In Re Application of JOHN HAY WHITNEY (TRANSFEROR) AND DUN & BRADSTREET, INC. (TRANSFEREE) For Transfer of Control of CORINTHIAN BROADCASTING CORP., Parent of the Licensees of Station KOTV (Tulsa, Okla.); KXTV (Sacramento, Calif.); KHOU-TV (Houston, Tex.); WISH-TV (Indianapolis, Ind.); and WANE-TV (Fort Wayne, Ind.)
File No. BTC-6201
FEDERAL COMMUNICATIONS COMMISSION
28 F.C.C.2d 736
RELEASE-NUMBER: FCC 71-420
April 23, 1971 Released
Adopted April 14, 1971
BY THE COMMISSION: COMMISSIONER BARTLEY DISSENTING AND ISSUING A STATEMENT IN WHICH COMMISSIONER JOHNSON JOINS. COMMISSIONER H. REX LEE DISSENTING AND ISSUING A STATEMENT
[*736] 1. Corinthian Broadcasting Corporation (Corinthian) owns all the stock of the licensees of the following stations: KOTV (Tulsa, Oklahoma); KXTV (Sacramento, California); KHOU-TV (Houston, Texas); WISH-TV (Indianapolis, Indiana); and WANE-TV (Fort Wayne, Indiana). John Hay Whitney (Whitney) presently has de facto control of Corinthian through his direct ownership of 32.1% of Corinthian's outstanding shares and his ability to vote an additional 8.1% of Corinthian's shares, a total of 40.2%. The referenced application contemplates a merger of Corinthian and Dun & Bradstreet, Inc. (D & B), and a resulting transfer of control of the licensees to D & B. After the merger, Whitney and his associates would be in a position to vote approximately 7.1% of D & B's post-merger stock, the largest single block in D & B.
2. In addition to the application, as amended, we have before us the following pleadings and documents:
a. "Petition to Deny and for Other Relief", filed by RJN Broadcasting, Inc. (RJN); an "Opposition to 'Petition to Deny' and to Other Filings"; filed by the applicants; RJN's "Reply"; and the applicants' "Contingent Request for Leave to File Further Pleading".
b. "Petition to Deny" filed by LVO Cable, Inc. (LVO); the applicants' "Opposition to So-Called 'Petition to Deny' of LVO Cable, Inc."; LVO's "Petition for Reconsideration [of the Commission's Order -- 22 FCC 2d 436 -- denying an earlier request to extend the time for filing a petition to deny] and Motion for Acceptance Out of Time"; and the applicant's opposition to the latter petition and motion.
c. A "Reply to Opposition of Anthony R. Martin-Trigona" (Martin-Trigona) filed by the applicants on March 24, 1970; a letter from Anthony R. Martin-Trigona [*737] dated March 27, 1970, to which is attached a copy of his "Opposition to Proposed Transfer of Control"; a letter dated April 8, 1970 from Martin-Trigona stating further objections to the application; the applicants' opposition (a pleading filed jointly against the RJN objections and Martin-Trigona's); a letter dated May 16, 1970 from Martin-Trigonia supporting the LVO and RJN objections and replying, in effect, to the applicants' opposition; a "Statement" of the applicants denying charges in the previous item; a letter of July 7, 1970 from Martin-Trigona urging conglomerate issues in view of the Penn-Central collapse; and the applicants' letter in opposition to the previous item, and undated letter received August 5, 1970 from Martin-Trigona referring to a $6,000,000 jury verdict rendered against D & B in certain court proceedings; and the applicants' reply to the previous item.
d. Our letter of November 30, 1970, sent to the applicants following initial consideration of the application and requesting new or additional information on (a) the "compelling public interest showing" required under the Top-50 policy (12 RR2d 1501, 1507); (b) competitive practices to be followed after merger; (c) a statement from the Federal Trade Commission and the Department of Justice indicating the proposed merger is not objectionable under any of the antitrust laws or policies of the United States; (d) interlocking directorates and a statement of what policy would be followed after merger to prevent use of such cross-directorships to the competitive disadvantage of any D & B competitor; and (e) the nature and extent of asserted improvements in the area of children's programming or any other programming improvements contemplated by the applicants.
e. A letter of February 1, 1971 from Corinthian and D & B responding to points a, b, d, an d e of the previous item; a letter of February 8, 1971 from Martin-Trigona commenting on the applicants' February 1st response; a letter of February 16, 1971 from RJN commenting on the applicants' February 1st response; and a letter of February 19 from the applicants replying to the RJN and Martin-Trigona comments.
f. A letter of February 19, 1971 from the Antitrust Division of the Department of Justice indicating the Division's position on the proposed merger.
g. A letter of February 19, 1971 from the applicants setting forth their response -- based on the Antitrust Division's position -- to point c of Item d, supra; a letter of March 1, 1971 from Martin-Trigona commenting on the applicants' response to Point c; a letter of March 3, 1971 from the applicants indicating no reply would be made to the Martin-Trigona comments; a letter of March 8, 1971 from RJN commenting on the applicants' response to Point c; and a letter of March 11, 1971 from the applicants replying to the RJN comments.
h. Two letters on March 1, 1971 from Martin-Trigona, one setting forth a "Motion for Recuse and Suggestion for Recuse", the other a "Motion to Strike and Remove" the applicants' letter of February 19, 1971 setting forth their response to Point c.
i. Two letters of March 4, 1971 from Martin-Trigona, one setting forth his "Reply to Amended Community Service Filings by Applicants to Corinthian Merger", the other setting forth a "Demand for Order on FCC Procedures in Dun & Bradstreet/Corinthian Merger".
3. A brief recital of background facts is necessary. Corinthian's major business is in television broadcasting, although it does have certain non-broadcast subsidiaries. D & B, one of America's oldest corporations, presently has three main lines of business: business information services, publishing, and marketing. The business information services includes a function popularly associated with D & B -- furnishing business credit reports to manufacturers, banks, wholesalers, etc., on a subscription basis. But this division also makes economic studies and compiles information from ICC public records for use by the transportation industry. Through its publishing division, D & B puts out 18 professional and specialty journals (e.g., American Journal of Medicine, Fire Engineering, Roads and Streets, etc.) which report new developments in the medical, engineering and teaching professions. [*738] This division also publishes Official Airline Guides; publishes juvenile, college, trade and paperback books through its Thomas Crowell subsidiary; publishes basic statistical and financial data through its Moody's Investors Service Subsidiary; and publishes certain classified telephone directories, sells classified directory advertising, and provides door-to-door delivery of telephone directories. The marketing services division includes the Reuben H. Donnelley subsidiary, which produces and processes mail advertising for clients. Mailing lists are compiled and used to mail coupons, samples and other direct mail advertising. Marketing activities also include "Dunhs Market Identifiers", a roster of U.S. and Canadian businesses used to serve the marketing needs of customers. The applicants contemplate that Corinthian will become the fourth D & B operating division after merger.
4. The reasons for the merger are lengthy but they boil down to a single point -- the desire of the merger parties to expand their activities within a framework which lends assurance the Corinthian stations will continue their sound operations under the present station management (as a subsidiary of D & B), and will be placed under a responsible leadership as to whose integrity no question exists. The applicants further believe the quality operation of the Corinthian stations can be augmented by giving Corinthian access to D & B's greater personnel resources and expertise in such fields as education, marketing, business and professional information, general publishing, demographies, and computer sophistication. The existing operations of each merger party are viewed as closely complementary to and entirely compatible with the background and operations of the other party. The applicants contend (Exhibit A-5, p. 8) no "conglomerate" questions arise, since the merger does not bring together diverse and unrelated operations, but rather, involves operations bound by the common thread of communications, data and information services, and marketing services. The applicants believe a merger will assure both continuation of the present high-quality service offered by Corinthian stations and ultimately even better performance and service to the public by the Corinthian stations. Finally, the applicants note the merger affords the most realistic opportunity for Corinthian shareholders to grow without exposing the stations to risk. Technical limits on signals bar geographic extension of present markets. Acquisition of additional broadcast stations, they contend, is "... hemmed-in both by regulatory circumstances and by the scarcity of quality outlets for purchase at an acceptable rice." (Exhibit A-5, p. 9). Corinthian's relatively small size rules out growth through a program of diversification. Ibid. Further in support of the merger, Exhibit A-5 documents the extensive availability of competing broadcast services in the markets in which Corinthian owns television stations.
5. All three petitioners deny the merger would serve the public interest. Their common claim is that the merger would have important anti-competitive effects. These alleged anti-competitive effects are considered at length below. Suffice it to note here that petitioners fear a "merged" Corinthian will gain a "leg-up" on competitors through the confidential information resources of D & B; that other [*739] D & B divisions will be in a position to "throw" business to Corinthian stations; that the merger involves "conglomerate" issues and action on the application should be deferred until the pending conglomerate inquiry is completed; and that the merger will lessen competition. The fears expressed by petitioners have not been lessened by the applicants' response to our letter of November 30, 1970. In fact, two of the petitioners -- RJN and Martin-Trigona -- have renewed their objections on the basis of that response.
6. We turn now to the pleadings. A threshold matter is Martin-Trigona's "Motion for Recuse and Suggestion for Recuse", submitted in a letter of March 1, 1971. Martin-Trigona asks that Chairman Burch and Commissioners Wells and Houser disqualify themselves from participating in this matter, and he suggests that Commissioner Robert E. Lee do the same. The implication is that these Commissioners might have partisan links or indebtedness to a political organization which makes disqualification imperative. The motion is denied. Martin-Trigona filed a similar motion against participation by Chairman Burch and Commissioner Wells in the original consideration of the merger application, and the Commission denied that motion as being without merit. Letter of November 25, 1970 to Martin-Trigona. The present motion similarly lacks merit.
7. We consider next the matter of petitioners' standing. RJN's UHF station (WLFI-TV, Lafayette, Indiana) competes with Corinthian's Indianapolis station (WISH-TV), in a common area for audience, and national, regional and local advertising revenues. RJN's petition to deny is timely and there can be no serious question that it is a "party in interest", D & B's contentions notwithstanding. See Broadcast Enterprises, Inc. v. Federal Communications Commission, 390 F2d 483, 12 RR 2d 2001, mandating a generous attitude in approaching standing questions where it is alleged a proposed assignee will be in a position to compete more effectively.
