. (Letter of February 8, 1971, p. 2). It claims this
evidences "pernicious policies" which warrant denial of the
application. (Undated letter received August 5, 1970.) This matter is
disclosed in the application, the pertinent exhibit (G-5, application) further
indicating the verdict is the subject of post-trial motions, and counsel's
opinion the verdict is without basis in fact or law. In our view, the
matter referred to in the press account (Newsweek, July 27, 1970, pp. 17 &
19) does not require a hearing. Even assuming the verdict stands, it
would have no substantial effect on D & B's financial qualifications.
Moreover, there has been no final judicial decision respecting the
verdict. And finally, even assuming the verdict is sustained, the matters
referred to in the press account would not in our judgment warrant an adverse
conclusion respecting D & B's fitness to be a licensee. This is
because the account refers to a single isolated credit-rating incident
occurring almost a decade ago in a regional (Atlanta) D & B office.
There is nothing to suggest that what might be characterized as vindictive
conduct of personnel in the regional office was approved by D & B
management. Apart from the fact that D & B has conceded it is not
infallible in its credit reporting functions, this single incident is outweighed
by other measures D & B takes to insure the integrity of its services
(supra).
(f) Martin-Trigona makes several new
requests for investigations. He asks investigation into "whether
merger approval is being bought or sold, and what financial inducements have
been made to present, past or future campaign committees, especially in the
District of Columbia, to lubricate approval or support for thereof."
(Letter of February 8, 1971, p. 3). He further suggests "secret
representations" have been made to the Department of Justice, and charges
this, as well as the allegations of stockbrokers who have called him on the
merger, must be evaluated. (Ibid.) In a similar vein, Martin-Trigona has
made a number of ad hominen arguments of the crudest kind, impugning the character
of the applicants' counsel, hinting of bribery by offers of post-Commission
employment, and charging political influences and political payoffs. We
are told these charges rest on "highly reliable confidential
sources", but those sources remain unidentified and the charges are
utterly without factual support. (Radio Free America letter of May 16,
1970.) Prompted by a letter from the applicants requesting timely action on the
application prior to initial consideration of the application, Martin-Trigona
directed further venomous [*757] letters to the Chairman of the
Commission, the President and four members of Congress. In our view,
these charges ordinarily would merit summary rejection without mention.
They are mentioned here solely to indicate that the Commission has considered
the charges. Upon such consideration we find them utterly vicious,
totally lacking any factual support, and completely unworthy of serious
consideration. These vague and rank suspicions do not warrant the
investigation demanded.
(g) Following release of the Primer
on ascertainment of community needs, the application was amended (Amendment 14)
to confirm that the original survey of community needs fully complied with
requirements set out in the Primer. On March 4, 1971, Martin-Trigona
filed a "Reply to Amended Community Service Filings by Applicants to
Corinthian Merger". The claim is made that Amendment 14 consists of
nothing but "bedsheet lists of 'needs and interests'" which ignore
real problems in the service areas of the Corinthian stations. Here
Martin-Trigona refers to the disproportionately large old-age population in
Tulsa and poverty problems in Indiana, which he claims have been ignored.
He also suggests D & B's approach to Negro problems is "... out of
tune". Accordingly, he requests that (1) all materials relating to
the entire community survey be resubmitted, and (2) that Amendment 14 be
stricken as meaningless and prolix. These requests are denied. D
& B's ascertainment of community needs in the five Corinthian communities
complies with Commission policies, and this is confirmed by Amendment 14.
Amendment 14 also confirms that D & B ascertained there is a higher
percentage of old people in the outlying communities which surround Tulsa, and
that young people were leaving Tulsa. (Amendment 14, "Significant
Demographic Characteristics of the Area Service by KOTV, Tulsa, Oklahoma",
p. 2, and "Additional Specific Needs and Interests of Tulsa and the
Surrounding Area".) Apart from the fact a licensee is not expected to
formulate programming covering every single ascertained community problem,
Martin-Trigona's broad-brush attack here is totally lacking in specifics.
This same observation applies to the claim poverty needs will be ignored by
Corinthian's Indiana stations. See Amendment 14, "Additional
Specific Needs and Interests of Indianapolis and the Surrounding Area",
and "Additional Specific Needs and Interests of Fort Wayne and the
Surrounding Area", both of which set forth needs of the poor and
subsidiary aspects of poverty (housing, welfare services, etc.).
