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[Federal Register: November 28, 2003 (Volume 68, Number 229)]
[Notices]
[Page 66854-66873]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr28no03-94]
[[Page 66854]]
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DEPARTMENT OF JUSTICE
Antitrust Division
Response to Public Comments on the Proposed Final Judgment in
United States v. Univision Communications Inc.
Pursuant to the Antitrust Procedures and Penalties Act, 15 U.S.C.
16(b)-(h), the United States hereby publishes the two public comments
on the proposed Final Judgment in United States v. Univision
Communications Inc., Civil No. 1:03V00758, filed in the United States
District Court for the District of Colombia, together with the
responses of the United States to the comments. On March 26, 2003, the
United States filed a Complaint alleging that Univision Communications
Inc.'s proposed acquisition of Hispanic Broadcasting Corp. would
substantially lessen competition in the sale of advertising time on
Spanish-language radio stations in many geographic markets, in
violation of Section 7 of the Clayton Act. The proposed Final Judgment,
filed at the same time as the Complaint, requires Univision to exchange
its Entravision shares for a nonvoting equity interest, divest a
substantial portion of its ownership in Entravision, give up its seat
on Entravision's Board of Directors, eliminate certain rights Univision
has to veto important Entravision actions, and restrain certain conduct
that would interfere with the governance of Entravision's radio
business. The proposed Final Judgment particularly requires Univision,
presently owning approximately thirty percent of Entravision, to divest
down to fifteen-percent ownership within three years, and ten-percent
ownership within six years. Public comment was invited within the
statutory 60-day comment period. The public comments and the repsonses
of the United States thereto are hereby published in the Federal
Register, and shortly thereafter these documents will be attached to a
Certificate of Compliance with Provisions of the Antitrust Procedures
and Penalties Act and filed with the Court, together with a motion
urging the Court to enter the proposed Final Judgment. Copies of the
Complaint, the proposed Final Judgment, and the Competitive Impact
Statement are currently available for inspection in Room 200 of the
Antitrust Division, Department of Justice, 325 Seventh Street, NW.,
Washington, DC 20530 (telephone: 202-514-2481) and at the Clerk's
Office, United States District Court for the District of Columbia, 333
Constitution Avenue, NW., Washington, DC 20001. (The United State's
Certificate of Compliance with Provisions of the Antitrust Procedures
and Penalties Act will be made available at the same location shortly
after they are filed with the Court.) Copies of any of these materials
may be obtained upon request and payment of a copying fee.
J. Robert Kramer II,
Director of Operations, Antitrust Division.
In the United States District Court for the District of Columbia
Civil Action No. 1:03CV00758; Judge: Hon. Rosemary M. Collyer
United States of America, Plaintiff, v. Univision Communications Inc.,
and Hispanic Broadcasting Corporation, Defendants, Response to Public
Comments
Pursuant to the requirements of the Antitrust Procedures and
Penalties Act, 15 U.S.C. Sec. 16(b)-(h) (``Tunney Act''), the United
States hereby responds to the public comments received regarding the
proposed Final Judgment in this case. After careful consideration of
these comments, the United States continues to believe that the
proposed Final Judgment will provide an effective and appropriate
remedy for the antitrust violation alleged in the Complaint. The United
States will move the Court for entry of the proposed Final Judgment
after the public comments and this Response have been published in the
Federal Register, pursuant to 15 U.S.C. 16(d).
On March 26, 2003, the United States filed the Complaint in this
matter alleging that the proposed acquisition of Hispanic Broadcasting
Corporation (``HBC'') by Univision Communications, Inc. (``Univision'')
would violate Section 7 of the Clayton Act, as amended, 15 U.S.C. 18.
Simultaneously with the filing of the complaint, the United States
filed a proposed Final Judgment and a Stipulation signed by the United
States and the defendants consenting to the entry of the proposed Final
Judgment after compliance with the requirements of the Tunney Act.
Pursuant to those requirements, the United States filed a Competitive
Impact Statement (``CIS'') in this Court on May 7, 2003; published the
proposed Final Judgment and CIS in the Federal Register on May 21,
2003; and published a summary of the terms of the proposed Final
Judgment and CIS, together with directions for the submission of
written comments relating to the proposed Final Judgment, in the
Washington Post for seven days on May 23, 2003, through May 29, 2003.
The 60-day period for public comments, during which two comments were
received as described below, expired on July 23, 2003.\1\
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\1\ On September 22, 2003, the Federal Communications Commission
announced that it granted Univision's and HBC's applications for
transfer of control that were required in order for the transaction
to proceed. See Memorandum Opinion and Order, FCC 03-218 (located at
http://hraunfoss.fcc.gov/edocs&_public/attachmatch/FCC-03-218A1.pdf.
