Jessell | An Open Letter To Makan Delrahim

Makan Delrahim

U.S. Asst. Attorney General
Antitrust Division
Department of Justice
950 Pennsylvania Ave. NW
Washington, DC 20530

Dear Makan:

Why are you picking on broadcasters?

The word on the street is that that your antitrust agents are going after TV station groups and their rep firms for allegedly sharing pricing information about the ad market — sharing that you believe is one short step of outright price fixing. The investigation was apparently sparked by some communications you discovered during your review of Sinclair’s bid to acquire Tribune.

I get it. You don’t have to tell anybody in broadcasting that Sinclair can be annoying. But you can’t allow your feelings about that Baltimore gang to slop over and color your opinion of other broadcasters and their business practices. Not all broadcasters are alike.

And this investigation seems to be getting out of hand. I hear you now want certain broadcasters to sign consent decrees saying that they will be more circumspect in what they say to their peers about how business is going.

You may see the consent decree as a modest measure, insurance against broadcasters stepping over the line between sharing and collusion.

Let me disabuse you of that notion. There is nothing modest about it.

First, consent decrees will require the signatories to hire compliance officers and lawyers to police themselves so they don’t violate the decree and land in serious federal hot water — another hefty regulatory cost.

And, worse, signing the decree would be an implicit admission that you just might have done something wrong. Although not an admission of guilt, it would be enough to excite the bloodlust of the plaintiffs’ lawyers that have been circling your investigation for the past few months and filing civil antitrust suits against groups they think might be among your targets.

Any station group that is not already a defendant in the suits will likely become one if it signs one of your decrees, according to one attorney with whom I spoke.

As of Oct. 4, according to 360Law, at least 18 suits have been filed against station groups, including Sinclair, Tribune, Gray, Hearst, Nexstar and Tegna. This week, the New York Post and others reported that the bankrupt Bon-Ton department store chain has joined in the feeding frenzy.

I should also think that you could find better things to do than go after broadcasters whose share of the local advertising market is just 17%.

If you truly want a robust and competitive local ad market, you should focus on those media whose share of the dollars is growing, not stagnating or declining.

Facebook and Google are sucking up most of the digital advertising money, crushing others that have tried to compete and knocking the support out of the thousands of local digital media that pay actual reporters and generate original content.

I was encouraged by your testimony at a Senate hearing last week. You said you were preparing a criminal case against search engines whose algorithms may be directing users away from the best options in favor of the search engines’ advertisers. You called it a “potential misuse of market power.”

It reminds me of the old joke. What do you call 1,000 lawyers chained together at the bottom of the ocean? Pause. A good start. (You don’t mind a good lawyer joke, do you?)

And what about local cable? It’s a head-to-head competitor of broadcasting and it takes nearly 5% of the local ad dollars.

Look around. In any given TV market, several cable and satellite operators have carved up the market through the power of their municipal franchises and their marketing prowess. There is some shifting of subscribers between cable and satellite and a few overbuilders, but not much anymore.

With all those companies, you would think that there would be lot of healthy competition for advertising. There is not. In most markets of any size, the MVPDs form consortia to aggregate and sell their inventory.

Take New York. The big three cable providers — Altice, Charter and Comcast — just formed the New York Interconnect to represent themselves along with FiOs, DirecTV, Dish, RCN, Service Electric and Blue Ridge. With one call to NYI, advertisers can buy more than 85 cable networks reaching 6.4 million TV homes.

As the nation’s largest cable operator, Comcast is big enough to pull together interconnects on its own, and it has in 79 markets covering nearly 33 million homes. The markets include seven of the top 10 and 18 of the top 25 markets.

Look, I can see how the interconnects are pro-competitive. For advertisers seeking TV, they make cable competitive by making local cable an efficient buy. If an agency had to go to 10 different places to make a market-wide buy on ESPN or CNN, it might not bother.

But, at the same time, the interconnects have exclusive control over the local time on virtually every cable network worth advertising on in their markets. I would call that a monopoly on cable. A political advertiser that needs to buy cable networks to reach certain voters has only one place to go.

No broadcaster enjoys a monopoly on all the broadcast inventory in a market. When you get right down to it, you are the assistant attorney general for business fairness and somehow this just isn’t fair.

At the very least, you should give broadcasters credit for having to compete with such MVPD monoliths, not only in the advertising marketplace, but also when they come to you seeking approval of deals that would give them two Big Four affiliates in a market.

Makan, speaking for the broadcasters, I can assure you that competition for advertising dollars among them is as cutthroat as it has ever been in the medium’s 70-year history.

I can also imagine that some broadcasters may have over-shared in talking about who’s spending money in a market and how much. Station managers are desperate for such information so they can use it to pound on their account executives.

But your investigation itself has already put broadcasters on notice that they need to be more careful.

Let that be the end of it and start paying more attention to the monopolized other media with which broadcasters have to compete.

Say hello to Jeff for me.

Best,

Harry

Harry A. Jessell is editor of TVNewsCheck. He can be contacted at 973-701-1067 or here.