44. Requests that action on
application be deferred until completion of Conglomerate Inquiry. All
three petitioners contend that acquisition by a conglomerate corporation is
involved, and accordingly, that action be deferred until the Conglomerate
Inquiry (Docket 18449) is completed. In renewed objections, RJN continues
to insist the application cannot be granted without an evidentiary hearing, and
at a minimum the Commission should not act until it has the benefit of the type
of information which will be elicited from Corinthian itself in the
Conglomerate Inquiry. It further argues the Inquiry should be expanded to
include proposed operations and policies of the applicants upon implementation
of the proposed merger. (RJN Letter of February [*758] 16,
1971). Martin-Trigona renews his prior objections via a renewal of all
prior pleadings and objections. (Martin-Trigona Letter of February 8,
1971).
45. Petitioners' requests are
denied. The Commission emphasized in its Notice of Inquiry that no
tentative conclusions had been formed, and that the Commission merely sought to
determine whether remedial action was needed (and if so, whether by
administrative or legislative action). Notice of Inquiry, 16 FCC 2d 436,
at 437. In this state of affairs, delay in acting on the application would be
inappropriate. Indeed, other applications involving applicants who
conceivably could be subject to further actions resulting from that inquiry
have been acted upon.
Conclusions Respecting the
Application
46. We have considered the
objections to the merger at great length. Perhaps unnecessary length, but
then for a reason: the objections are many and touch on sensitive areas which
even in the absence of pleadings would need exploring. As we have seen,
those problems center around competitive factors -- whether the combined
resources of D & B and Corinthian would lessen competition, or enhance it
(perhaps even to a destructive level), and whether there is anything in the
record to suggest D & B could -- or might possibly -- abuse its enlarged
potential to the detriment of competitors. Apart from competitive
factors, there is a further point to which the petitioners have not addressed
themselves in terms -- whether the merger would result in undue concentration
of mass media ownership which is inconsistent with the public interest.
47. On all these points, we
are satisfied there are no substantial and material questions which would
require a hearing. There would be no lessening of competition among
broadcast stations because the merger does not involve parties who presently
compete. Nor would competition be reduced because the Corinthian stations
will have available the other business services and information resources of D
& B. Petitioners' arguments on this score raise the specter of secret
business information used for sinister ends. Petitioners' fears are
useful in bringing this matter out into the open, because they have forced the
applicants to demonstrate these fears are illusory. The applicants'
representations on this point dispel any concern here and we fully expect the
applicants to hew faithfully to these representations. With respect to
the enhancement of competition, it is reasonable to assume the merger of the
applicants' resources may enlarge the capacity of the Corinthian stations to
compete more effectively. After all, this is the whole purpose of the
merger. At the same time, while the Corinthian stations will undoubtedly
be strengthened, nothing suggests Corinthian will be enabled to dominate the
markets in which it operates television stations. And in view of the
Antitrust Division's examination of the application and all the objections
thereto, and the Division's conclusion, we think there is a substantial basis
for inferring that our judgment on the various competitive factors we have
considered under the public interest standard is correct.
[*759] 48. Nor
will the merger unduly concentrate mass media ownership. The Commission
has previously concluded that Corinthian's mass media interests present no
problems in this area. D & B's specialty publications can in no sense
be regarded as mass media of a kind which can be used to shape public
opinion. The merger adds nothing in the way of new mass media interests,
but merely shifts control of existing interests which have never been found to
raise problems of undue concentration. Each of the Corinthian stations
operates in markets with anywhere from two competing commercial television stations
(Ft. Wayne and Tulsa) to three competing stations (Sacramento, Houston and
Indianapolis). Additionally, the Sacramento, Houston and Tulsa markets
have an operating non-commercial television station, and each market has
anywhere from one to four authorized commercial channels, some of which are
likely to be operational in the near future. Each Corinthian station is
in a state with numerous television stations, from a high of 52 for Texas to a
low of 10 for Oklahoma. Fourteen individual television stations have a
greater net weekly circulation than the five Corinthian stations combined
(2,292,500). Among multiple owners, Corinthian ranks 31st in terms of
combined population of standard metropolitan statistical areas (SMSA); 31st
based on population of the SMSA of the city of license; 28th based on ARB's
rank by Area of Dominate Influence (ADI) TV homes; and 19th in terms of ARB net
weekly circulation. (Exhibit A-5 application) and each Corinthian
television city of license is served by from 7 to 23 AM and FM stations, as
well as various printed media. (Ibid).