8. LVO's petition to deny is admittedly untimely. See Corinthian Broadcasting Corporation, 22 FCC2d 436, denying LVO's earlier request to extend the time in which to file a petition to deny. In its "Petition for Reconsideration and Motion for Acceptance Out of Time", LVO asks the Commission to reconsider its denial of the time extension and to accept the petition. We are not persuaded that reconsideration is in order. The fact remains there was ample time to file a petition to deny -- witness RJN's timely petition which thoroughly explores the issues -- but LVO chose to spend its time in deliberating whether it even wanted to take a position on the application. This vacillating position runs contrary to the "[orderliness], expedition, and finality in the adjudicating process... which [have] authentic claims" of their own in determining the public interest. Valley Telecasting Co. v. Federal Communications Commission, 118 U.S. App. D.C. 410, 413; 336 F2d 914, 917, 2 RR 2d 2064, 2068. See also Spanish International Broadcasting Co. v. Federal Communications Commission, 128 U.S. App., D.C. 93, 385 F2d 615, 9 RR 2d 2053, upholding denial of a waiver of the cut-off rule involved here. In view of all this, we conclude that the petition for reconsideration and motion for acceptance [*740] out of time must be denied. Thus discussion of LVO's "standing" is unnecessary, although we note that LVO's status as one of several partners in a mere applicant for a CATV system in Tulsa would not give rise to "standing". See WIBF Broadcasting Co., 17 FCC2d 876, 16 RR2d 263, and cases cited there. However, since the matters raised by LVO are important, LVO's petition will be treated as an informal objection to the application under Section 1.587 of the Rules. Indeed, D & B urges that the merits of LVO's objections be reached through such procedures.
9. Anthony R. Martin-Trigona, Chairman of Radio Free America, has filed an "Opposition to Proposed Transfer of Control." Radio Free America is identified only as "... a national organization which has been formed to operate as a public interest watchdog at the Commission to see that the Commission vigorously adheres to its statutory duty and awesome responsibilities." (Opposition to Proposed Transfer of Control, p. 2). The opposition is otherwise silent regarding Radio Free America. Where the group was formed, what its official existence is, who its members are, and -- a matter crucial to standing -- how the interests of Radio Free America and its members would be adversely affected by the merger are all left to conjecture. Given petitioner's failure to set forth "... specific allegations of fact sufficient to show that [it] is a party in interest" (Section 309(d)(1), Communications Act of 1934, as amended, 47 U.S.C. 309(d)(1), there is no basis for concluding its interests would be adversely affected. Accordingly, Radio Free America has failed to meet the explicit statutory requirements regarding "standing", and its "Opposition to Proposed Transfer of Control" must be dismissed. However, as with the LVO pleadings, Radio Free America's pleadings and correspondence will be treated as informal objections to the application.
10. For the most part, petitioners raise identical objections. To avoid repetition, those objections are grouped together. Several individualized objections will be considered separately.
11. Concern that Corinthian would gain a competitive advantage because of D & B's credit reporting and business information services. All three petitioners advert to D & B's credit reporting and business information services. RJN asserts (petition to deny, p. 6) that this would give Corinthian a "leg-up" over competing stations because Corinthian stations could offer prospective advertisers a range of services and data not available from other broadcasters. Radio Free America views the "... roles of credit investigator and intelligence agent" as absolutely incompatible with broadcast station ownership. (Opposition to proposed transfer of control, p. 1). LVO expresses similar fears that Corinthian's access to D & B's "... vast confidential information reserves" would unduly advantage Corinthian stations over competing licensees and CATV systems. (Petition to Deny, p. 3).
12. The applicants deny these charges. They note all of D & B's business information services (credit reporting, etc.) are available to any Corinthian competitor who wishes to subscribe to such services, and to other broadcasters (including RJN). Corinthian's access to such services would be on a regular, billed basis and Corinthian would not have access to any information not equally available to other subscribers. [*741] (D & B Opposition to "Petition to Deny and Other Filings"). D & B further asserts there is no "mystery" to its business information services and its past record is good. It gathers information for business credit reports for use by banks, wholesalers, government agencies and others who contemplate doing business with a subject of D & B reports. (D & B Opposition, p.7). (Business credit information is distinct from consumers credit, an area which is under a cloud because of current Congressional investigations regarding consumer credit practices.) Strong internal and external checks exist on the completeness, integrity and fairness of D & B's reports. D & B has stringent standards for fact finding, reporting and ratings. Where possible, the subject under investigation is interviewed to obtain current information, and always when the subject requests it, the entire report and proposed rating are made availble to him. There is further a special National Rating Committee to review disputed ratings. Moreover, subscribers provide a vigilant check on the integrity of D & B reports because they have money "riding" on D & B judgments and would not continue to subscribe if the reports were unreliable. D & B also notes laws governing libel and dissemination of business reports provide an external check. n1 (Opposition, pp. 7-8). D & B further points out that its record has been built up over a century and it would be suicidal for D & B to risk that reputation (essential to continued success of its operations) to benefit the Corinthian stations. (Opposition, p. 8). Finally, D & B seeks to dispel any lurking suspicions that it might adversely slant business credit reports involving Corinthian competitors, or that through its power to report and rate in the credit area, it might coerce advertisers into purchasing time on Corinthian stations. On these points, D & B notes (Opposition, pp. 10-11), that there is nothing factual to justify these speculations. In this regard, D & B points out a number of its present competitors in certain fields -- publishing, textbooks, professional journal field, etc. -- have been the subjects of D & B credit ratings. But even in the small total number of instances where such competitors may disagree with a D & B rating, there is nothing to indicate credit reports on D & B competitors have been distorted.
n1 D & B claims no infallibility, admits it can err, and has been sued by persons disputing its ratings. Recently a New York jury rendered a $6,000,000 verdict against D & B in a libel suit arising out of D & B credit ratings. That verdict is now the subject of post-trial motions.
13. In its letter of November 30, 1970 Point (b), the Commission requested a complete statement of competitive practices to be followed after merger, noting that its particular concern centered about the manner in which D & B's business information and credit reporting services will be used and whether there was any possibility that after merger, D & B would abuse its resources to the detriment of any competing broadcast station. The applicants were requested specifically to address themselves to the various objections which had been raised by the petitioners. Essentially, the applicants' response (Letter of February 1, 1971, pp. 13 to 16) repeats the assurances made in oppositions to the petitions to deny. Additionally, the applicants specifically state (Letter, p. 17) that:
Dun and Bradstreet here and now represents to the Commission that there shall never be any [abuse of its resources to the detriment of competitors.] And this is [*742] not merely a statement of volitional commitment on the part of present management; it is rather an acknowledgement of the basic economic reality that any hint of lack of integrity can severely damage or destroy Dun & Bradstreet's valuable credit reporting business.
Further, D & B cites its record in 1970 of downgrading the credit ratings of a number of America's largest corporations, including many who were among D & B's top customers for business information. This, it claims, establishes D & B tells it as it is and confirms the integrity of its approach.
14. Notwithstanding the foregoing, RJN continues to fear the combined resources of Corinthian and D & B and insists an evidentiary hearing is needed on the application. (RJN letter of February 16, 1971). Martin-Trigona reports his objections respecting the potential for abuse of D & B's resources, claims even AT&T must reflect before D & B's credit rating powers, suggests (without further elaboration) that D & B showed less than total alacrity in the recent Penn-Central collapse, and reiterates his demand for an evidentiary hearing.
15. Petitioners' fear respecting the potential for misuse of D & B's credit and financial information to benefit Corinthian's competitors is grounded on sheer speculation. The statutory framework governing petitions to deny requires the presentation of specific allegations of fact raising substantial and material question which could only be resolved by an evidentiary hearing. There is nothing of a factual nature in the petitions regarding either Corinthian's or D & B's credit and financial services to the disadvantage of Corinthian station competitors. We are further convinced the internal and external checks outlined above furnish safeguards against possible abuses in this area. What petitioners ignore is that D & B is most popularly identified with credit and financial reporting and derives a major share of its revenues from these operations. It thus seems inherently improbable that D & B would destroy its reputation in the credit reporting and business information areas to benefit the Corinthian station. Moreover, such conduct by D & B could result in the loss of all of the licenses which it seeks, either by way of revocation or renewal hearings. Finally, the applicants' response of February 1, 1971 in our judgment negatives any prospect that the potential for abuse cited by the petitioners will materialize.
16. D & B's existing advertising activities and claims that following merger, D & B (through "outside" directors) can funnel business to the Corinthian stations. D & B's publishing division puts out a number of publications which carry advertising. Among these are 18 trade and professional journals (e.g., American Journal of Medicine, Water and Wastes Engineering, Textile Services Management, etc.). Seventeen of these journals carry advertising and 16 are distributed domestically. n2 The circulation of these publications range from 625,000 for the monthly Electricity on the Farm the 13,000 for the monthly American Journal of Cardiology. Additionally, D & B puts out the Official Airline Guide, with a total circulation (national and international) of [*743] 125,000 copies for the semi-monthly domestic edition, and 35,000 copies (national and international) for the monthly international edition. These publications offer schedule and route information to carriers, travel agents, and passengers. RJN disputes the applicants' claim that these D & B operations do not give rise to any possible conflict with broadcast operations. It asserts the sellers of goods and services would presumably be solicited by the merged company to advertise in different media and non-television media. (RJN petition to deny, pp. 7 to 8). D & B denies this. It points out that any advertising in its specialty magazines is directed to a special market and not a mass general television audience. (D & B Opposition, p. 13). It further notes that revenues for the Official Airline Guide come chiefly from subscriptions, with only 25% of revenues coming from advertising. Moreover, this publication is also directed to essentially a specialty market.
n2 One construction trade manual is in Spanish and intended for Latin American construction engineers. Another construction trade manual is in English but intended for construction engineers in Europe, Asia and Africa. An annual compendium for the drug trade carries no advertising. (D & B Opposition, affidavit of Richard D. Simmons.)
