Justice Officials Seek to Block Radio Merger

For the first time since a 1996 law set off more than 1,000 mergers among radio stations, the Justice Department sued on Thursday to block one of the deals: Chancellor Media Corp.’s $54-million acquisition of four New York stations.

In a complaint filed in U.S. District Court in New York, the department alleged that Chancellor’s deal with SFX Broadcasting Inc. to buy the Long Island stations, announced a year ago, would result in local businesses paying higher radio advertising prices, which would ultimately be passed on to consumers.

The Telecommunications Act of 1996 triggered rapid consolidation in the radio industry by relaxing Federal Communications Commission limits on the number of radio stations held by any one owner. More than 4,000 of the nation’s 11,000 radio stations have changed hands since the law was enacted.

Assistant Atty. Gen. Joel I. Klein has said there have been more than 1,000 mergers. Of these, 206 have been large enough to require the companies to notify the department’s antitrust division for automatic review.

The department is still investigating 15 deals, said Charles Biggio, senior counsel to Klein.

The government has objected to eight deals. In five, it reached settlements resolving competitive concerns--often by requiring that some stations be sold. Three other deals were restructured or abandoned without going to court.

The government alleged this deal would create a dominant Long Island radio group with more than 65% of the local radio advertising market.

SFX spokesman Tim Klahs said only that the lawsuit does not affect SFX’s larger, pending deal to sell its other radio interests to Capstar of New York and Hicks Muse of Dallas. A spokesman for Chancellor did not immediately return a telephone call seeking comment.

Chancellor and SFX are the two largest radio groups on Long Island. Chancellor, which already owns two stations, wants to acquire all four SFX stations there.

In return, SFX would get Chancellor’s two Jacksonville, Fla., stations, WAPE-FM and WFYV-FM, and $11 million. SFX owns four other Jacksonville stations.

The deal would end a daily competitive battle for radio advertising in Suffolk County between Chancellor’s WALK-FM and SFX’s WBLI-FM and WBAB-FM, the government said. These stations dominate key listener groups, especially adults ages 25 to 54, in the New York suburban county of 1.3 million residents.

“The parties were unwilling to restructure their transaction to keep WALK and WBAB and WBLI in separate hands,” Biggio told reporters.

The complaint quotes Chancellor executives as saying that the merger “will result in less competitive ‘undercutting’ ” and that “rates will increase as a result of [the] removal of competitive pressures.”

Chancellor, based in Irving, Texas, is the second-largest radio broadcaster in the nation, with 95 stations in 21 major markets. The company is a product of the recent combination of Evergreen Media Corp., Chancellor Broadcasting Co. and Viacom Inc.’s former radio group, which together had 1996 sales of more than $800 million.

SFX, which is based in New York City, owns or operates 85 radio stations in 23 metropolitan areas. It had 1996 revenue of $282 million.