Ted Turner's hostile bid to acquire CBS Inc. is now undergoing both regulatory and antitrust scrutiny by government agencies to determine whether the proposed transaction is in the public interest.
Federal Communications Commission sources and documents filed by Turner indicate that the Atlanta cable broadcaster would be forced to divest several CBS radio station holdings to satisfy FCC cross-ownership restrictions.
The Turner filing urged the FCC to "act expeditiously," citing the Turner Broadcasting System's "ability and determination to revitalize one of the major television broadcast enterprises in this country."
The filing urged the commission "to resist any effort to have its procedures be used to obstruct marketplace forces and thwart the will of the CBS Inc. stockholders."
One FCC commissioner, who did not want to be identified, said the FCC "absolutely" feels it should not be used as a "shark repellent" in hostile takeovers. "Shark repellent" is Wall Street's term for legal maneuvers to fend off hostile takeovers.
A recent FCC decision could be considered a regulatory precedent for hostile takeovers. In that case, Storer Communications Inc., supported by several congressmen, asked the FCC to prevent transfer of company control to a dissident group of shareholders who want to liquidate the company. The FCC said that if the dissidents are successful, it would not block that transfer.
The commissioner, who called Storer "a wrenching experience for everyone," said that nevertheless, "the politics of the people involved is not the concern of the FCC" so long as Turner meets broadcasting qualifications. Turner already meets those qualifications because he holds a broadcast license, said one FCC official.
The public will have 30 days to comment on the proposed takeover, and it will be at least 50 days before the FCC begins to act on the application, agency officials say.
Should Turner's hostile takover bid prove successful, CBS FM and AM radio stations in New York, Chicago, Los Angeles, Philadelphia, San Francisco and Boston would have to be sold. WCAU-TV in Philadephia would be sold or "swapped" by TBS to eliminate signal overlap between that station and WCBS-TV in New York.
Up until now, CBS has been allowed to "grandfather" its multiple holdings of radio and TV stations in the same communities because FCC rules forbidding such ownership were adopted after the network had made the purchases.
Turner also would sell its program syndication subsidiary, Turner Program Services Inc.
Sources close to CBS said Turner's ability to keep his WTBS Atlanta "superstation" may be in question because of FCC srutiny of cross-ownership of an independent television station and a network affiliate in the same city. CBS has an affiliate in Atlanta.
"Although there is no rule, the commission has raised that as a serious question," said the source who declined to be identified.
Though cable and TV station cross-ownership rules do not apply to Turner, who is a cable programmer but does not own cable systems, there could be "substantial concentration of media control," the source said. "There is no FCC rule per se, but the commission has general concentration of media control policies that may or may not apply ," he said.
Turner's Cable News Network and WTBS have programming beamed to cable stations via satellite, reaching 66.3 million subscribers combined.
TBS asked the commission for a one-year waiver to complete the transaction and two years' waiver to dispose of CBS and TBS assets to be in compliance with FCC rules.
Both the Federal Trade Commission and the Department of Justice are examining the antitrust implications of the proposed merger. Under Section 7 of the Clayton Act, those agencies are empowered to see whether such a merger would "unreasonably constrain competition in any one or more markets or whether it would adversely affect the ease of entry into any market," said an FTC spokeswoman.
"The two agencies will get together soon to decide which one will look into it," said Mark Sheehan, a Justice Department spokesman. "I'm almost certain it will be the Justice Department . Traditionally, we look at broadcast mergers. We're now looking at the ABC-Capital Cities merger."
The Justice Department said it can review the takeover bid for 30 days and, if it seeks additional information, delay the acquisition for another 20 days from the day the newly requested information is received. If Turner had made a cash tender offer for CBS, the waiting period would have dropped to only 15 days.
Neither Justice nor the FTC would comment on any other aspect of the filing by Turner and would not say if additional information would be needed to settle the antitrust concern.