UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF COLUMBIA
UNITED STATES OF AMERICA,
United States Department of Justice
Merger Task Force
4000 City Center Building
1401 H. St. N.W.
Washington, DC 20530
7201 W. Lake Mead Blvd.
City Center West
Las Vegas, NV 89128
750 B Symphony Towers
San Diego, CA 92101
600 Congress Ave.
Austin, TX 78701
Civil Action No. 99-CV-01043
The United States of America, acting under the direction of the Attorney General of the United
States, brings this civil antitrust action to terminate a Joint Sales Agreement ("JSA") between Citadel
Communications Corporation ("Citadel") and Triathlon Broadcasting Company ("Triathlon") that
eliminates competition in the sale of radio advertising time on certain radio stations in Colorado
Springs, Colorado and Spokane, Washington. The United States alleges as follows:
I. Nature of Violation
- On or about December 15, 1995, Citadel and Triathlon's predecessor corporation
(collectively, "the parties") entered into a JSA. Under the terms of the JSA, Citadel sells advertising
time for 14 Citadel and Triathlon radio stations that otherwise would have been in competition in
Colorado Springs and Spokane.
- Under the JSA, Citadel sets prices and sells advertising time on the radio stations
subject to the JSA in both Colorado Springs and Spokane. Citadel also collects payments from
advertisers, makes a monthly report to Triathlon, deducts expenses, and divides the profits between
the parties. Citadel and Triathlon have operated under the JSA since 1995.
- In Colorado Springs, Citadel sells advertising on KKFM-FM and KKMG-FM -- which
Citadel owns -- as well as KVUU-FM, KSPZ-FM, KVOR-AM, and KTWK-AM -- which Triathlon
owns. Citadel later purchased KKLI-FM and also sells advertising on that station in Colorado
- Citadel owns radio stations in Colorado Springs that control approximately 37% of the
radio advertising expenditures directed towards listeners in Colorado Springs, while Triathlon owns
stations that control approximately 21%. When Citadel combines its and Triathlon's stations under
the JSA, it controls approximately 58% of the radio advertising expenditures directed towards listeners
in Colorado Springs.
- In Spokane, Citadel sells advertising under the JSA on KAEP-FM, KDRK-FM, KJRB-AM, and KGA-AM -- which Citadel owns -- as well as KKZX-FM, KEYF-FM, KEYF-AM, and
KUDY-AM -- which Triathlon owns. Triathlon later acquired KNFR-FM, KISC-FM, and KAQQ-AM. Triathlon sells advertising time on these stations as well as on KCDA-FM, which it sells under
a joint selling agreement with a third party.
- Citadel owns stations in Spokane that control approximately 25% of the radio
advertising expenditures directed towards listeners in Spokane, while Triathlon has placed in the JSA
stations that control approximately 19%. When Citadel combines its stations with those of Triathlon's
stations that it sells under the JSA, it controls approximately 44% of the radio advertising expenditures
directed towards listeners in Spokane.
- In addition to owning stations in Spokane that Citadel sells under the JSA, Triathlon
also owns and sells advertising time on KNFR-FM, KISC-FM, and KAQQ-AM. Triathlon acquired
these stations after it had already entered into the JSA. Triathlon also sells radio advertising time on
KCDA-FM through a joint selling arrangement with a third party. These stations control
approximately 26% of the radio advertising revenue collected by radio stations selling access to
listeners in Spokane. Triathlon's JSA with Citadel reduces Triathlon's incentive to compete
aggressively to attract business away from the stations Citadel sells under the JSA because doing so
reduces the business of the JSA for which Triathlon receives a share of the profits. Together, Citadel
and Triathlon control 70% of the radio advertising expenditures directed towards listeners in Spokane.
- Citadel, while acting pursuant to the JSA, also attempted to reach an agreement with
its remaining competitors in Colorado Springs to eliminate certain discounts. Citadel developed a
plan to eliminate a discount for large advertisers who buy radio advertising directly rather than through
advertising agencies. In July, 1997, a Citadel representative announced its plan and distributed copies
of its policy to a trade association meeting of other Colorado Springs radio stations. The Citadel
representative then urged the other radio stations in Colorado Springs to adopt a similar policy, noting
that they could all make more money if they were to do so. Citadel later sent a copy of its policy to
another radio station that had not been represented at the meeting.
- Capstar Broadcasting Corporation ("Capstar") has announced its agreement to acquire
Triathlon, including its stations in Colorado Springs and Spokane. After it acquires Triathlon, Capstar
will become a party to the JSA.
III. Jurisdiction and Venue
- Citadel is a Nevada corporation headquartered in Las Vegas, Nevada. According to
industry estimates, it owns 107 radio stations in 20 U.S. markets.
- Triathlon is a Delaware corporation headquartered in San Diego, California. According
to industry estimates, it currently owns 31 radio stations in six U.S. markets.