49. We have thus far
considered the merger mainly in terms of the alleged negative aspects raised by
petitioners. But the merger has a positive side. It would serve the
public interest by giving Corinthian access to important D & B resources --
financial, personnel, and others. It would also pave the way for the
programming improvements discussed earlier in connection with the required
"compelling public interest showing" under the Top-50 policy.
50. The application discloses
several banks will have more than 1% of D & B's stock after merger.
As we have done with other applications, our approval will be conditioned on
the outcome of the rule making in Docket No. 18751.
51. We find, therefore, that
the applicants have made a compelling public interest showing that the public
interest, convenience and necessity will be served by approval of the merger,
and we further find that there are no substantial or material questions of fact
which require a hearing.
52. Accordingly, IT IS
ORDERED, That, Section 73.636(a)(1) of the Rules, IS WAIVED and that the
application for transfer of control of Corinthian Broadcasting Corporation from
John Hay Whitney to Dun and Bradstreet, Inc., IS GRANTED, subject to whatever
final action the Commission may take in Docket No. 18751 on the Bankers
Petition, in the matter of amendment of Section [*760] 73.35,
73.240, and 73.636 of the Commission's multiple ownership rules.
53. IT IS FURTHER ORDERED,
That, the "Petition to Deny and for Other Relief" filed by RJN
Broadcasting, Inc., IS DENIED; that the "Petition for Reconsideration and
Motion for Acceptance Out of Time" filed by LVO Cable, Inc., IS DENIED;
the "Opposition to Proposed Transfer of Control" filed by Radio Free
America, IS DISMISSED; that the "Motion for Recuse and Suggestion for
Rescue" filed by Anthony R. Martin-Trigona, IS DENIED; and that the
"Motion to Strike and Remove" the letter of the Antitrust Division,
Department of Justice, dated February 19, 1971, filed by Anthony R.
Martin-Trigona, IS DENIED.
FEDERAL
COMMUNICATIONS COMMISSION, BEN F. WAPLE, Secretary.
DISSENT:
DISSENTING STATEMENT OF COMMISSIONER
ROBERT T. BARTLEY (IN WHICH COMMISSIONER NICHOLAS JOHNSON JOINS)
I dissent.
The applicants' showing fails to set
forth facts from which I can conclude that the package deal would bring about
an improvement in the general structure of broadcasting.
Moreover, the applicants have
failed, in my opinion, to make a "compelling public interest showing"
sufficient "to overcome the detriment with respect to the policy of
diversifying the sources of mass media communications to the public," as
required by the Commission's Top-50 Policy, (12 RR 2d, 1501, 1507). The
applicants' showing rests upon alleged strengthening of the Corinthian stations
with Dun and Bradstreet resources and upon purported program
improvements. The claimed advantages of expertise are by reason of other
media interests of Dun and Bradstreet -- already a substantial media
complex. There is no showing, or claim, that the Corinthian stations need
financial strengthening in order to serve the public interest better or that
they could not afford to make the proposed program improvements without the
transfer. Each of the Corinthian stations standing alone is a highly
profitable operation. Each could well afford to make whatever program
improvements are considered desirable without the aid of Dun and Bradstreet
resources. In my opinion, the reasons given by the applicants in support
of the required compelling public interest showing are not valid.
The paper showings by the applicants
do not, in my opinion, resolve substantial questions of unfair competitive
advantages inherent in the merger.
In view of the foregoing, I would
designate the applications for evidentiary hearing pursuant to Section 309(e)
of the Act to determine whether our granting consent to the merger would serve
the public interest.
DISSENTING STATEMENT OF COMMISSIONER H. REX LEE
Dun & Bradstreet (D&B) is
acquiring five television stations from Corinthian Broadcasting Company, three
of which are located in the [*761] nation's top-fifty
markets. This engages the Commission's Top-50 Market Policy, requiring
that a transfer applicant must present a compelling public interest showing of
the benefits the public can expect to receive from the grant -- demonstrating
that such benefits are sufficient to overcome the detriment to the Commission's
policy of diversifying the sources of mass media communications.
