Some of the biggest names in the TV industry have engaged in a conspiracy to drive up the price of local television advertising, according to a federal lawsuit filed Wednesday on behalf of advertisers nationwide.
The proposed class-action lawsuit, which targets Sinclair Broadcast Group, Tribune Media and four other firms, alleges that the companies violated the nation’s antitrust laws by colluding to fix the rates TV stations charge for advertising airtime. The suit blames the alleged collusion partly on recent decisions at the Federal Communications Commission, whose deregulatory approach to the broadcast industry allegedly contributed to media consolidation that encouraged illicit coordination.
The dwindling number of competitors in the broadcast market has not only given former rivals a greater chance to work together but also made it harder for newer rivals to challenge their dominance, the suit alleges.
“Instead of competing with each other on prices for advertising sales, as competitors normally do, Defendants and their co-conspirators shared proprietary information and conspired to fix prices and reduce competition in the market,” argues the suit, which was filed in the U.S. District Court for the Northern District of Illinois.
The remaining defendants are Gray Television, Hearst, Nexstar Media Group and Tegna. Sinclair and Tribune declined to comment for this report. The other four companies did not immediately respond to a request for comment.
The suit comes a week after the Wall Street Journal reported that the Justice Department had conducted an investigation into whether the companies had improperly coordinated to manipulate the price of TV advertising.
The FCC last year relaxed decades-old rules governing media ownership, lifting requirements on the number of independent stations that must remain in a market after a broadcast merger. It also voted to end a requirement that media companies operate a physical studio in the markets where they hold a license. FCC Chairman Ajit Pai said the moves were aimed at helping struggling broadcasters to survive economically; critics said they would lead to a decline in media diversity as more stations merged.
On Thursday, the FCC voted to approve a program designed to address the diversity issue. The program aims to establish “broadcast incubators” across the country that will essentially allow a media company in a given market to take a new or struggling station under its wing for a period of three years. “Successful implementation of the incubator program we adopt today will promote ownership diversity by fostering entry into the broadcasting sector by entrepreneurs and small businesses, including those owned by women and minorities,” the FCC said.
According to the FCC, at the end of the incubation period, the smaller broadcaster would be independent or on stronger footing and the established media company could seek a waiver that exempts it from agency rules limiting how many stations the company may own in that market.