A federal grand jury in Kansas City, Mo., is hearing evidence of alleged price fixing and collusion between all three network-affiliated television stations in the Joplin, Mo., and Pittsburg, Kan., markets. The probe could lead to an unprecedented across-the-board denial of the renewal applications of all three broadcast licenses.
Meanwhile, the three stations have had their license renewals delayed for up to 10 months by the Federal Communications Commission, which is conducting its own investigation into the same charges and a few more.
The basis of the FCC postponement is a 30-year-old, little-known policy statement that always the regulatory agency to deny renewal of a license because the station involved has either violated antitrust regulations, or merely acted anti-competitively without having been convicted of those charges.
The FCC probe reportedly began in November 1976, when the former sales manager for KODETV, the ABC affiliate, went to Washington to discuss various practices of the station with the FCC. He said the practices also were carried out at two other local outlets. KTVJ-TV, the CBS affiliate in Joplin and KOAM-TV the NBC affiliate in nearby Pittsburgh.
John T, Homes was sales manager for KODE-TV for several years, according to station sources, when he took early retirement in July, 1976. The sources said he had dispute with the new general manager, John Markward, shortly before his departure.
Holmes told the FCC that KODE-TV and probably both other local operators were quilty of collision, double-billing, "brokering time" practices which violate FCC policy, and other charges related to how advertising was sold.
Holmes would net comment on the case when reacehd by telephone at his home in Joplin.
While the FCC has with increasing frequency come down on stations guilty of double-billing and brokering time violations, this is the first case in which the commission is conducting its own antitrust investigation, according to agency officials.
Several months into the investigation, according to sources close to the probe, an FCC official approached a Justice Department Antitrust Division attorney with a "hypothetical situation" that was really a description of the allegations in the Joplin matter.
When the Justice lawyer was asked if the actions could be criminal violations, he reportedly said they probably did. Then he asked the FCC official to hand over the case.
The FCC aide did.In late summer, the Justice Department began its own investigation into the situation.
Executives of the three stations confirm that they are under investigation by [WORD ILLEGIBLE] agencies. They deny all [WORD ILLEGIBLE] and say they have compiled [WORD ILLEGIBLE] requests from the FCC and Justice for massive documentation of advertising charges to various clients.
"We have produced documents." said John Monica, an attorney for KOAM-TV. "We were asked first in October for documents concerning our billings for our eight largest advertisers , and we were asked for what we charged the same advertisers after the investigation began."
Monica said that to his knowledge all three station general managers have given statements to the FCC.
"I fear that the FCC will sit on this whole investigation and wait until Justice does something," Monica said. "Heaven knows when that will happen."
KODE-TV's Markward said the action "has caused us a lot of grief, and is eating us alive with legal fees."
He also said the parent company of KODE-TV, Gilmore Boradcasting Corp. - which also owns two other TV stations and five radio stations - has been prevented from making any new acquisitions until the matter is settled.
"We have no idea when that will happen," he said. "We haven't even seen anyone from the Justice Department out here in the field yet."
Justice Department officials will only say that they have an "active grand jury sittingin Missouri" looking into the matter. Privately, they say that Justice has direct jurisdication only in the area of restraint of trade and antitrust matter raised in this ease. The FCC has authority over the other issues.
"But we probably could get into the either areas in one way or another," said one official.
He said the FCC can deny a license renewal because of antitrust violations. Citing a public policy statement issued by the FCC in the late 1940's he said.
"While the actions of the applicant many not constitute an antitrust violation per se." he added, "the FCC could even take away a license just because the applicant acted in an anti-competitive manner."
A source at the FCC involved in the renewal process confirmed that while the FCC will not enforce antitrust rules, "it will look for the course of conduct by the applicant."
He said that in the past four years alone between 15 and 20 television licenses have not been renewed because of violations similar to those in this case, not including the antitrust allegations.
Among the allegations under investigation are:
Double-billing. This practice generally, involves fraudulent, inflated bills sent to advertisers.
Brokering time. In this case a station sells large chunks of advertising to a party that in turn sells that time to several advertisers. Generally, the middleman makes a profit because he has purchased time at a volume discount, and sells it at a higher rate. This practice is permitted by the FCC unless a station does not report it to the agency, or if the station fails to retain the right to reject advertising sold in this manner. The latter is not permitted because it takes the control of air time out of the hands of the licensed station.
Network clipping. This means that the local station is cutting off bits of network programming to insert local advertising.
Program-length commercials. This involves an advertiser's sponsorship of a program with a content so similar to the advertising that it can appear to be a full-length commercial.