D&B equivocates about both the
applicability of the Top-50 Market Policy and the necessity of making a
compelling public interest showing. But, it says, if such a showing is
required, its commitment to continue the "quality operation" of the
Corinthian stations and to augment that service through access to D&B
personnel and expertise, will suffice. In a supplement to this
commitment, D&B "anticipates" that the personnel resources of its
Thomas Y. Crowell subsidiary will produce 26 half-hour general science
color television programs for a pre-teen children's audience, ready for
distribution within 6 to 12 months from the date of the merger. D&B
also maintains it has other "plans" that could fulfill the requirement
of a compelling public interest showing. It points generally to the
resources and capacity of its subsidiary, Life Extension Institute, to produce
65 three-to-five minute programs, dealing generally with the subjects of food,
health and age. Another subsidiary, Reuben H. Donnelley, is said to have
the personnel expertise available for program production touching on pollution,
water conservation, urban transportation, emergency services, home economics,
and general matters related to health.
These availabilities seem a poor
substitute for a fastened commitment, especially since commitment has become
the touchstone of a compelling public interest showing. Triangle
Publications, Inc., FCC 71-209, February 26, 1971.
The vagueness of D&B's promise
to continue and augment the present quality of Corinthian operations seems to
raise substantial character questions. D&B maintains that its merger
with Corinthian will "assure not only continuation of the existing high
quality of public service provided by Corinthian stations, but which (sic)
ultimately should be translated into even better performance and service to the
public." (Reasons for the Merger, Exhibit A-5, pp. 5-9 passim.) Then, in
the face of this assurance, D&B proposes to slightly reduce the percentages
of time devoted to news, public affairs, and other programming in three of the
five stations it is acquiring (KXTV, Sacramento; WISH, Indianapolis; and KOTV,
Tulsa). A very slight increase in percentages is proposed for the other
two stations (KHOU, Houston; and WANE, Ft. Wayne). At a minimum this type
of program proposal raises a material question concerning the veracity of
D&B's promise of "continuing" the "high quality" of
Corinthian operations.
Moreover, there is a serious
question concerning the meaning of D&B's commitment. Based on an
analysis of data contained in FCC files, the Corinthian stations apparently
constitute some of the highest profit producing television properties in the
top-fifty markets. But, among VHF network affiliated stations located in
these markets, they devote some of the smallest percentages of their revenues
to program expenditures. In markets 11 through 25 (where three of
[*762] the Corinthian stations are located), the median of program
expenditures to revenue is 25 percent. By this index Corinthian ranks
under the median program expense with 16.8 percent for WISH and 19.8 percent
for KHOU. Only, Corinthian's Sacramento station, KXTV expends as much as
30.5 percent of its gross receipts on programming, and therefore is 5.5 percent
above the 25 percent median in markets 11 through 25.
In comparing Corinthian against the
range of program expenditures to gross revenue by other stations in the
top-fifty markets, a substantially similar pattern seems to emerge. In
markets 1 through 50 the percent of program expense to revenue of VHF network
affiliates ranges from 14 percent to 44 percent. On this scale all of the
Corinthian stations in these markets fall near the low end of the range.
In markets 11 through 25, the range varies between a low of 16 percent and a
high of 42 percent. Corinthian's WISH falls just above the low end of the
register with a 16.8 percentage. KHOU is slightly above the lower range
with 19.8 percent. And KXTV is slightly above the median with 30.5 percent.
In comparison to the 44 VHF network
affiliated television properties in markets 11 through 25, Corinthian's record
of program expense to revenue seems to rank it a poor achiever.
Corinthian's KHOU (Houston) ranks 41st, and WISH (Ft. Wayne) ranks 43rd. KXTV
(Sacramento) alone breaks out of this low category because its program
expenditures (as a percent of gross revenue) rise slightly above the 25 percent
median. Unfortunately, however, KXTV ranks 40th in the total time devoted
to local programming, and 44th in time expended on local programming within the
prime time period. KHOU stands 3/th among the 44 network affiliated
television stations in markets 11 through 25, consigning only a small portion
of total broadcast time to local programming.
