UNITED STATES DISTRICT COURT|
FOR THE DISTRICT OF COLUMBIA
UNITED STATES OF AMERICA
Department of Justice, Antitrust Division
450 5th Street, N.W., Suite 4000
Washington, DC 20530,
RAYCOM MEDIA, INC.
RSA Tower, 20th Floor
201 Monroe Street
Montgomery, AL 36104,
Civil Action No.: 1:08-cv-01510
Assigned To: Urbina, Ricardo M.
Assign. Date: 08/28/2008
The United States of America, acting under the direction of the Attorney General of the
United States, brings this civil action to obtain equitable relief against defendant Raycom Media,
Inc. ("Raycom"), and complains and alleges as follows:
- The United States brings this suit to prevent Raycom from continuing to own two
of the top four broadcast television stations in Richmond, Virginia. On April 1, 2008, Raycom
consummated a transaction with Lincoln Financial Media Company ("Lincoln"), in which
Raycom acquired WWBT-TV, the Richmond, Virginia, affiliate of the National Broadcasting
Corporation ("NBC") (the "acquisition"). Raycom at that time already owned and continues to
own WTVR-TV, the Richmond, Virginia, affiliate of CBS Broadcasting Inc. ("CBS"). In 2007,
WWBT-TV earned approximately 32 percent and WTVR-TV earned approximately 23 percent
of the broadcast television spot advertising revenues in the Richmond market.
- The acquisition eliminated substantial head-to-head competition between WWBT-TV and WTVR-TV. Unless remedied, the loss of WWBT-TV as an independent significant
competitor will substantially lessen competition for the sale of broadcast television spot
advertising in the Richmond market, in violation of Section 7 of the Clayton Act, as amended, 15
U.S.C. § 18.
I. Jurisdiction and Venue
- This Complaint is filed and this action is instituted under Section 15 of the Clayton
Act, as amended, 15 U.S.C. § 25, to prevent and restrain Defendant from violating Section 7 of
the Clayton Act, 15 U.S.C. § 18.
- Raycom sells broadcast television spot advertising to advertisers, a commercial
activity that substantially affects and is in the flow of interstate commerce. This Court has
jurisdiction over the subject matter of this action pursuant to Sections 15 and 16 of the Clayton
Act, 15 U.S.C. §§ 25, 26, and 28 U.S.C. §§ 1331, 1337.
- The Defendant has consented to personal jurisdiction and venue in this judicial
II. The Defendant
- Raycom Media, Inc. is a Delaware corporation with its headquarters in
- Raycom is one of the country's largest television broadcasters. It currently owns
and/or operates forty-six television stations in thirty-five markets and eighteen states. Raycom
also distributes syndicated television programming and provides event management, information
system support, and website design and hosting services.
III. Trade and Commerce
A. Relevant Product Market
- Broadcast television stations attract viewers through their programming and then
sell access to their viewers to businesses and others that want to advertise their products and
services. Broadcast television programming is transmitted by broadcast television stations, for
free, over the air to television receivers. Broadcast television programming is also
simultaneously retransmitted, as aired, by cable television systems (systems that deliver
programming, for a fee, through wires into homes), and satellite television systems (systems that
deliver programming over the air, for a fee, to home satellite receivers). Sales of "spot"
advertising generate the majority of a broadcast television station's revenues. Broadcast
television spot advertising is purchased by advertisers that want to target potential customers in
specific localized geographic markets. It differs from network and syndicated television
advertising, which is sold by the major television networks and producers of syndicated programs
on a nationwide basis and broadcast in every market where the network or syndicated program is
aired. Spot advertising is sold either directly by the station or through its national representative
on a localized, market-by-market basis.
- Broadcast television spot advertising possesses attributes that collectively set it
apart from advertising using other types of media. Television combines sight, sound, and
motion, thereby creating a memorable and effective advertisement. Moreover, of all media,
broadcast television spot advertising reaches the largest percentage of all potential customers in a
particular desired target audience and is therefore especially effective in introducing and
establishing the image of a product. A significant number of advertisers view broadcast
television spot advertising as a necessary advertising medium for which there is no close
substitute. Such customers would not switch to another advertising medium –
such as radio,
cable, internet, or newspaper –
or some combination thereof, if broadcast television spot
advertising prices increased by a small but significant amount.