- Capstar is a Delaware corporation headquartered in Austin, Texas.
- According to industry estimates, it currently owns 309 radio stations in 76 U.S.
markets. Chancellor Media Company, the largest operator of radio stations in the United States and
a company with whom Capstar shares common owners and directors, has announced its intention to
- The court has subject-matter jurisdiction over this action pursuant to Section Four of
the Sherman Act, 15 U.S.C. § 4, to restrain defendants from violation of Section One of the Sherman
Act, 15 U.S.C. § 1.
- Citadel, Triathlon, and Capstar all sell radio advertising, a commercial activity that
substantially affects, and is in the flow of, interstate commerce.
- The parties have agreed to waive any objection to personal jurisdiction pursuant to 28
U.S.C. §§ 1331 and 1337.
- The parties have agreed to waive any objection to venue in this district under 15
U.S.C. § 22 and 28 U.S.C. § 1391(c).
IV. The JSA Substantially Reduces Competition for Radio
Advertising in Colorado
Springs and Spokane
A. The Sale of Radio Advertising Time is the Relevant
Product Market In Which to
Evaluate the Competitive Effect of the JSA
- Radio stations in Colorado Springs and Spokane generate almost all of their revenue
by selling advertising time to local, regional, and national advertisers.
- The sale of radio advertising time is the relevant product market in which to evaluate
the JSA in both Colorado Springs and Spokane.
- Many local and national advertisers purchase radio advertising time in Colorado
Springs and Spokane because they find such advertising preferable to advertising in other media to
meet their specific needs. Reasons for this include the fact that radio advertising time is less
expensive and more cost-efficient than other media at reaching certain advertisers' target audiences
(individuals most likely to purchase the advertiser's products or services). Radio also reaches certain
target audiences that cannot be reached as effectively through other media. Additionally, radio
stations render certain services or promotional opportunities to advertisers that they cannot exploit as
effectively using other media. For these reasons, many local and national advertisers who purchase
radio advertising time view radio either as a necessary advertising medium for them, or as a necessary
advertising complement to other media.
- Although some local and national advertisers may switch some of their advertising
to other media rather than absorb a price increase in radio advertising time, the existence of such
advertisers would not prevent all radio stations in the Colorado Springs and Spokane markets from
profitably raising their prices a small but significant amount. At a minimum, stations could profitably
raise prices to those advertisers who view radio as a necessary advertising medium for them, or as a
necessary advertising complement to other media. Radio stations negotiate prices individually with
advertisers; consequently, radio stations can charge different advertisers different prices. Radio
stations generally can identify advertisers with strong radio preferences. Because of this ability to
price discriminate among customers, radio stations can charge higher prices to advertisers that view
radio as particularly effective for their needs, while maintaining lower prices for other advertisers.
- As a result of these characteristics of radio, advertisers often consider one radio station,
rather than an alternative form of media, to be the closest substitute for another radio station.
- Radio stations are aware that one radio station is often the closest substitute for another
radio station and thus tend to set the price of their radio advertising time based upon prices charged
by other radio stations -- rather than those of alternative media.
B. Colorado Springs is a Relevant Geographic Market In Which to Evaluate the JSA
- The first relevant geographic market for evaluating the JSA is El Paso County,
Colorado, which constitutes the Colorado Springs Metropolitan Survey Area ("MSA"), because
advertisers wishing to reach Colorado Springs listeners would not turn to stations outside of the MSA
for three reasons. First, radio signals from other markets do not generally reach Colorado Springs
listeners. Second, the relevant industry trade services treat Colorado Springs as a distinct market. For
example, Arbitron, a company that surveys radio listeners and provides data about audience size and
composition to radio stations and advertisers, uses the Colorado Springs MSA to compare radio
stations. Third, advertisers rely upon these industry distinctions in making their buying decisions.
C. Spokane is a Relevant Geographic Market
In Which to Evaluate the JSA and
- The second relevant geographic market for evaluating the JSA is Spokane County,
Washington, and Kootenai County, Idaho, which together constitute the Spokane Metropolitan Survey
Area ("MSA") because advertisers wishing to reach Spokane listeners would not turn to stations
outside of the MSA for three reasons. First, radio signals from other markets do not generally reach
Spokane listeners. Second, the relevant industry trade services treat Spokane as a distinct market. For
example, Arbitron, a company that surveys radio listeners and provides data about audience size and
composition to radio stations and advertisers, uses the Spokane MSA to compare radio stations.
Third, advertisers rely upon these industry distinctions in making their buying decisions.