17. D & B's Reuben H. Donnelley Division is engaged in direct mail services. All three petitioners suggest these operations may be in conflict with broadcasting. (RJN petition to deny, pp. 5 and 7; LVO petition to deny p. 15; Radio Free America letter dated April 8, 1970, p. 3) D & B points out the direct mail activities are of two kinds: distribution of "price-off" coupons or free samples of products, and highly localized (e.g., neighborhood or very small areas) mail distribution or promotional material specifically tailored for local dealers of a national company (e.g., material for a local "ESSO" filling station, mailed in a few blocks' radius of the station). D & B argues that by their very nature, direct mail techniques are not competitive with television advertising, since this is not the kind of advertising in which television stations engage, (D & B opposition, p. 14). With respect both to advertising in D & B specialty journals (including the Official Airline Guide) and direct mail advertising, D & B notes that tie-ins, package rates, forced buying or similar practices are (a) illegal under antitrust principles and contrary to Commission policy, (b) there is neither fact nor even a hint that either D & B or Corinthian has a record of, or inclination toward, such practices, and (c) that it cannot be assumed either applicant would in the future engage in such activities. (D & B Opposition, pp. 15 to 16).
18. RJN states (RJN Petition to Deny, p. 5) that a D & B director (J. R. Newman) is also a director of General Foods, one of America's largest television advertisers. RJN implies that after merger, this relationship might be beneficial to Corinthian through the ability to influence decisions in placing television advertising. (Ibid, p. 6). The response to the Commission's letter requesting information on all cross-directorships indicates that additionally, D & B directors also serve on the boards of three other major television advertisers -- Kraftco, Bristol-Myer, and Gulf Oil. (Response of February 1, 1971, pp. 32 to 36). The applicants note first that cross-directorships exist as to a number of the largest broadcasters (CBS, NBC, ABC, Capital Cities, Avco, Cowles Communications, etc.), and this practice is not unique to broadcasting. With respect to the potential for funneling business to the Corinthian stations, the applicants point out this would be contrary to well-recognized legal and moral obligations to stockholders; that decisions to place advertising are generally made at several removes [*744] below the Board level, and in most cases by the advertising agency; and that decisions to place advertising turn on obtaining maximum exposure per dollar rather than on favoritism. To allay any doubts in this area, D & B directors (both on a pre-and post-merger basis) have written letters, similar in form, assuring that no service by such director on the board of another company would be "misused to the competitive disadvantage of any Dun & Bradstreet competitor". (Attachments, February 1st Response).
18. Martin-Trigona and RJN consider the response inadequate. Martin-Trigona (Letter of February 8, 1971) views cross-directorships as inherently bad and insists that all must be abolished. RJN (Letter of February 16, 1971) points to the similarity of the directors' letters and claims that an evidentiary hearing is needed to elicit hard facts on the cross-directorships. The need for a hearing is reiterated in RJN's letter of March 11, 1971. The applicants have replied to these objections.
19. The claims respecting D & B's present advertising activities and common directorships between D & B and potential advertisers rest on the premise Corinthian would have -- as RJN puts it -- a "leg-up" on competitors after the merger. We have examined petitioners' claims and the applicants' response to Point (d) of our November 30th letter with special care because the charges are serious. But as with the allegations respecting a potential conflict between D & B's credit reporting activities and broadcasting, the allegations here are speculative to say the least. We agree with D & B that its direct mail activities and broadcasting are not in conflict because they involve entirely different advertising techniques. One depends on promotion through mail or door-to-door distribution of tangibles ("price-off" coupons or product samples), while the other promotes products or services through radio-transmitted visual images. In the nature of things, television stations cannot use the techniques available to direct mail advertisers. Similarly with advertising in D & B's specialty journals. It seems obvious advertising in these journals is directed to limited audiences with interests in specialized products such as medical equipment, prescription drugs, municipal sewage systems, highway construction equipment, etc. Advertising for these specialized products and services is quite different from the advertising of consumer products and services on television, which must have mass appeal for a large, general audience. As for interlocking directorates, the Communications Act does not specifically prohibit such directorates in the broadcast field, unlike the specific statutory prohibitions set out in Title II of the Act. See Section 212 of the Communications Act of 1934, as amended, 47 U.S.C., 212. And as the applicants point out, cross-directorships while not unique to broadcasting exist with respect to a number of broadcasters and the Commission has thus far had no occasion to formulate policies respecting the same. On the whole, we think the realities here -- the management levels at which decisions to place advertising are made and the crucial fact that placement decisions turn on obtaining maximum value for the client's advertising dollar -- militate against D & B's directors using their positions on other corporate boards to throw business to the Corinthian stations. And this conclusion is buttressed by the specific written assurances given by the D & B [*745] directors. We conclude, therefore, that there is no essential conflict between D & B's existing activities and broadcasting n3 and the cross-directorships referred to.
n3 We also note other broadcasters (such as Metromedia, Inc.) have direct mail sidelines, and the Commission has never considered this to be incompatible with broadcasting.
20. Contention that the merger would violate Section 7 of the Clayton Act. LVO argues at length that the merger would violate Section 7 of the Clayton Act. (LVO Petition to Deny, pp. 4 to 16). Its petition is replete with analyses of the appropriate "product market" for Section 7 enforcement purposes, "geographic market delineation", oligopolistic markets and case law dealing with antitrust principles. The applicants take issue with this line of argument. (D & B Opposition to LVO petition, pp. 5 to 8).
21. It is unnecessary to decide whether the merger violates Section 7 of the Clayton Act because this issue lies in an area forbidden to the Commission. The "... Commission was not given the power to decide antitrust issues at such." United States v. Radio Corporation of America, 358, U.S. 334, at 346. That case puts it beyond argument that Congress did not intend to confer power on the Commission to adjudicate antitrust issues and left enforcement of the laws in this area to other agencies of the government, and exceptions to this principle (primary jurisdiction where a pervasive rate scheme is involved) have no application here. The wisdom of the RCA case is fully apparent here; the Commission has neither staff resources to develop the facts on which the alleged violation of Section 7 is claimed to rest nor expertise in interpreting and applying the highly complicated principles of law which have evolved in the antitrust field. This has been the longstanding policy of the Commission, and one antedating the RCA case. See footnote 18 of the RCA case, at 358 U.S. 350.
22. Consideration of various competitive factors under the public interest standard of the Communications Act. But though the Commission cannot decide antitrust questions as such, it can appropriately consider Federal antitrust policy under the public interest standard. RCA case, supra (358 U.S. at 351-2). We consider here various arguments that the merger would have anticompetitive effects. LVO contends the merger would reduce existing and potential competition. Essentially, its arguments existing competition would be lessened rest on the premise D & B and Corinthian are present competitors. The LVO arguments thus parallel similar arguments by RJN -- the claim that the combined resources of D & B and Corinthian would give the merger company a "leg-up" on competitors -- which have already been considered and found wanting in substance. The plain fact is there is nothing to indicate that D & B and Corinthian are presently in competition, or that after merger, they would engage in anticompetitive practices.
23. But LVO goes further. It suggests the merger would have a chilling effect in the Tulsa market (LVO's main concern) on potential competition from others in the area. Elsewhere in its petition LVO suggests that if D & B wishes to enter broadcasting, it should acquire one of the dormant UHF stations available in Corinthian markets. [*746] In this argument, LVO is joined by Radio Free America, which also suggests that if Corinthian is interested in nonbroadcast activities of the kind D & B engages in, it should enter such business by routes other than merger. (Letters of March 27, 1970, p. 2 and April 8, 1970, p. 3.) The thrust of these arguments is that under antitrust principles, D & B and Corinthian are potential new entrants into business fields they do not presently occupy, and that a merger would have anticompetitive effects because the potential competition they could offer by de novo entry will be lost. The applicants deny that they are potential de novo entrants into new fields under the principles set out in the case law relied on by LVO (e.g., Procter & Gamble v. Federal Trade Commission, 386 U.S. 568; United States v. Penn-Olin Chemical Co., 378 U.S. 158, etc.) D & B asserts it has not had and would not have any interest in entering broadcasting without experienced broadcasting management such as Corinthian can provide. Corinthian asserts the argument it could enter non-broadcast fields by other than the merger route is irrelevant, and there are no facts showing Corinthian has the necessary know-how or meets the various tests laid out in the cases noted above. As to the dissuasive effects a merger might have on CATV operations in the Tulsa area, the applicants point out the combined assets of the two general partners in LVO Cable -- Livingston Oil and the Williams Brothers Company -- exceed $520,330,000, more than double the combined post-merger assets of Corinthian and D & B. They further note LVO is itself a division of a diversified conglomerate, and that in view of these circumstances, claims LVO might be dissuaded from future competition are nonsense.
24. In addition to the alleged loss of new entrant competition, RJN asserts that under the Commission's statutory mandate, the issue before us is whether approval of the application will foster competition in broadcasting. In RJN petition to deny, p. 5.) In RJN's responsive pleadings, it is argued that applicants must make an affirmative showing that competition will be enhanced by the merger. (RJN reply, pp. 8 to 11.) The applicants contend RJN is in error, that approval of the merger does not require a showing of enhanced competition. Rather, this competitive issue becomes relevant only if it is first shown that the merger carries a threat that competition will be substantially reduced, which threat is nonexistent here. (D & B opposition, pp. 16 to 17.) Additionally, RJN asserts it is a marginal UHF operator fighting for survival, and for the Commission to strengthen its strongest competitor -- Corinthian -- would be a death blow. (RJN petition to deny, p. 9.) RJN continues to express fears concerning the combined potential of Corinthian and D & B (Letter of February 16, 1971), and this fear is renewed in its letter of March 11, 1971. Similarly, Martin-Trigona's letter of February 8, 1971 makes extravagant claims that the merger would give D & B "... unparalleled power over company and corporate life in America," would increase the market domination of the Corinthian stations and would have important anticompetitive consequences.
25. These various allegations respecting competitive consequences prompted the Commission to require the applicants to obtain a statement from the Federal Trade Commission and the Department of [*747] Justice that the proposed merger was not objectionable under any antitrust laws or policies. On invoking the proper procedures, the applicants were informed that these two agencies do not duplicate each other's efforts, and that the matter would be handled by the Antitrust Division of the Department of Justice. Following this, the applicants made available to the Division the complete application, including all of the objections raised by petitioners and the applicants' responses thereto. On February 19, 1971, the Antitrust Division notified the Commission that under its Business Review Procedures, it had concluded
... that the Department does not presently intend to initiate an antitrust action should the parties proceed with their proposed merger.
On February 19, 1971, the applicants filed their response to Point (c) of the Commission's letter of November 30, 1970, which had requested the statement referred to above.