- In the Richmond DMA, cable television advertising is not a meaningful substitute
for broadcast television spot advertising because the viewership of cable television networks,
even when the networks are combined and packaged together, is significantly smaller than the
viewership of broadcast television stations and is more demographically homogeneous.
Additionally, unlike broadcast television advertising, it is generally difficult for advertisers to
place last minute advertisements on cable television. Other media, such as radio, newspapers,
internet or billboards, are even less desirable substitutes for broadcast television advertising.
Satellite television advertising is not a substitute because satellite television providers cannot
limit the distribution of their advertisements to a particular DMA, and therefore do not sell
advertising in competition with local broadcast television stations.
- Broadcast television stations generally can identify advertisers with strong
broadcast television advertising preferences. Broadcast television stations negotiate prices
individually with advertisers; consequently, broadcast television stations can charge different
advertisers different prices. In the event of a price increase in broadcast television spot
advertising, some advertisers may shift some of their advertising to other media rather than
absorb a price increase. However, the existence of such advertisers would not prevent broadcast
television stations from profitably raising prices by a small but significant amount for a
substantial number of advertisers that would not shift to other media or broadcast television
- Accordingly, the sale of broadcast television spot advertising is a relevant product
market within the meaning of Section 7 of the Clayton Act.
B. Relevant Geographic Market
- A Designated Marketing Area ("DMA") is a non-overlapping geographic area
defined by A. C. Nielsen Company, a firm that surveys television viewers and furnishes television
stations, advertisers, and advertising agencies with data to aid in evaluating audience size and
composition. The Richmond DMA encompasses the city of Richmond, Virginia, and the
surrounding counties in which stations within the Richmond DMA receive the largest share of
- Advertisers use broadcast television stations within the Richmond DMA to reach the
largest possible number of viewers within the entire DMA. Advertising on television stations
outside the Richmond DMA is not an effective alternative for these advertisers because such
stations are not viewed by a significant number of potential customers within the Richmond DMA.
Thus, if there were a small but significant price increase in broadcast television spot advertising
prices within the Richmond DMA, an insufficient number of advertisers would switch their
advertising time purchases to television stations outside the Richmond DMA to render the price
- Accordingly, the Richmond DMA is a relevant geographic market for the sale of
broadcast television spot advertising within the meaning of Section 7 of the Clayton Act.
C. Anticompetitive Effects
- Broadcast television stations compete for advertisers by providing advertisers access
to their viewers. A station attracts viewers by selecting shows that appeal to the greatest number of
viewers, and also tries to differentiate itself from other stations by appealing to specific
demographic groups. Advertisers, in turn, are interested in using broadcast television spot
advertising to reach a large audience, as well as to reach a high proportion of the type of viewers
that are most likely to buy their products.
- Broadcast station ownership in the Richmond DMA is highly concentrated.
Unremedied, Raycom's acquisition of WWBT-TV would give it control
of two of the top four broadcast stations in the Richmond DMA and
sales of over 50 percent of the total broadcast television spot advertising
revenues in the Richmond DMA. Using a measure of concentration called
the Herfindahl-Hirschman Index ("HHI"), defined and explained in Appendix
A, combining the ownership of WWBT-TV and WTVR-TV substantially
increases the HHI from approximately 2400 to approximately 3800, well
above the 1800 threshold at which the Division normally considers
a market to be highly concentrated.
- Prior to the transaction, WWBT-TV, the local NBC affiliate, and WTVR-TV, the
local CBS affiliate, competed vigorously for advertisers because the demographic makeup of their
viewers makes them close substitutes for a significant number of advertisers. The two stations
competed head-to-head for a substantial number of advertisers seeking a desired audience, forcing
the stations to offer better terms to win an advertiser's business. These advertisers would find it
difficult or impossible to obtain competitive rates with the threat to "buy around" WWBT-TV and
WTVR-TV, because they would be unable to as effectively reach their desired audiences without
purchasing advertising from Raycom's stations. Thus, without divestiture of one of its Richmond
stations, Raycom's acquisition of WWBT-TV substantially reduces competition for broadcast
television spot advertising in the Richmond DMA.