Although statistics are not the only
yardstick of a station's performance, these records seem to bear significantly
on D&B's commitment to continuing Corinthian's "quality"
operations -- especially in view of the profit picture which is evident in
Corinthian's performance. WISH, for example, realizes a profit of 60.2
percent on total revenue. KHOU falls just under WISH with a 57.7 percent
on total revenue. And KXTV earns 21.5 percent.
With this distressing picture of the
quality of Corinthian operations, D&B's promise of augmenting that
"quality", may perhaps only be regarded either as an undertaking to
do less, or as a commitment to continue the pursuit profits at the expense of
local programming and original production. D&B's supplemental
filings, to structure a verbal showing of compelling public interest, do not
seem to alter this conclusion. According to D&B's language, the 26
half-hour children's television programs are "planned" and
"anticipated," not committed. Consequently, the transfer
application, without any public interest commitment, does not permit a
determination of the reason D&B needs to own television facilities to
justify the validity of any television program investment it may ultimately
make. If ownership of these stations means D&B will be assured of a
Corinthian "buy" to cover its [*763] promised program
investment, then D&B is not really contemplating any contribution which
rises to the dignity of a compelling public benefit. In this
circumstance, D&B's ownership of these stations merely guarantees itself
the availability of a distribution market it might not otherwise gain if forced
to rely on the program selection process of independent stations operating in a
competitive market for program acquisitions. For the public interest to
be served, an actual financial commitment is required to guarantee this
proposed programming as a capital contribution to the Corinthian
stations. Cf. Triangle Publications, supra. If Corinthian must buy
D&B program production, at best the merger amounts to little more than an
internal reciprocity arrangement which seems to dilute Corinthian's internal
management supervisory control over the program selection process. Since
the Commission has no information about this relationship of purchases to
contributions, it cannot be determined whether the public is acquiring a
compelling benefit, or is being sold a reciprocal typing arrangement between a
new production source and an existing distribution chain.
All the Commission gets in the way
of information is Corinthian's claim that the continued "quality
operation" of its stations will be kept and augmented through its access
to the personnel resources and expertise of the D&B organization.
Moreover, Corinthian says the stations will be "placed under responsible
leadership as to whose integrity no questions exists." In the face of
petitions to deny, these claims raise material and unanswered questions as to
the reasons why Corinthian needs the personnel and expertise of D&B.
They also raise a substantial question concerning the manner in which
Corinthian's integrity will be improved by the transfer. Corinthian's
pre-tax earnings, at the end of its 1970 fiscal year, were $9.8 million, with
retained earnings reaching an all time high of $22 million. In 1970, the
corporation reduced its debt by $2 million, increased its working capital by
nearly $1.9 million, and paid out dividends slightly in excess of $1
million. Given these facts, it is difficult to comprehend Corinthian's
need for access to the personnel resources and expertise of D&B.
Generally, where a transferor claims a need for the resources of a transferee,
without substantiating the basis for that need, a hearing is required to
determine in what respect the existing owner's resources are not adequate to
preserve or improve broadcast station operations. The Citizens Committee
to preserve "Voice of the Arts" in Atlanta (WGKA) v. F.C.C., No. 23,
515 (D.C. Cir., October 30, 1970).
After considering how the above
facts reflect on D&B's promise to augment the "quality" of
Corinthian operations, it is worthwhile reflecting on Corinthian's argument
that this merger is needed to give its shareholders an opportunity for
investment growth without exposing their television stations to risk.
Corinthian contends that undisclosed regulatory circumstances restrict its
growth, that the company is too small to pursue a diversification program. In
view of the corporation's profits and capital structure, this assertion would
seem questionable. But, in any event, the Commission has no recognized
communications policy of encouraging investment growth of broadcast
shareholders, except as that growth may promote the policy of diversifying
program sources or encourage program development. Since the
[*764] Commission's adoption of the Prime Time Access Rule, the
obligation of broadcast licensees to stimulate first-run quality program
production has become a matter of critical priority. Although this
obligation has always existed, recent developments within the broadcasting
industry have sharpened it, especially with respect to licensees such as
Corinthian who seemingly possess the resources essential to a program
production enterprise. Considering the magnitude of Corinthian's capital
resources, it is difficult to understand how its expansion is restricted in any
way that makes sense to complementary broadcast and regulatory
objectives. Corinthian's strong cash position, together with the manner
in which it desires to improve the investment growth potential of shareholders
has the effect of raising substantial questions concerning the propriety of the
corporation's use of broadcast revenues for expansion in other business markets
instead of devoting its ostensibly large resources to the program production
and syndication fields.