26. The referral of this matter to obtain the views of the Antitrust Division and the applicants' response of February 19, 1971, were variously received. Martin-Trigona from the outset considered the referral improper because he viewed it as an attempt by the Commission to avoid making the necessary public interest determination. He took an appeal to the U.S. Court of Appeals for the District of Columbia (Martin-Trigona v. Federal Communications Commission, Case No. 24886), which was dismissed on the motions of the applicants and the Commission on February 26, 1971. n4
n4 In dismissing, the Court relied on the Commission's representations that the application and Martin-Trigona's pleadings would be fully considered when information on the antitrust aspects of the application was received from the Department of Justice.
Following dismissal of his appeal, he wrote the Commission on March 4, 1971, transmitting a "Demand for Order on FCC Procedures in Dun & Bradstreet/Corinthian Merger," demanding a formal advance statement from the Commission as to what procedures will be used in evaluating his pleadings so that all parties and the Court would have a basis for determining the Commission's action. n5 In the same letter, he objects to the Antitrust Division's letter as "... little more than a naked conclusion without any supporting data or evidence of meaningful inquiry." In another letter to the Commission (Letter of February 8, 1971), Martin-Trigona attacks the referral of the antitrust aspects to the Antitrust Division as involving "... secret representations to the Department of Justice" which must be evaluated, although this charge is not documented by any facts. And in two letters of March 1, 1971, Martin-Trigona attacks the Antitrust Division's Business Review Letter and the applicant's response to Point (c). The "Motion to Strike and Remove" the Business Review Letter charges the Antitrust Division's action involved no "independent investigation" but rather "... a studied attempt to invoke political pressure and clearance, and to resolutely block public participation in the proceeding." (Letter of March 1, 1971.) In this matter to strike the Business Review Letter, Martin-Trigona also charges the Antitrust Division's conclusion "... is the product [*748] of collusion", nothing that the Division's letter and the applicants' response commenting thereon bear the same date -- February 19, 1971. Martin-Trigona believes this identical date means some one must have "tipped off" the applicants as to the Division's position. Martin-Trigona further asks that the Division's letter be stricken until the Department of Justice reopens the proceeding and gives all parties the right to submit evidence and conduct cross-examination. Charges of a similar vein are continued in the second letter of March 1, 1971, commenting on the applicants' response to Point (c). References are made to "political pressure... behind closed doors for political rubber-stamping of the merger," to the alleged comic subservience of the Justice Department to the applicants, to an alleged violation of the Freedom of Information Act by the Division in not permitting participation by Martin-Trigona, n6 to "sanitized" financial figures in the material submitted to the Department of Justice by the applicants (i.e., the use of blank spaces to avoid disclosing confidential financial data), and to the alleged concentration of to much power in the hands of too few which would result from approval of the merger.
n5 The "Demand for Order, etc." is denied. The Commission's rules make no provision for the subject demand. Apart from this, Martin-Trigona's pleadings have and will be carefully considered.
n6 It appears from one of the attachments that Martin-Trigona has invoked the Freedom of Information Act (5 U.S.C. 552) to obtain reopening of the Business Review Letter. At this writing, we have not been informed of any action taken by the Department of Justice on this request.
27. In a more temperate vein, RJN notes that no affirmative showing has been made before the Department of Justice that the merger is in the public interest, and that the limited conclusion of the Division falls short of the affirmative finding requisite to our approval. RJN also suggests that an inadvertent claim by the applicants that Corinthian's Indianapolis station (WISH-TV) served Lafayette, Indiana -- where RJN's competing station is located -- involves an inconsistency which is open to question.
28. In view of the critical importance of the Antitrust Division's views on the antitrust aspects of the merger, we consider first Martin-Trigona's "Motion to Strike and Remove" that letter. That motion is denied. We see nothing improper in our having directed the applicants to obtain from those branches of the government directly concerned with enforcement of the antitrust laws, a statement that the merger is not objectionable under any such laws. We think this action was entirely proper, especially in view of the numerous and repeated objections made by the petitioners, charging that the merger was questionable under the antitrust laws and had important anticompetitive consequences. Having thus directed the applicants to obtain the requested position statement, it would be the height of foolishness to strike that statement as Martin-Trigona now requests. The intemperate charges made by Martin-Trigona in his motion and other letters concerning the Antitrust Division's actions are utterly without factual support, and are rejected. n7 Nor do we think the Antitrust Division's statement is defective because it does not rest on an evidentiary hearing. Objections to procedures followed in issuance of Business Review Letters should more properly be referred to the Department of Justice, and we note (see footnote 6) that Martin-Trigona [*749] has in effect sought Departmental review of the latter by invocation of the Freedom of Information Act. We note also, however, that all of the pleadings and papers filed by the petitioners up to the time of our initial consideration of the application were furnished to the Division. (Applicants' letter of February 19, 1971, p. 2.)
29. In view of the Antitrust Division's consideration of the application and other documents submitted to it, we are satisfied from its statement that the proposed merger raises no significant antitrust problems. With this in mind, we turn to the various allegations involving competitive factors raised by the petitioners. While the position of the Antitrust Division would appear to be largely dispositive of any claims that the merger has significant anticompetitive consequences, we will nevertheless consider these claims so that our position will be on the record.
n7 Needless to say, the request for a position statement did not amount to referring the application to the Department of Justice for decision. The necessary public interest determination on the merger remains ours, as evidenced by this very consideration here.
30. Competitive factors are appropriately to be considered under the public interest standard, even though competition as such may not be considered the single or controlling reliance for safeguarding the public interest. ABC-ITT Merger, 9 FCC 2d 546, at 548. As to the claim the applicants are potential de novo entrants into business fields they do not now occupy, we are unable to see how competition would be lost or lessened here as a result of the merger. Competition afforded by de novo entry rather than acquisition or merger with a going concern is relevant only where there is a substantial likelihood of such entry. For a discussion of the cases relied on by LVO, see ABC-ITT Merger, 9 FCC 2d 546, 549 to 552. On the other hand, where there is no factual showing evidencing an interest or likelihood of entry into new lines of business and where merger applicants deny they have either the inclination or capabilities for de novo entry, then there is no factual predicate for concluding that a potential for competition exists. That principle governs here. We hasten to added that there might well be situations in which a merger threatening lessened competition would require a different result under the public interest standard. But all we decide here is that the barebones contentions of the petitioners are not supported by specific facts which warrant a conclusion of loss of potential competition.
31. We consider next RJN's argument the Commission must find competition will be fostered before it can approve the merger. Despite what RJN says, the statutory mandate contains no requirement for explicit findings respecting enhanced competition as an indispensable prerequisite to approval. Of course, in particular situations enhanced competition can be an important ingredient under the public interest standard in considering a merger proposal, and indeed, the bolstered competitive positive of ABC vis-a-vis other networks was one of the considerations leading to Commission approval of the ABC-ITT merger. But in relying on the ABC-ITT merger decision -- its principal source for contentions respecting enhanced competition -- RJN ignores that this was only one of many factors considered in balancing detriments and benefits under the public interest standard. See particularly 9 FCC 2d 579, for a resume of these factors. Nothing in that decision makes approval of a merger turn on a finding of enhanced competition. In fact, analysis suggests the fallacy inherent in RJN's [*750] line of argument -- enhanced competition might well be so destructive that it would raise valid antitrust problems.
32. This leads us to a point made several times by RJN -- that the merger will so enhance Corinthian's resources that it threatens RJN's continued existence. n8 Under Section 309(d)(1), the need for a hearing rests on whether there are specific allegations of fact, supported by proper affidavits, which raise substantial and material questions of fact. RJN's petition is fatally defective in this respective. Its arguments that approval of the merger would deal a death blow to RJN are made without supporting affidavits. But there are no allegations of fact here or elsewhere in the petition tending to suggest destruction or significant crippling, of RJN's UHF station. See Cosmos Broadcasting Corp., 18 RR 2d 541. There is nothing to suggest, for example, that present advertisers over WLFI-TV will abandon that station for WISH-TV as a result of the merger. And the prospect of this happening is remote, because while the two stations presently enjoy a common service area in some degree, they serve essentially different markets. Advertisers wishing to cover WLFI-TV's service area would find WISH-TV could not cover this full area. Nor is there any showing of a threatened loss of network affiliation. In fact, both stations are affiliated with CBS, which suggests, under prevailing industry affiliation practices, that the competitive situation between the two stations is not acute. Apart from this, the management of the Corinthian stations will remain essentially unchanged under D & B ownership, and no claim is made this management will engage in destructive competitive practices. On the contrary, as we have already pointed out, the applicants are fully aware that following merger, any utilization of Corinthian's expanded resources under coercive practices (tie-ins, package deals, etc.), would be illegal and contrary to Commission policy. Thus, RJN's petition lacks specific allegations of fact raising a UHF impact issue. While the merger will undoubtedly leave the Corinthian stations with greater resources, claims that this strengthened position will lessen competition in the Corinthian station markets, or have a chilling effect on the emergence of new competitive services, or will be used in a manner detrimental to petitioners' interests lie entirely in the realm of speculation.
n8 Needless to say, this argument seems to undercut the RJN claim a merger must enhance competition.
33. Contentions that D & B's program proposals are slanted to favor D & B non-broadcast interests, and that D & B will be partial in presenting controversial issues. RJN notes that D & B has an indirect relation with the trucking industry (through its transportation publications), and with health care and education (through trade journals published in these fields). D & B's ascertained community needs of the WISH-TV area include the need for improving roads and health care and education. RJN contends a hearing is needed to determine the position espoused by various D & B clients in these fields. (RJN petition to deny, pp. 8 to 9.) Radio Free America argues in a similar vein. It claims that most of Corinthian's prime time programming is network originated and its locally produced programs present essentially [*751] the corporate viewpoint. Little time is devoted to programs for students, antiwar groups, migrant workers, etc., and when time is devoted to these subjects, Corinthian weeds out reformist ideas hostile to its point of view. (Letter of April 8, 1970, p. 4.) The applicants deny these charges. (D & B opposition, pp. 28 to 30.) D & B further notes the application states it will continue Corinthian's present policy of fairness in presenting controversial issue programming, and that undertaking is reaffirmed.