- De novo entry into the Richmond DMA is unlikely, because the Federal
Communications Commission ("FCC") regulates entry through the issuance of licenses. These
licenses are difficult to obtain because the availability of spectrum is limited, and the regulatory
process associated with obtaining a license is lengthy. Even if a new signal became available,
commercial success would come, at best, over a period of many years, because all major broadcast
networks are already affiliated with a licensee in the Richmond DMA, the contracts last for many
years, and the broadcast networks rarely switch licensees when the contracts expire. Thus, entry
into the Richmond DMA broadcast television spot advertising market would not be timely, likely,
or sufficient to deter Raycom from unilaterally raising prices.
IV. Violation Alleged
- Each and every allegation in paragraphs 1 through 19 of this Complaint is here
realleged with the same force and effect as though said paragraphs were here set forth in full.
- The effect of Raycom's acquisition of WWBT-TV would be to substantially lessen
competition in interstate trade and commerce, in violation of Section 7 of the Clayton Act.
- Raycom's acquisition of WWBT-TV will likely have the following effects, among
- competition in the sale of broadcast television spot advertising in the Richmond
DMA would be substantially lessened;
- actual and potential competition between WWBT-TV and WTVR-TV in the sale of
broadcast television spot advertising in the Richmond DMA would be eliminated;
- the prices for broadcast television spot advertising in the Richmond DMA would
- Unless restrained, the acquisition will violate Section 7 of the Clayton Act, as
amended, 15 U.S.C. § 18.
V. Requested Relief
- Plaintiff requests:
- that Raycom's acquisition of WWBT-TV be adjudged to violate Section 7 of the
Clayton Act, as amended, 15 U.S.C. § 18;
- that Raycom be ordered to divest WTVR-TV in accord with the attached Hold
Separate Stipulation and Order and proposed Final Judgment;
- that a proposed Final Judgment giving effect to the divestiture be entered by the
Court after compliance with the Antitrust Procedures and Penalties Act,
15 U.S.C. § 16;
- that the United States be awarded the costs of this action; and
- that the United States be granted such other and further relief as the Court may
deem just and proper.
Dated: August 28, 2008.
FOR PLAINTIFF UNITED STATES:
Deborah A. Garza
Acting Assistant Attorney General
Ann Marie Blaylock (D.C. Bar No. 967825)
Litigation III Section
United States Department of Justice
450 Fifth Street, NW, Suite 4000
Washington, DC 20530
Facsimile: (202) 514-7308
Patricia A. Brink
Deputy Director, Office of Operations
John R. Read (D.C. Bar No. 419373)
Chief, Litigation III Section
Nina B. Hale
Assistant Chief, Litigation III Section
CERTIFICATE OF SERVICE
I hereby certify that on August 28, 2008, I caused a copy of the foregoing Complaint to be
served on the defendant in this matter in the manner set forth below:
By facsimile and U.S. mail:
Counsel for Defendant Raycom Media, Inc.
Everett J. Bowman, Esq.
Robinson Bradshaw & Hinson
101 North Tryon St., Suite 1900
Charlotte, NC 28246
Telephone: (704) 377-8329
Facsimile: (704) 373-3929
Ann Marie Blaylock (D.C. Bar. No. 967825)
Litigation III Section
United States Department of Justice
450 Fifth Street, NW, Suite 4000
Washington, DC 20530
Facsimile: (202) 514-7308
DEFINITION OF HHI
The term "HHI" means the Herfindahl-Hirschman Index, a commonly accepted measure of
market concentration. The HHI is calculated by squaring the market share of each firm competing
in the market and then summing the resulting numbers. For example, for a market consisting of
four firms with shares of 30, 30, 20, and 20 percent, the HHI is 2,600 (302 + 302 + 202 + 202 =
2,600). The HHI takes into account the relative size and distribution of the firms in a market. It
approaches zero when a market is occupied by a large number of firms of relatively equal size and
reaches its maximum of 10,000 when a market is controlled by a single firm. The HHI increases
both as the number of firms in the market decreases and as the disparity in size between those firms
Markets in which the HHI is between 1000 and 1800 are considered to be moderately
concentrated, and markets in which the HHI is in excess of 1800 points
are considered to be highly concentrated. Transactions that increase
the HHI by more than 100 points in highly concentrated markets presumptively
raise significant antitrust concerns under the Department of Justice
and Federal Trade Commission 1992 Horizontal Merger Guidelines.