Sinclair’s attempt to win regulatory approval of its Tribune merger has so far severely damaged Sinclair’s standing at the FCC, aggravated the most broadcast-friendly FCC chairman in decades, subjected its own and several other broadcast groups’ basic business dealings to intense Justice Department scrutiny and exposed those same groups to a lawsuit that, no matter how frivolous, needs to be answered.
I’ve been talking here for several months about how Sinclair’s aggressive approach in its dealing with the Justice Department and the FCC with regard to its merger with Tribune has been polluting the best regulatory atmosphere in Washington since the Reagan administration.
Now, we have learned that those dealings have metastasized into into the DOJ antitrust investigation into whether leading broadcasters are colluding to fix advertising prices and an opportunistic, piggyback class action law suit seeking treble damages.
You can thank David Smith when those legal bills start rolling in.
I don’t think there is much to worry about from the class action suit unless Justice uncovers something. The sole plaintiff now is Clay Massey & Associates, a Mobile, Ala., ambulance-chasing law firm that is apparently unhappy with the results of its last local TV ad campaign.
I doubt the suit was a Clay Massey idea. Antitrust is above their pay grade. The suit was filed by two other law firms — Freed Kanner London & Millen and Robins Kaplan. I’m thinking one of them was the instigator — the one with a subscription to The Wall Street Journal, which broke the story of the DOJ antitrust probe on July 26.
The suit points the finger at Sinclair, of course, but also at Nexstar, Tribune, Gray, Hearst and Tegna. The last four have to be wondering how they got caught up is this. They don’t even have a station in Mobile.
Right now, with just one aggrieved party, the suit is not much of a class action. But others would certainly come out of the woodwork should the suit gain any traction.
The complaint starts off as though there might be some substance to it. “Defendants unlawfully shared information and coordinated efforts to artificially inflate prices for television commercials.
“Specifically, instead of competing with each other on prices for advertising sales, as competitors normally do, Defendants and their co-conspirators shared proprietary information and conspired to fix prices and reduce competition in the market.”
But you read on and see the complaint is but a hollow shell. It offers no real evidence of wrongdoing. It strains to fill enough pages to look credible. There’s a lot of boilerplate in there about the defendants and the state of the broadcasting business, but not a peep on Clay Massey’s experience buying TV time.
The complaint’s chief argument seems to be BIA research showing local broadcasting revenue will rise 6% this year even though an eMarketer report says that total TV revenue has been falling since 2016.
That the local broadcasters may be bucking the trend this year can only mean they are cheating, the complaint says, either ignoring or unaware of broadcasting’s even-odd, up-down revenue cycle caused by political advertising.
Funny thing is, the complaint later argues that “declining sales” is what compelled broadcasters to conspire on ad rates. You can’t have it both ways. Sales can’t be going up and down at the same time.
Did the broadcasters have opportunity to conspire? Oh, yes, the complaint says, they had plenty of opportunity. They all belong to the NAB, the TVB and the Media Rating Council, which the lawyers would have us think are nothing but sketchy social clubs where the conspiratorial broadcasters can cook up their schemes.
We posted a good article from sales consultant Jim Doyle this morning calling the lawsuit “bullshit” and that about says it all.
The DOJ investigation that grew out of its review of the Sinclair-Tribune merger and sparked the lawsuit is another matter. It cannot be so easily dismissed.
I’m told that the DOJ interest in the local TV market started long before it was unveiled in the Wall Street Journal article. And in addition to several station groups, notably Sinclair and Tribune, it may also involve the Cox and Katz rep firms. Cox represents the Tribune stations; Katz, most of the Sinclair stations.
Unlike the class-action lawyers, the Justice lawyers have a deep understanding of the local TV ad marketplace by now and they are becoming ever more expert as responses to their civil investigative demands come in.
Broadcasters do share information about the ad marketplace. As Doyle pointed out in his piece, many contribute their sales figures to third parties like Hungerford and Miller Kaplan, which aggregate the numbers and produce reports on market share for all the cooperating stations.
And I know from attending industry receptions, broadcasters will casually swap information on how their quarters or even particular categories are pacing. Such talk is also a topic of public panel sessions.
But the lawyers tell me that such activity is far short of anything illegal. It’s only when two rivals talk about actual spot prices and the need to avoid undercutting each other that matters enter the realm of fines, remedial consent decrees and treble damages.
At this point, I cannot say that the DOJ probe will yield nothing. Somewhere at some time at some level, some broadcasters may have gone too far in comparing notes and crossed the line.
What makes me doubt that the DOJ find anything is that, with the exception of that one law firm in Mobile with dubious motives, I do not hear any advertisers or media agency squawking about how local spot rates are fixed and they are far more familiar with the dynamics of the ad marketplace than the feds and they have far more at stake.
In fact, I am unaware of any antitrust action against TV stations for price-fixing. (In 1996, Justice did nail three broadcasters in Corpus Christi, Texas, for conspiring on retransmission consent fees.)
And here’s the other thing. As Bill Clinton knows and Donald Trump is learning, once you unleash federal investigators, you don’t know where they will go and what they might turn up. In the hunt for one thing, they may find another.
So, let’s recap. Sinclair’s attempt to win regulatory approval of its Tribune merger has so far severely damaged Sinclair’s standing at the FCC, aggravated the most broadcast-friendly FCC chairman in decades, subjected its own and several other broadcast groups’ basic business dealings to intense Justice Department scrutiny and exposed those same groups to a lawsuit that, no matter how frivolous, needs to be answered.