34. As with earlier objections, the charges rest on pure conjecture. Moreover, the facts refute any substantial links between D & B's other business interest and ascertained needs. D & B's relation to the trucking industry is limited to two publications (Trinc and The Dun & Bradstreet Reference Book of Transportation). Neither carries advertising and both are merely compilations of information from ICC public records distributed to those who do business with the trucking industry. Its professional journals in the health field (devoted to medicine, surgery and cardiology) are highly technical and are limited in circulation to specialized audiences. The suggestions these publications might espouse a "viewpoint" which might influence future programming is without merit. Similarly with Radio Free America's charges regarding the potential for slanting programming. Conjecture is insufficient to support charges of slanting. Indeed, extrinsic evidence of slanting, as opposed to mere allegations, is needed to justify an inquiry, let alone hold a hearing. See CBS Program "Hunger in America," 20 FCC 2d 143 at 150, which indicates the stringent standards in this area are designed to avoid bogging down the Commission in mass allegations respecting program judgments.
35. Contentions that overlap between WANE-TV and WISH-TV requires denial of application. There is Grade B overlap between the signals of two Corinthian stations -- WANE-TV (Fort Wayne) and WISH-TV (Indianapolis). Under rules for calculating overlap in effect when the application was filed, the overlap area covered 28 square miles with a population of 890. Under amended procedures adopted April 3, 1970 in Docket No. 17253, the overlap area embraces 83 square miles with a population of 4,756. Under further changes for calculating Grade B overlap proposed in Docket 16004, there would be no calculated overlap. RJN and Radio Free America contend the existence of this overlap requires denial of the application. (RJN petition to deny, pp. 9 to 10, and RJN reply, pp. 12 to 13; Radio Free America letter of April 8, 1970, p. 3.) Radio Free America suggests in the same letter that overlap may be aggravated by carriage of WANE-TV over CATV systems in the area affected. It claims competition would be improved by putting the stations under separate ownership. The applicants contend the overlap is de minimis and cite precedents involving for greater overlap, both in terms of increased overlap ( Main Radio & Television Co., 5 RR 2d 672) and the creation of new overlap ( WIBF Broadcasting Co., 17 FCC 2d 876). They point out the overlap population calculated under the amended procedures of April 13, 1970 amounts to 1/4 of 1% of the population in WISH-TV's Grade B contour and less than 4/5ths of 1% of the total population in WANE-TV's Grade B contour. There are 4 to 6 other [*752] Grade B or better services in the overlap area. As to CATV, the applicants note the merger would have no effect on any carriage of Corinthian stations and such carriage is not in the applicants' control.
36. In determining whether Section 73.636(a)(1) of the rules should be waived, we look first to the policy objectives underlying the multiple ownership rules. The Report and Order adopting fixed overlap standards states the multiple ownership rules are grounded on diversifying ownership to promote more effective competition, and a desire to reduce the chances that any one person or group would have an inordinate effect in shaping of public opinion through political, editorial or similar programming. The Report and Order placed particular emphasis on the latter policy aspect. See 2 RR 2d 1588 and 1591-92. Applying these principles, there is nothing to suggest the miniscule overlap area has an adverse effect on competition between WANE-TV and WISH-TV. It is to Corinthian's self-interest to promote each station fully, and there are no contrary facts to suggest this has not and will not be done. Nor is this conclusion altered by carriage of WANE-TV's signal over CATV systems. See WIBF Broadcasting Co., supra. As for the second policy basis of the rule, we find it inconceivable that the minimal overlap involving only insignificant fractions of total Grade B areas and populations could give the Corinthian stations any potential for dominating public opinion in the overlap area. Apart from the existence of abundant competing television service, the overlap population enjoys numerous other broadcast services (AM and FM) and other mass media (newspapers, magazines of general circulation, etc.) with which the Corinthian stations have no association. In view of these circumstances, a waiver would clearly not be incompatible with the policy objectives of the rule.
37. We recognize the Report and Order adopting the fixed overlap standards stated in footnote 12 "A request for waiver of the rule showing, on its face, that application of the rule would be inappropriate would be entitled to a hearing." (2 RR 2d at 1594.) But recognition of a right to a hearing was not intended to mean a hearing was mandatory on all waiver requests where application of the rule would be inappropriate. That footnote must be read in light of practical considerations which dictate the need for a hearing -- the resolution of disputed facts or questions of law or policy. Just as the mere filing of a waiver request does not invariably require a hearing ( United States v. Storer Broadcasting Co., 351 U.S. 192, referred to in footnote 12), neither must every waiver request be subject to a hearing before it can be granted. The need for administrative flexibility is recognized both in footnote 12 and the Storer case, supra. Where the facts are not in dispute, the overlap involves inconsequential areas and population and carries no threat of any kind to the policies underlying our multiple ownership rules, and a waiver is entirely consistent with prior precedent, a hearing would be wasteful and serve no useful purpose. Accordingly, we hold that the applicants are entitled to a waiver of Section 73.636(a)(1), and such waiver is granted.
38. Applicability of the Top-50 Policy. None of the petitioners originally raised the question of the applicability of the Top-50 policy to the merger. However, on initial consideration of the application, the [*753] Commission considered the policy applicable and in its letter of November 30, 1970 (Point (a)), it stated it was not satisfied the applicants had made the necessary "compelling public interest showing" (12 RR 2d 1501 at 1507). Accordingly, the applicants were requested to furnish additional information on how -- under the standard referred to -- the merger would serve the public interest. The applicants argue at length (response of February 1, 1971) that the policy is inapplicable. Martin-Trigona contends the policy applies and that the necessary showing has not been made. RJN argues similarly, and cites our recent decision in the Triangle-Capital Cities application.
39. We agree with petitioners that the Top-50 policy applies to this merger. We are not impressed by D & B's arguments that the policy has no application because there is no change in the number of Top-50 stations, n9 or any increase in audiences within the Top-50 markets. As we noted in our Triangle decision, our concern was with substance and not mere form. See Triangle Publications, Inc., FCC 71-209, released February 26, 1971. Focusing on substance, D & B in one fell swoop will increase its Top-50 audience from zero to a combined net weekly circulation of 2,011,452. Obviously, were D & B to acquire these stations piecemeal, once it had acquired the initial triggering interests, it would be subject to the policy. We see no sound reason why the transaction here should escape scrutiny under the Top-50 test merely because the applicants have chosen the merger approach. A contrary holding would be untenable because it would lead to substantial evasion of the Top-50 policy.
n9 The three stations in the Top-50 television markets involved here are Indianapolis (20th market), Houston (21st) and Sacramento (23rd).
40. The applicants argue, however, that even if the policy applies, the required "compelling public interest showing" of public benefits weighed against possible detriment to the public interest has been made. They refer here to the substantial strengthening of the Corinthian stations which would be made possible by addition of D & B's personnel, financial, and other resources. And in response to Point (e) of our letter of November 30, 1970, the applicants have now furnished specific details on improvements in the area of children's programs at the Corinthian stations, and other proposed program improvements. Using the resources of its Thomas Y. Crowell subsidiary (which publishes children's books), D & B plans a new program series entitled "Let's Find Out," directed to 5 to 8-year olds. This color series would consist of 26 half-hour programs to be broadcast by all Corinthian stations and would cover 26 related topics. The programs would be aired at hours suitable for children's viewing, and Corinthian will promote the programs and later consider possible syndication so such programs could be made available to other stations. The plans for this series have been firmed up, and plans for a similar series directed to older children are under consideration. D & B further notes that the resources of two other D & B subsidiaries -- the Life Extension Institute and the Reuben H. Donnelley Corporation -- are available for other programs. A series of 65 3 to 5-minute programs concerned with health and preventive medicine have been planned, and are in direct response to ascertained [*754] community needs in the Corinthian markets. Through the Reuben H. Donnelley Corporation's various publications, Corinthian stations will obtain expertise of persons in a number of different areas. The applicants note, for example, that pollution is a community problem in all Corinthian markets, and D & B expertise obtained through publishing Water and Waste Engineering (dealing with water supply and waste water matters) would be ideally suited for programs on pollution. Similarly, personnel of Control Engineering (traffic systems controls) and Urban Roads (road construction and maintenance) could be used for programs on ascertained needs respecting transportation, streets and highways. Other D & B publications lending themselves to program production are Fire Engineering (ambulance systems and services, an ascertained need in Houston), What's New in Home Economics (women's programming in general) and the Journals of Cardiology, Surgery and Medicine (health problems). Presently, no detailed plans have been made for such programs, but these resources will be available. And to coordinate interchange of ideas, an official of Donnelley Corporation will be designated as liaison officer to Corinthian after merger.
41. RJN quarrels with these proposed program improvements, contending these "limited types of new programming" are irrelevant because there is no basis for assuming such programming could not be made available without the merger. (RJN letters of February 16, 1971 and March 11, 1971). Martin-Trigona (Letter of February 8, 1971) dismisses the programming improvements as "meaningless," because Corinthian merely commits itself to more kinds and amounts of programming which will be expected of every licensee in the future. Martin-Trigona also argues the applicants have not shown how the additional prime time which will become available once the prime-time rules go into effect will be used, and whether programs for such additional time will be locally produced or syndicated. The applicants contend the "opinions" of RJN and Martin-Trigona in this are not entitled to weight, and they rest on their compelling public interest showing. (Applicants' letter of February 19, 1971.)
42. We are of the opinion that the applicants have made the necessary "compelling public interest showing" required under the Top-50 policy. The planned improvements in the area of children's programs and the area of health and preventive medicine are significant. And the prospect for extension of the "Let's Find Out" format to older children, and plans for additional programming made possible by D & B's expertise obtained through publication of its various trade and technical journals look to further significant program improvements. In our judgment, such improvements -- coupled with the potential for strengthening the Corinthian stations by the addition of D & B's resources (expert personnel, finances, etc.) -- constitute a "compelling public interest showing" that on balance, approval of the merger would be in the public interest. We are not persuaded by petitioners' dismissal of these improvements as irrelevant and meaningless. And Martin-Trigona is in error when he claims Corinthian is merely doing what it will be required to do in the future. The Commission does not dictate to licensees on matters of program content or specific [*755] programs, and this applies to licensee judgments on how additional prime-time hours will be filled when the new rules go into effect. See Section 326 of the Communications Act of 1934, as amended, 47 U.S.C. 326.