The only explanation for D&B's
failure or refusal to make definitive financial commitments to program
production in areas of ascertained community needs, seems to rest in the
combined interests of D&B and Corinthian to use broadcast revenues for the
development and promotion of publication enterprises rather than for the
enhancement of program service. Corinthian owns Standard Reference
Library, Inc., a publisher of encyclopedias and dictionaries (Funk &
Wagnells), which it acquired in 1968. According to Corinthian's 1970
Annual Statement, between 1969 and 1970 more than $1 million in broadcast
revenues were invested in encyclopedia development. When the
D&B-Corinthian merger was first announced (Broadcasting, December 8, 1969)
C. Wrede Petersmeyer, the President of Corinthian, reportedly said that the
enormous computer sophistication of D&B would be used by Corinthian
"to pursue its goals in all phases of research." Petersmeyer was also
reported as saying "the merger will aid Corinthian in developing
encyclopedia for children." Advertising Age (December 8, 1969) reported
Petersmeyer as stating that the merger would better enable Corinthian "to
serve its TV viewers and further develop its activities in the reference book
field." Moreover, Corinthianhs 1970 Annual Statement reported that,
"During the past year the management of Standard was strengthened in
several key areas. Progress has also been made in plans for additional
products."
Not only do these statements appear
as adversely reflecting on any promises for augmented broadcast service, but
Corinthian's acknowledged progress in planning additional product development
tends to cast doubt on its alleged inability to diversify business enterprises
because of limited financial resources. Moreover, in all this, there is
no assertion of any management policy of making any major financial commitments
to expanded originating capacity for program production. Corinthian's
financial statements indicate that its most substantial investment in broadcast
programming involves purchases of slightly over $3 million in syndicated film
packages of old movies which are no longer in theatrical distribution.
In the overall picture of profit
motivation, it may be noted that between 1967 and 1968, Corinthian's major
stockholder, John Hay Whitney, publicly sold nearly $33 million of his
Corinthian securities. [*765] The merger with D&B will
bring Corinthian shareholders in excess of $114 million in D&B securities,
of which Whitney will receive approximately $44.7 million. When these
facts are placed in perspective with the unusually high profits generated by
Corinthian stations, the extremely low percentage of revenues devoted to
programming and program production, the ostensibly poor record of performance
in broadcasting news, public affairs and other programs, and the use of
broadcast revenues in the development and promotion of publications and other
products, there emerges a pattern of speculation for profit rather than of
broadcast ownership and operation to serve the public. With all these
facts of record, it is difficult to see how a hearing would not be
warranted. Certainly, the existence of these material and substantial
questions appears to inhibit the ability of the Commission to determine how the
public interest will be served by the transfer. Under the circumstances,
Section 309 of the Communications Act requires a hearing.
Finally, this transfer creates
serious problems in terms of the impact of bank-broadcast stock holdings on the
Commission's multiple ownership rules. Nine banks hold in excess of 30
percent of D&B's stock. That fact, however, gives only a partial
glimpse of the interrelationship of bank investments and broadcast properties
affected by this transfer. For example, the Mercantile Safe Deposit and
Trust Company of Baltimore, Maryland, which has the sole or joint right to vote
3.26 percent of the shares of post-merger D&B stock, also votes 62 percent
of the stock of A.S. Abell Co., which owns or controls the Baltimore Sun
newspaper, WMAR-FM and TV (Baltimore, Maryland) and WBOC-AM-FM-TV (Salisbury,
Maryland). In addition, the bank also owns and votes 1.65 percent of the
stock of Rollins, Inc. the licensee of 7 AM, one FM, and three VHF
stations. n1 Thus, after this merger is
consummated, the Mercantile Bank will own over 1 percent interest in 8 VHF, 2
UHF, 8 AM, and 3 FM stations. This clearly violates the Commission's
multiple ownership rules.
n1 Mercantile Safe Deposit attempts
to remove this violation by agreeing not to vote as much as one percent of
Rollins common stock. Even though the Commission has, in the past, waived
its multiple ownership banking rule on the basis of such insulation of bank
voting power, suffice it to say that existing FCC rules prohibit any bank
ownership exceeding a one percent interest in more than the maximum permissible
number of broadcast licenses.