D. The JSA Harms Competition
- Prior to the JSA, the stations currently owned by Citadel competed with the stations
currently owned by Triathlon in both Colorado Springs and Spokane. The stations were good
substitutes for each other within their respective geographic markets because each group of stations
could reach a large number of listeners in a variety of demographic groups. During this time,
advertisers could obtain lower prices by "playing off" the Citadel stations against the Triathlon
stations. Advertisers used the threat to move their business between the Citadel and the Triathlon
stations -- as well as to other radio stations -- to get more favorable prices and better service at all
radio stations. Advertisers in Colorado Springs and Spokane thus paid less for advertising and
enjoyed better service as a result of the competition between the Citadel and Triathlon radio stations.
- Since the JSA, however, advertisers cannot play the Citadel and Triathlon stations off
against each other in either Colorado Springs or Spokane. Because under the JSA Citadel controls
such large shares of the markets in both Colorado Springs and Spokane, many advertisers no longer
can fulfill their advertising goals by avoiding or "buying around" the JSA stations. Prior to the JSA,
an advertiser could choose to buy radio advertising time on a combination of Citadel, Triathlon and
independent stations that would allow them to exclude either the Triathlon or Citadel stations -- thus
giving both Citadel and Triathlon an incentive to negotiate. After the JSA, however, the Citadel and
Triathlon stations subject to the JSA no longer compete. Because the JSA represents a large
percentage of the market, many advertisers cannot meet their goals while excluding the JSA stations.
Realizing that these advertisers cannot buy around its JSA, Citadel can raise prices to many
- In addition, in Spokane, the JSA reduces Triathlon's incentive to compete against the
JSA using its non-JSA stations. Triathlon obtains a portion of the JSA's profit. Triathlon therefore
has less incentive to compete against the JSA than it would have if it did not have an interest in the
JSA. Similarly, Citadel has reduced incentives to compete against the non-JSA Triathlon stations
because Triathlon is its partner in the JSA.
E. The JSA and Triathlon's Acquisition of Additional Radio Stations in Spokane Have Had
- In Colorado Springs, the JSA has reduced competition for the sale of radio advertising
- In Spokane, the JSA between Citadel and Triathlon, as well as Triathlon's acquisition
of additional stations, have reduced competition for the sale of radio advertising time.
F. The Entry of New Radio Stations is Unlikely to Prevent
Citadel From Imposing an
Anticompetitive Price Increase in both Colorado Springs and Spokane
- If Citadel and Triathlon raised prices to advertisers in Colorado Springs or Spokane,
other radio stations in Colorado Springs and Spokane would not and could not mitigate the effect of
the price increase by offering additional advertising inventory or changing their formats to provide
access to different audiences. An advertiser wishing to reach a broad audience cannot simply run
more commercials on fewer stations, because the advertiser will not reach a broad enough audience
without a range of stations. In addition, stations are constrained in their ability to play additional
commercials by the tendency of listeners to avoid stations that play too much advertising and the
insistence of advertisers on "separation" from similar advertisers. Thus, even if advertisers trying to
avoid a price increase wanted to run additional commercials on non-Citadel and Triathlon stations,
the stations likely could not accommodate them. Further, even assuming that such a station could
accommodate an increase in advertisers, it would recognize an increase in demand for its product and
would have an incentive to raise its prices as well. Finally, successful stations are reluctant to change
formats because of the risk and costs involved in the format change and unsuccessful stations may not
be able to gain a large enough audience to undermine a supra-competitive price increase.
- New entry has not and is not likely to deter the exercise of market power in either the
Colorado Springs or Spokane radio advertising markets through a non-competitive price increase by
the JSA and affiliated stations.
- The JSA violates Section One of the Sherman Act, 15 U.S.C. § 1, in both Colorado
Springs, Colorado, and Spokane, Washington.
- Triathlon's acquisition of additional stations in Spokane after it had entered into the
JSA violates Section One of the Sherman Act, 15 U.S.C. § 1, in Spokane, Washington.
V. Requested Relief
- Plaintiff requests: (a) adjudication that Citadel's JSA with Triathlon in Colorado
Springs violates Section One of the Sherman Act, 15 U.S.C. § 1; (b) adjudication that Citadel's JSA
with Triathlon and Triathlon's acquisition of non-JSA stations in Spokane violate Section One of the
Sherman Act, 15 U.S.C. § 1; (c) entry of an injunction terminating the JSA in both Colorado Springs
and Spokane and requiring Capstar to divest KEYF-FM to Citadel in Spokane; (d) entry of an
injunction preventing Citadel from discussing the price of radio advertising time with competitors in
Colorado Springs and Spokane; and (e) such other relief as is just and proper.
Dated: April 29, 1999
Joel I. Klein
Assistant Attorney General
A. Douglas Melamed
Principal Deputy Assistant Attorney General
Rebecca P. Dick
Director of Civil Non-Merger Enforcement
Craig W. Conrath, Chief
Reid B. Horwitz, Assistant Chie
Merger Task Force
Karl D. Knutsen
Merger Task Force
Colorado Bar Reg. No. 23997
U.S. Department of Justice
Merger Task Force
1401 H Street, N.W.
Washington, D.C. 20530