43. Miscellaneous contentions of Martin-Trigona.
(a) Martin-Trigona makes several contentions which can be answered briefly. He contends the merger will shift control of the Corinthian stations to out-of-state directors quartered mainly in New York City and Chicago (Letter of April 8, 1970) and that following merger, diluted attention will be paid to station operations (Ibid., p. 1). These contentions are baseless. The Corinthian stations will continue under essentially the same management as present, except that they will be placed under a subsidiary of D & B. The D & B board of directors will be expanded to include four present Corinthian directors, and Whitney and his associates, who now have de facto control of Corinthian will own or have the power to vote the largest single block of post-merger D & B stock. (Exhibits A-5 and A-11, application.) Commission standards do not regulate the geographical distribution of directors, and the facts establish that attention to the stations will not be diluted.
(b) Martin-Trigona contends a merger is justified only for compelling financial reasons (Letter of April 8, 1970) and that Corinthian should first be required to offer its stations for sale to local groups (Letter of March 9, 1970). The charge that it is "illegal" for Corinthian not to have made an effort to sell the stations to local interests before proposing a merger with D & B is repeated in Martin-Trigona's letter of February 8, 1971. While financial necessity can be an important factor, neither the Communications Act nor Commission policy conditions approval of mergers on financial need. As for sales to local groups, this proposal is completely inconsistent with Commission policy. The Commission has never required that stations must first be offered for sale to local owners before a sale to non-local owners can be approved.
(c) Martin-Trigona suggests Corinthian is trafficking in licenses (Letter of April 8, 1970). Martin-Trigona repeats these trafficking charges. He notes he has received calls from a New York broker (who remains unidentified), who claims to know of major investments in Corinthian stock and who flatly represented Corinthian would be worth less without merger (Letter of February 8, 1971). All this, he asserts, requires the Commission to investigate "trafficking" and whether undue influence has been used to secure approval of the merger. These statements are without factual support. While it is true Whitney and his associates have over the years sold stock interests in Corinthian under public offerings and their aggregate interests have gone from de jure to de facto control, the fact remains Corinthian's stockholders will continue to have ownership interests in the stations via D & B, and station management will remain intact.
(d) Martin-Trigona asserts the merger has "Penn-Central" implications. (Undated letter received July 7, 1970.) Penn-Central is mentioned again in Martin-Trigona's letter of February 8, 1971, in [*756] which petitioner asserts -- without any explanation or substantiating facts -- that D & B showed "... less than total alacrity" in the Penn-Central financial collapse. The Commission is aware of the problem here and it would reject any merger proposal which put stations in a position where their assets and their continuing ability to serve the public were threatened with plundering or diversion. The prospect of this is not present here. Both merger partners are financially solid and there is nothing in D & B's background to suggest its ends are piratical.
(e) Radio Free America brings to our attention press accounts of a $6,610,000 verdict rendered against D & B in the New York courts, arising out of D & B's credit reporting activities. Martin-Trigona again brings these matters to our attention. (Letter of February 8, 1971, p. 2). It claims this evidences "pernicious policies" which warrant denial of the application. (Undated letter received August 5, 1970.) This matter is disclosed in the application, the pertinent exhibit (G-5, application) further indicating the verdict is the subject of post-trial motions, and counsel's opinion the verdict is without basis in fact or law. In our view, the matter referred to in the press account (Newsweek, July 27, 1970, pp. 17 & 19) does not require a hearing. Even assuming the verdict stands, it would have no substantial effect on D & B's financial qualifications. Moreover, there has been no final judicial decision respecting the verdict. And finally, even assuming the verdict is sustained, the matters referred to in the press account would not in our judgment warrant an adverse conclusion respecting D & B's fitness to be a licensee. This is because the account refers to a single isolated credit-rating incident occurring almost a decade ago in a regional (Atlanta) D & B office. There is nothing to suggest that what might be characterized as vindictive conduct of personnel in the regional office was approved by D & B management. Apart from the fact that D & B has conceded it is not infallible in its credit reporting functions, this single incident is outweighed by other measures D & B takes to insure the integrity of its services (supra).
(f) Martin-Trigona makes several new requests for investigations. He asks investigation into "whether merger approval is being bought or sold, and what financial inducements have been made to present, past or future campaign committees, especially in the District of Columbia, to lubricate approval or support for thereof." (Letter of February 8, 1971, p. 3). He further suggests "secret representations" have been made to the Department of Justice, and charges this, as well as the allegations of stockbrokers who have called him on the merger, must be evaluated. (Ibid.) In a similar vein, Martin-Trigona has made a number of ad hominen arguments of the crudest kind, impugning the character of the applicants' counsel, hinting of bribery by offers of post-Commission employment, and charging political influences and political payoffs. We are told these charges rest on "highly reliable confidential sources", but those sources remain unidentified and the charges are utterly without factual support. (Radio Free America letter of May 16, 1970.) Prompted by a letter from the applicants requesting timely action on the application prior to initial consideration of the application, Martin-Trigona directed further venomous [*757] letters to the Chairman of the Commission, the President and four members of Congress. In our view, these charges ordinarily would merit summary rejection without mention. They are mentioned here solely to indicate that the Commission has considered the charges. Upon such consideration we find them utterly vicious, totally lacking any factual support, and completely unworthy of serious consideration. These vague and rank suspicions do not warrant the investigation demanded.
(g) Following release of the Primer on ascertainment of community needs, the application was amended (Amendment 14) to confirm that the original survey of community needs fully complied with requirements set out in the Primer. On March 4, 1971, Martin-Trigona filed a "Reply to Amended Community Service Filings by Applicants to Corinthian Merger". The claim is made that Amendment 14 consists of nothing but "bedsheet lists of 'needs and interests'" which ignore real problems in the service areas of the Corinthian stations. Here Martin-Trigona refers to the disproportionately large old-age population in Tulsa and poverty problems in Indiana, which he claims have been ignored. He also suggests D & B's approach to Negro problems is "... out of tune". Accordingly, he requests that (1) all materials relating to the entire community survey be resubmitted, and (2) that Amendment 14 be stricken as meaningless and prolix. These requests are denied. D & B's ascertainment of community needs in the five Corinthian communities complies with Commission policies, and this is confirmed by Amendment 14. Amendment 14 also confirms that D & B ascertained there is a higher percentage of old people in the outlying communities which surround Tulsa, and that young people were leaving Tulsa. (Amendment 14, "Significant Demographic Characteristics of the Area Service by KOTV, Tulsa, Oklahoma", p. 2, and "Additional Specific Needs and Interests of Tulsa and the Surrounding Area".) Apart from the fact a licensee is not expected to formulate programming covering every single ascertained community problem, Martin-Trigona's broad-brush attack here is totally lacking in specifics. This same observation applies to the claim poverty needs will be ignored by Corinthian's Indiana stations. See Amendment 14, "Additional Specific Needs and Interests of Indianapolis and the Surrounding Area", and "Additional Specific Needs and Interests of Fort Wayne and the Surrounding Area", both of which set forth needs of the poor and subsidiary aspects of poverty (housing, welfare services, etc.).
44. Requests that action on application be deferred until completion of Conglomerate Inquiry. All three petitioners contend that acquisition by a conglomerate corporation is involved, and accordingly, that action be deferred until the Conglomerate Inquiry (Docket 18449) is completed. In renewed objections, RJN continues to insist the application cannot be granted without an evidentiary hearing, and at a minimum the Commission should not act until it has the benefit of the type of information which will be elicited from Corinthian itself in the Conglomerate Inquiry. It further argues the Inquiry should be expanded to include proposed operations and policies of the applicants upon implementation of the proposed merger. (RJN Letter of February [*758] 16, 1971). Martin-Trigona renews his prior objections via a renewal of all prior pleadings and objections. (Martin-Trigona Letter of February 8, 1971).
45. Petitioners' requests are denied. The Commission emphasized in its Notice of Inquiry that no tentative conclusions had been formed, and that the Commission merely sought to determine whether remedial action was needed (and if so, whether by administrative or legislative action). Notice of Inquiry, 16 FCC 2d 436, at 437. In this state of affairs, delay in acting on the application would be inappropriate. Indeed, other applications involving applicants who conceivably could be subject to further actions resulting from that inquiry have been acted upon.
Conclusions Respecting the Application
46. We have considered the objections to the merger at great length. Perhaps unnecessary length, but then for a reason: the objections are many and touch on sensitive areas which even in the absence of pleadings would need exploring. As we have seen, those problems center around competitive factors -- whether the combined resources of D & B and Corinthian would lessen competition, or enhance it (perhaps even to a destructive level), and whether there is anything in the record to suggest D & B could -- or might possibly -- abuse its enlarged potential to the detriment of competitors. Apart from competitive factors, there is a further point to which the petitioners have not addressed themselves in terms -- whether the merger would result in undue concentration of mass media ownership which is inconsistent with the public interest.
47. On all these points, we are satisfied there are no substantial and material questions which would require a hearing. There would be no lessening of competition among broadcast stations because the merger does not involve parties who presently compete. Nor would competition be reduced because the Corinthian stations will have available the other business services and information resources of D & B. Petitioners' arguments on this score raise the specter of secret business information used for sinister ends. Petitioners' fears are useful in bringing this matter out into the open, because they have forced the applicants to demonstrate these fears are illusory. The applicants' representations on this point dispel any concern here and we fully expect the applicants to hew faithfully to these representations. With respect to the enhancement of competition, it is reasonable to assume the merger of the applicants' resources may enlarge the capacity of the Corinthian stations to compete more effectively. After all, this is the whole purpose of the merger. At the same time, while the Corinthian stations will undoubtedly be strengthened, nothing suggests Corinthian will be enabled to dominate the markets in which it operates television stations. And in view of the Antitrust Division's examination of the application and all the objections thereto, and the Division's conclusion, we think there is a substantial basis for inferring that our judgment on the various competitive factors we have considered under the public interest standard is correct.