Moreover, this picture appears to
reflect only the tip of an iceberg that reaches down through a sea of bank
trust departments and broadcast licensees. On the basis of information
supplied the Commission by the applicants, it is difficult, if not impossible
to determine, without a hearing, where banking interests leave off and
broadcast control begins. For example, in a recent amendment filed by the
applicants, the Commission was informed that two banks, additional to those
previously reported, will hold more than one percent of D&B stock after the
merger. Furthermore, examination of Commission records turns up two more
instances of bank ownership of D&B stock and of bank ownership in other
broadcast properties, not reported by the applicants, which seemingly will
violate the multiple ownership rules.
For example, Bankers Trust Company
has sole voting power over 278,900 shares (less than 3 percent) of the D&B
stock. The other 642,319 shares held by it or its nominees are (a)
maintained in various [*766] agency or custodial accounts, to be
voted only in accord with the instructions of beneficial owners, or (b) are
held in various trusts in which Bankers Trust is a co-trustee and therefore
must join with others in reaching voting decisions. But what the
applicants fail to inform the Commission is that Bankers Trust also holds over
one percent of the stock of Taft Broadcasting Company which owns 17
licenses. Even though Bankers Trust represents it does not intend to
control D&B management or policy and after merger will not in the aggregate
vote, or give instructions to vote, as much as one percent of D&B's
outstanding shares if such vote would contravene Commission rules, such
cross-ownership raises a question of whether the D&B-Corinthian merger
creates a community of banking interests between 22 stations held by Taft and
Corinthian. This relationship would seem further aggravated by the
overlapping signal contours of Taft's Cincinnati television stations and
Corinthian's Indianapolis station.
Another bank-broadcast relationship
not fully explained by the applicants concerns Northern Trust of Chicago.
This bank is listed as owning over three percent of D&B's stock.
Though the bank also claims it will not vote more than one percent of D&B's
outstanding shares, it fails to inform the Commission that Northern Trust also
owns approximately 21 percent of the stock of WICS-TV in Springfield,
Illinois. This holding would therefore seem to produce a regional
relationship of broadcast properties situated in Illinois, Indiana, and Ohio,
involving WICS-TV and Northern Trust, D&B-Corinthian and Bankers Trust, and
Taft and Bankers Trust.
Finally, Morgan Guaranty Trust
Company, which holds over seven percent of D&B's stock, also possesses a
concentration of voting power in 92 other broadcast licenses. This
transfer will raise the sum of Morgan's holdings to 97 broadcast licenses,
without at all reflecting the combinations held by other banking institutions
whose investments in D&B exceed 30 percent of D&B's total outstanding
stock. The Commission's multiple ownership rules prohibit any one bank
from owning more than one percent in more than seven AM, seven FM, and seven TV
stations. Consequently, this transfer application brings to light very
obvious violations of Commission rules. Even though the Commission is
conditioning the approval of the D&B-Corinthian merger upon the ultimate
conclusion of a rulemaking proceeding in which these questions will be
explored, that condition does not eliminate the presence of a current
violation. Furthermore, the extent of bank ownership which surfaces with
this merger presents a magnitude of bank ownership and interlocking
directorates the like of which the Commission has never previously
considered. To say the public interest may be served by such a situation
is only tantamount to a conclusion that the situation itself is not of
sufficient import to justify review. I cannot hold to that view; nor, as
I have stated before, do I believe that our multiple ownership rules should be
waived until at some future time the Commission may choose to resolve the
dilemma.
I do not mean to prejudge the action
the Commission should ultimately take with respect to bank holdings and
relationships of this type. Nevertheless, until some decision is reached,
it seems to me that [*767] the Commission should carefully
scrutinize, through the hearing process, transfer applications which, as here,
demonstrate so high a degree of overall banking concentration and so severely
strain the multiple ownership rules.
For all of the above reasons, I find
that I must dissent to this transfer.