Antitrust Law Daily TV broadcast stations, ad sales reps settle U.S. charges over exchange of competitively sensitive information
Tuesday, June 18, 2019

TV broadcast stations, ad sales reps settle U.S. charges over exchange of competitively sensitive information

By George Basharis, J.D.

Latest allegations follow settlements with seven other broadcasters announced in 2018.

The Department of Justice Antitrust Division announced on June 17 that television broadcasters CBS Corporation, Cox Enterprises Inc., The E.W. Scripps Company, Fox Corporation, and TEGNA Inc. have agreed to settle allegations that they participated in a conspiracy to exchange competitively sensitive information. The allegations against the five broadcasters, including a national sales representative firm, follow settlements last year with seven other television broadcasting companies with respect to the same conduct. The Department of Justice filed a second amended complaint in the action, naming the latest defendants. At the same time, it filed proposed final judgments that, if approved by the court, will resolve the government’s antitrust concerns (U.S. v. Sinclair Broadcast Group, Inc., Case No. 1:18-cv-02609-TSC).

The alleged conspiracy reduced competition in the sale of spot advertising in designated marketing areas (DMAs), according to the government. Each broadcaster sells spot advertising to advertisers throughout the United States or owns and operates broadcast TV stations in multiple states or in DMAs crossing state lines. The Sales Rep Firms represent broadcast stations throughout the United States. The government alleges that the Broadcasters and Sales Rep Firms agreed in many DMAs across the country to exchange revenue pacing information and, in some cases, other forms of competitively sensitive sales information. Pacing compares a broadcast station’s revenues for a certain time to revenues booked for the same time in the previous year, indicating how each station is performing in relation to the rest of the market. The complaint alleges that the exchange of pacing information has taken at least two forms: (1) the broadcasters regularly exchanged pacing information through the Sales Rep Firms in which the Firms agreed to facilitate; and (2) in some DMAs, the broadcasters exchanged competitively sensitive information directly between broadcast station employees.

The exchange of pacing information provided the broadcasters with a greater ability to negotiate with buyers over spot advertising prices and helped stations to anticipate whether competitors were likely to raise, maintain or lower spot advertising prices, according to the Justice Department. The exchange of information distorted the normal price-setting mechanism in the spot advertising market, thereby harming the competitive process.

The proposed settlements with CBS, Cox, Scripps, Fox, and TEGNA prohibit the direct or indirect sharing of such competitively sensitive information, according to the Justice Department. Additionally, the proposed final judgment with Cox requires that Cox Reps implements firewalls in markets where it represents more than one broadcast station. Antitrust compliance programs and reporting measures to prevent similar conduct in the future would also be required.

Attorneys: Lee F. Berger, U.S. Department of Justice, for the United States. Jeff L. White (Weil Gotshal & Manges LLP) for CBS Corp. Gregory J. Commins Jr. (Baker & Hostetler LLP) for The E.W. Scripps Company. Katharine Mitchell-Tombras (Covington & Burling LLP) for Cox Enterprises, Inc. David Bitkower (Jenner & Block LLP) for TEGNA Inc. George S. Cary and Kenneth S. Reinker (Cleary Gottlieb Steen & Hamilton LLP) for Fox Corp. Tabitha Bartholomew (Hughes Hubbard & Reed LLP) for Sinclair Broadcast Group, Inc.

Companies: CBS Corp.; Cox Enterprises Inc.; E.W. Scripps Co.; Fox Corp.; TEGNA Inc.; Sinclair Broadcast Group Inc.

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