[*759] 48. Nor will the merger unduly concentrate mass media ownership. The Commission has previously concluded that Corinthian's mass media interests present no problems in this area. D & B's specialty publications can in no sense be regarded as mass media of a kind which can be used to shape public opinion. The merger adds nothing in the way of new mass media interests, but merely shifts control of existing interests which have never been found to raise problems of undue concentration. Each of the Corinthian stations operates in markets with anywhere from two competing commercial television stations (Ft. Wayne and Tulsa) to three competing stations (Sacramento, Houston and Indianapolis). Additionally, the Sacramento, Houston and Tulsa markets have an operating non-commercial television station, and each market has anywhere from one to four authorized commercial channels, some of which are likely to be operational in the near future. Each Corinthian station is in a state with numerous television stations, from a high of 52 for Texas to a low of 10 for Oklahoma. Fourteen individual television stations have a greater net weekly circulation than the five Corinthian stations combined (2,292,500). Among multiple owners, Corinthian ranks 31st in terms of combined population of standard metropolitan statistical areas (SMSA); 31st based on population of the SMSA of the city of license; 28th based on ARB's rank by Area of Dominate Influence (ADI) TV homes; and 19th in terms of ARB net weekly circulation. (Exhibit A-5 application) and each Corinthian television city of license is served by from 7 to 23 AM and FM stations, as well as various printed media. (Ibid).
49. We have thus far considered the merger mainly in terms of the alleged negative aspects raised by petitioners. But the merger has a positive side. It would serve the public interest by giving Corinthian access to important D & B resources -- financial, personnel, and others. It would also pave the way for the programming improvements discussed earlier in connection with the required "compelling public interest showing" under the Top-50 policy.
50. The application discloses several banks will have more than 1% of D & B's stock after merger. As we have done with other applications, our approval will be conditioned on the outcome of the rule making in Docket No. 18751.
51. We find, therefore, that the applicants have made a compelling public interest showing that the public interest, convenience and necessity will be served by approval of the merger, and we further find that there are no substantial or material questions of fact which require a hearing.
52. Accordingly, IT IS ORDERED, That, Section 73.636(a)(1) of the Rules, IS WAIVED and that the application for transfer of control of Corinthian Broadcasting Corporation from John Hay Whitney to Dun and Bradstreet, Inc., IS GRANTED, subject to whatever final action the Commission may take in Docket No. 18751 on the Bankers Petition, in the matter of amendment of Section [*760] 73.35, 73.240, and 73.636 of the Commission's multiple ownership rules.
53. IT IS FURTHER ORDERED, That, the "Petition to Deny and for Other Relief" filed by RJN Broadcasting, Inc., IS DENIED; that the "Petition for Reconsideration and Motion for Acceptance Out of Time" filed by LVO Cable, Inc., IS DENIED; the "Opposition to Proposed Transfer of Control" filed by Radio Free America, IS DISMISSED; that the "Motion for Recuse and Suggestion for Rescue" filed by Anthony R. Martin-Trigona, IS DENIED; and that the "Motion to Strike and Remove" the letter of the Antitrust Division, Department of Justice, dated February 19, 1971, filed by Anthony R. Martin-Trigona, IS DENIED.
FEDERAL COMMUNICATIONS COMMISSION, BEN F. WAPLE, Secretary.
DISSENTING STATEMENT OF COMMISSIONER ROBERT T. BARTLEY (IN WHICH COMMISSIONER NICHOLAS JOHNSON JOINS)
The applicants' showing fails to set forth facts from which I can conclude that the package deal would bring about an improvement in the general structure of broadcasting.
Moreover, the applicants have failed, in my opinion, to make a "compelling public interest showing" sufficient "to overcome the detriment with respect to the policy of diversifying the sources of mass media communications to the public," as required by the Commission's Top-50 Policy, (12 RR 2d, 1501, 1507). The applicants' showing rests upon alleged strengthening of the Corinthian stations with Dun and Bradstreet resources and upon purported program improvements. The claimed advantages of expertise are by reason of other media interests of Dun and Bradstreet -- already a substantial media complex. There is no showing, or claim, that the Corinthian stations need financial strengthening in order to serve the public interest better or that they could not afford to make the proposed program improvements without the transfer. Each of the Corinthian stations standing alone is a highly profitable operation. Each could well afford to make whatever program improvements are considered desirable without the aid of Dun and Bradstreet resources. In my opinion, the reasons given by the applicants in support of the required compelling public interest showing are not valid.
The paper showings by the applicants do not, in my opinion, resolve substantial questions of unfair competitive advantages inherent in the merger.
In view of the foregoing, I would designate the applications for evidentiary hearing pursuant to Section 309(e) of the Act to determine whether our granting consent to the merger would serve the public interest.
DISSENTING STATEMENT OF COMMISSIONER H. REX LEE
Dun & Bradstreet (D&B) is acquiring five television stations from Corinthian Broadcasting Company, three of which are located in the [*761] nation's top-fifty markets. This engages the Commission's Top-50 Market Policy, requiring that a transfer applicant must present a compelling public interest showing of the benefits the public can expect to receive from the grant -- demonstrating that such benefits are sufficient to overcome the detriment to the Commission's policy of diversifying the sources of mass media communications.
D&B equivocates about both the applicability of the Top-50 Market Policy and the necessity of making a compelling public interest showing. But, it says, if such a showing is required, its commitment to continue the "quality operation" of the Corinthian stations and to augment that service through access to D&B personnel and expertise, will suffice. In a supplement to this commitment, D&B "anticipates" that the personnel resources of its Thomas Y. Crowell subsidiary will produce 26 half-hour general science color television programs for a pre-teen children's audience, ready for distribution within 6 to 12 months from the date of the merger. D&B also maintains it has other "plans" that could fulfill the requirement of a compelling public interest showing. It points generally to the resources and capacity of its subsidiary, Life Extension Institute, to produce 65 three-to-five minute programs, dealing generally with the subjects of food, health and age. Another subsidiary, Reuben H. Donnelley, is said to have the personnel expertise available for program production touching on pollution, water conservation, urban transportation, emergency services, home economics, and general matters related to health.
These availabilities seem a poor substitute for a fastened commitment, especially since commitment has become the touchstone of a compelling public interest showing. Triangle Publications, Inc., FCC 71-209, February 26, 1971.
The vagueness of D&B's promise to continue and augment the present quality of Corinthian operations seems to raise substantial character questions. D&B maintains that its merger with Corinthian will "assure not only continuation of the existing high quality of public service provided by Corinthian stations, but which (sic) ultimately should be translated into even better performance and service to the public." (Reasons for the Merger, Exhibit A-5, pp. 5-9 passim.) Then, in the face of this assurance, D&B proposes to slightly reduce the percentages of time devoted to news, public affairs, and other programming in three of the five stations it is acquiring (KXTV, Sacramento; WISH, Indianapolis; and KOTV, Tulsa). A very slight increase in percentages is proposed for the other two stations (KHOU, Houston; and WANE, Ft. Wayne). At a minimum this type of program proposal raises a material question concerning the veracity of D&B's promise of "continuing" the "high quality" of Corinthian operations.
Moreover, there is a serious question concerning the meaning of D&B's commitment. Based on an analysis of data contained in FCC files, the Corinthian stations apparently constitute some of the highest profit producing television properties in the top-fifty markets. But, among VHF network affiliated stations located in these markets, they devote some of the smallest percentages of their revenues to program expenditures. In markets 11 through 25 (where three of [*762] the Corinthian stations are located), the median of program expenditures to revenue is 25 percent. By this index Corinthian ranks under the median program expense with 16.8 percent for WISH and 19.8 percent for KHOU. Only, Corinthian's Sacramento station, KXTV expends as much as 30.5 percent of its gross receipts on programming, and therefore is 5.5 percent above the 25 percent median in markets 11 through 25.
In comparing Corinthian against the range of program expenditures to gross revenue by other stations in the top-fifty markets, a substantially similar pattern seems to emerge. In markets 1 through 50 the percent of program expense to revenue of VHF network affiliates ranges from 14 percent to 44 percent. On this scale all of the Corinthian stations in these markets fall near the low end of the range. In markets 11 through 25, the range varies between a low of 16 percent and a high of 42 percent. Corinthian's WISH falls just above the low end of the register with a 16.8 percentage. KHOU is slightly above the lower range with 19.8 percent. And KXTV is slightly above the median with 30.5 percent.
In comparison to the 44 VHF network affiliated television properties in markets 11 through 25, Corinthian's record of program expense to revenue seems to rank it a poor achiever. Corinthian's KHOU (Houston) ranks 41st, and WISH (Ft. Wayne) ranks 43rd. KXTV (Sacramento) alone breaks out of this low category because its program expenditures (as a percent of gross revenue) rise slightly above the 25 percent median. Unfortunately, however, KXTV ranks 40th in the total time devoted to local programming, and 44th in time expended on local programming within the prime time period. KHOU stands 3/th among the 44 network affiliated television stations in markets 11 through 25, consigning only a small portion of total broadcast time to local programming.
Although statistics are not the only yardstick of a station's performance, these records seem to bear significantly on D&B's commitment to continuing Corinthian's "quality" operations -- especially in view of the profit picture which is evident in Corinthian's performance. WISH, for example, realizes a profit of 60.2 percent on total revenue. KHOU falls just under WISH with a 57.7 percent on total revenue. And KXTV earns 21.5 percent.
With this distressing picture of the quality of Corinthian operations, D&B's promise of augmenting that "quality", may perhaps only be regarded either as an undertaking to do less, or as a commitment to continue the pursuit profits at the expense of local programming and original production. D&B's supplemental filings, to structure a verbal showing of compelling public interest, do not seem to alter this conclusion. According to D&B's language, the 26 half-hour children's television programs are "planned" and "anticipated," not committed. Consequently, the transfer application, without any public interest commitment, does not permit a determination of the reason D&B needs to own television facilities to justify the validity of any television program investment it may ultimately make. If ownership of these stations means D&B will be assured of a Corinthian "buy" to cover its [*763] promised program investment, then D&B is not really contemplating any contribution which rises to the dignity of a compelling public benefit. In this circumstance, D&B's ownership of these stations merely guarantees itself the availability of a distribution market it might not otherwise gain if forced to rely on the program selection process of independent stations operating in a competitive market for program acquisitions. For the public interest to be served, an actual financial commitment is required to guarantee this proposed programming as a capital contribution to the Corinthian stations. Cf. Triangle Publications, supra. If Corinthian must buy D&B program production, at best the merger amounts to little more than an internal reciprocity arrangement which seems to dilute Corinthian's internal management supervisory control over the program selection process. Since the Commission has no information about this relationship of purchases to contributions, it cannot be determined whether the public is acquiring a compelling benefit, or is being sold a reciprocal typing arrangement between a new production source and an existing distribution chain.
All the Commission gets in the way of information is Corinthian's claim that the continued "quality operation" of its stations will be kept and augmented through its access to the personnel resources and expertise of the D&B organization. Moreover, Corinthian says the stations will be "placed under responsible leadership as to whose integrity no questions exists." In the face of petitions to deny, these claims raise material and unanswered questions as to the reasons why Corinthian needs the personnel and expertise of D&B. They also raise a substantial question concerning the manner in which Corinthian's integrity will be improved by the transfer. Corinthian's pre-tax earnings, at the end of its 1970 fiscal year, were $9.8 million, with retained earnings reaching an all time high of $22 million. In 1970, the corporation reduced its debt by $2 million, increased its working capital by nearly $1.9 million, and paid out dividends slightly in excess of $1 million. Given these facts, it is difficult to comprehend Corinthian's need for access to the personnel resources and expertise of D&B. Generally, where a transferor claims a need for the resources of a transferee, without substantiating the basis for that need, a hearing is required to determine in what respect the existing owner's resources are not adequate to preserve or improve broadcast station operations. The Citizens Committee to preserve "Voice of the Arts" in Atlanta (WGKA) v. F.C.C., No. 23, 515 (D.C. Cir., October 30, 1970).
After considering how the above facts reflect on D&B's promise to augment the "quality" of Corinthian operations, it is worthwhile reflecting on Corinthian's argument that this merger is needed to give its shareholders an opportunity for investment growth without exposing their television stations to risk. Corinthian contends that undisclosed regulatory circumstances restrict its growth, that the company is too small to pursue a diversification program. In view of the corporation's profits and capital structure, this assertion would seem questionable. But, in any event, the Commission has no recognized communications policy of encouraging investment growth of broadcast shareholders, except as that growth may promote the policy of diversifying program sources or encourage program development. Since the [*764] Commission's adoption of the Prime Time Access Rule, the obligation of broadcast licensees to stimulate first-run quality program production has become a matter of critical priority. Although this obligation has always existed, recent developments within the broadcasting industry have sharpened it, especially with respect to licensees such as Corinthian who seemingly possess the resources essential to a program production enterprise. Considering the magnitude of Corinthian's capital resources, it is difficult to understand how its expansion is restricted in any way that makes sense to complementary broadcast and regulatory objectives. Corinthian's strong cash position, together with the manner in which it desires to improve the investment growth potential of shareholders has the effect of raising substantial questions concerning the propriety of the corporation's use of broadcast revenues for expansion in other business markets instead of devoting its ostensibly large resources to the program production and syndication fields.
The only explanation for D&B's failure or refusal to make definitive financial commitments to program production in areas of ascertained community needs, seems to rest in the combined interests of D&B and Corinthian to use broadcast revenues for the development and promotion of publication enterprises rather than for the enhancement of program service. Corinthian owns Standard Reference Library, Inc., a publisher of encyclopedias and dictionaries (Funk & Wagnells), which it acquired in 1968. According to Corinthian's 1970 Annual Statement, between 1969 and 1970 more than $1 million in broadcast revenues were invested in encyclopedia development. When the D&B-Corinthian merger was first announced (Broadcasting, December 8, 1969) C. Wrede Petersmeyer, the President of Corinthian, reportedly said that the enormous computer sophistication of D&B would be used by Corinthian "to pursue its goals in all phases of research." Petersmeyer was also reported as saying "the merger will aid Corinthian in developing encyclopedia for children." Advertising Age (December 8, 1969) reported Petersmeyer as stating that the merger would better enable Corinthian "to serve its TV viewers and further develop its activities in the reference book field." Moreover, Corinthianhs 1970 Annual Statement reported that, "During the past year the management of Standard was strengthened in several key areas. Progress has also been made in plans for additional products."
Not only do these statements appear as adversely reflecting on any promises for augmented broadcast service, but Corinthian's acknowledged progress in planning additional product development tends to cast doubt on its alleged inability to diversify business enterprises because of limited financial resources. Moreover, in all this, there is no assertion of any management policy of making any major financial commitments to expanded originating capacity for program production. Corinthian's financial statements indicate that its most substantial investment in broadcast programming involves purchases of slightly over $3 million in syndicated film packages of old movies which are no longer in theatrical distribution.
In the overall picture of profit motivation, it may be noted that between 1967 and 1968, Corinthian's major stockholder, John Hay Whitney, publicly sold nearly $33 million of his Corinthian securities. [*765] The merger with D&B will bring Corinthian shareholders in excess of $114 million in D&B securities, of which Whitney will receive approximately $44.7 million. When these facts are placed in perspective with the unusually high profits generated by Corinthian stations, the extremely low percentage of revenues devoted to programming and program production, the ostensibly poor record of performance in broadcasting news, public affairs and other programs, and the use of broadcast revenues in the development and promotion of publications and other products, there emerges a pattern of speculation for profit rather than of broadcast ownership and operation to serve the public. With all these facts of record, it is difficult to see how a hearing would not be warranted. Certainly, the existence of these material and substantial questions appears to inhibit the ability of the Commission to determine how the public interest will be served by the transfer. Under the circumstances, Section 309 of the Communications Act requires a hearing.
Finally, this transfer creates serious problems in terms of the impact of bank-broadcast stock holdings on the Commission's multiple ownership rules. Nine banks hold in excess of 30 percent of D&B's stock. That fact, however, gives only a partial glimpse of the interrelationship of bank investments and broadcast properties affected by this transfer. For example, the Mercantile Safe Deposit and Trust Company of Baltimore, Maryland, which has the sole or joint right to vote 3.26 percent of the shares of post-merger D&B stock, also votes 62 percent of the stock of A.S. Abell Co., which owns or controls the Baltimore Sun newspaper, WMAR-FM and TV (Baltimore, Maryland) and WBOC-AM-FM-TV (Salisbury, Maryland). In addition, the bank also owns and votes 1.65 percent of the stock of Rollins, Inc. the licensee of 7 AM, one FM, and three VHF stations. n1 Thus, after this merger is consummated, the Mercantile Bank will own over 1 percent interest in 8 VHF, 2 UHF, 8 AM, and 3 FM stations. This clearly violates the Commission's multiple ownership rules.
n1 Mercantile Safe Deposit attempts to remove this violation by agreeing not to vote as much as one percent of Rollins common stock. Even though the Commission has, in the past, waived its multiple ownership banking rule on the basis of such insulation of bank voting power, suffice it to say that existing FCC rules prohibit any bank ownership exceeding a one percent interest in more than the maximum permissible number of broadcast licenses.
Moreover, this picture appears to reflect only the tip of an iceberg that reaches down through a sea of bank trust departments and broadcast licensees. On the basis of information supplied the Commission by the applicants, it is difficult, if not impossible to determine, without a hearing, where banking interests leave off and broadcast control begins. For example, in a recent amendment filed by the applicants, the Commission was informed that two banks, additional to those previously reported, will hold more than one percent of D&B stock after the merger. Furthermore, examination of Commission records turns up two more instances of bank ownership of D&B stock and of bank ownership in other broadcast properties, not reported by the applicants, which seemingly will violate the multiple ownership rules.
For example, Bankers Trust Company has sole voting power over 278,900 shares (less than 3 percent) of the D&B stock. The other 642,319 shares held by it or its nominees are (a) maintained in various [*766] agency or custodial accounts, to be voted only in accord with the instructions of beneficial owners, or (b) are held in various trusts in which Bankers Trust is a co-trustee and therefore must join with others in reaching voting decisions. But what the applicants fail to inform the Commission is that Bankers Trust also holds over one percent of the stock of Taft Broadcasting Company which owns 17 licenses. Even though Bankers Trust represents it does not intend to control D&B management or policy and after merger will not in the aggregate vote, or give instructions to vote, as much as one percent of D&B's outstanding shares if such vote would contravene Commission rules, such cross-ownership raises a question of whether the D&B-Corinthian merger creates a community of banking interests between 22 stations held by Taft and Corinthian. This relationship would seem further aggravated by the overlapping signal contours of Taft's Cincinnati television stations and Corinthian's Indianapolis station.
Another bank-broadcast relationship not fully explained by the applicants concerns Northern Trust of Chicago. This bank is listed as owning over three percent of D&B's stock. Though the bank also claims it will not vote more than one percent of D&B's outstanding shares, it fails to inform the Commission that Northern Trust also owns approximately 21 percent of the stock of WICS-TV in Springfield, Illinois. This holding would therefore seem to produce a regional relationship of broadcast properties situated in Illinois, Indiana, and Ohio, involving WICS-TV and Northern Trust, D&B-Corinthian and Bankers Trust, and Taft and Bankers Trust.
Finally, Morgan Guaranty Trust Company, which holds over seven percent of D&B's stock, also possesses a concentration of voting power in 92 other broadcast licenses. This transfer will raise the sum of Morgan's holdings to 97 broadcast licenses, without at all reflecting the combinations held by other banking institutions whose investments in D&B exceed 30 percent of D&B's total outstanding stock. The Commission's multiple ownership rules prohibit any one bank from owning more than one percent in more than seven AM, seven FM, and seven TV stations. Consequently, this transfer application brings to light very obvious violations of Commission rules. Even though the Commission is conditioning the approval of the D&B-Corinthian merger upon the ultimate conclusion of a rulemaking proceeding in which these questions will be explored, that condition does not eliminate the presence of a current violation. Furthermore, the extent of bank ownership which surfaces with this merger presents a magnitude of bank ownership and interlocking directorates the like of which the Commission has never previously considered. To say the public interest may be served by such a situation is only tantamount to a conclusion that the situation itself is not of sufficient import to justify review. I cannot hold to that view; nor, as I have stated before, do I believe that our multiple ownership rules should be waived until at some future time the Commission may choose to resolve the dilemma.
I do not mean to prejudge the action the Commission should ultimately take with respect to bank holdings and relationships of this type. Nevertheless, until some decision is reached, it seems to me that [*767] the Commission should carefully scrutinize, through the hearing process, transfer applications which, as here, demonstrate so high a degree of overall banking concentration and so severely strain the multiple ownership rules.
For all of the above reasons, I find that I must dissent to this transfer.