). Univision and HBC closed their merger the same day.
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I. Background
As explained more fully in the Complaint and CIS, this transaction
raised competitive concerns relating to the sale of advertising time on
Spanish-language radio stations in several geographic markets. HBC is
the nation's largest Spanish-language radio broadcaster. Univision, the
largest Spanish-language media company in the United States, owns a
significant equity interest, and possesses governance rights, in
Entravision Communications Corporation (``Entravision''), another
Spanish-language media company that is HBC's principal competitor in
Spanish-language radio in many markets. The Complaint alleges that, due
to Univision's substantial equity interest and governance rights in
Entravision, Univision's proposed acquisition of HBC would
substantially lessen competition in provision of Spanish-language radio
advertising time to a significant number of advertisers in several
geographic markets in the United States.
The proposed Final Judgment, if entered, would require Univision to
reduce its equity interest in Entravision to 15 percent of the
outstanding shares within three years from the filing of the proposed
decree and to 10 percent within six years of such filing. The proposed
decree would also require Univision to convert all of its Entravision
equity into a nonvoting class of stock; to relinquish its right to
place directors on Entravision's Board of Directors; to eliminate
certain of Univision's rights to veto important Entravision actions;
and to refrain from certain conduct that would interfere with the
governance of Entravision's radio business.
Entry of the proposed Final Judgment would terminate this action,
except that the Court would retain jurisdiction to construe, modify, or
enforce the provisions of the proposed Final Judgment and to punish
violations thereof.
[[Page 66855]]
II. Legal Standard Governing the Court's Public Interest Determination
Upon the publication of the public comments and this Response, the
United States will have fully complied with the Tunney Act and will
move the Court for entry of the proposed Final Judgment as being ``in
the public interest.'' 15 U.S.C. 16(e). The Court, in making its public
interest determination, should apply to deferential standard and should
withhold its approval only under limited conditions. Specifically, the
Court should review the proposed Final Judgment in light of the
violations charged in the complaint and ``withhold approval only if any
of the terms appear ambiguous, if the enforcement mechanism is
inadequate, if third parties will be positively injured, or if the
decree otherwise makes `a mockery of judicial power.' '' Mass. School
of Law v. United States, 118 F.3d 776, 783 (D.C. Cir. 1997) (quoting
United States v. Microsoft Corp., 56 F.3d 1448, 1462 (D.C. Cir. 1995)).
It is not proper during a Tunney Act review ``to reach beyond the
complaint to evaluate claims that the government did not make and to
inquire as to why they were not made.'' Microsoft, 56 F.3d at 1459; see
also United States v. Archer-Daniels-Midland Co., 272 F. Supp. 2d 1, 6-
7 (D.D.C. 2003) (rejecting argument that court should consider effects
in markets other than those raised in the complaint); United States v.
Pearson PLC, 55 F. Supp. 2d 43, 45 (D.D.C. 1999) (noting that a court
should not ``base its public interest determination on antitrust
concerns in markets other than those alleged in the government's
complaint''). Because ``[t]he court's authority to review the decree
depends entirely on the government's exercising its prosecutorial
discretion by bringing a case in the first place,''\2\ it follows that
``the court is only authorized to review the decree itself,'' and not
to ``effectively redraft the complaint'' to inquire into other matters
the United States might have but did not pursue. Microsoft, 56 F.3d at
1459-60; see also United States v. Western Elec. Co., 993 F.2d 1572,
1577 (DC Cir. 1993) (noting that a Tunney Act proceeding does not
permit ``de novo determination of facts and issues'' because ``[t]he
balancing of competing social and political interests affected by a
proposed antitrust decree must be left, in the first instance, to the
discretion of the Attorney General'' (citations omitted)).
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\2\ It is the United States' responsibility to investigate a
transaction and decide what allegations to raise in any challenge it
may bring. See Heckler v. Chaney, 470 U.S. 821, 831-32 (1985)
(``[A]n agency's decision not to prosecute or enforce, whether
through civil or criminal process, is generally committed to an
agency's absolute discretion.'').
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Moreover, the United States is entitled to ``due respect''
concerning its ``prediction as to the effect of proposed remedies, its
perception of the market structure, and its view of the nature of the
case.'' Archer-Daniels-Midland Co., 272 F. Supp. 2d at 6 (citing
Microsoft, 56 F.3d at 1461).
III. Summary of Public Comments
The United States received comments from two entities, the American
Antitrust Institute (``AAI,'' comment attached as Exhibit 1) and
Spanish Broadcasting System, Inc. (``SBS,'' comment attached as Exhibit
2).
AAI takes the position that the United States' CIS fails to address
and evaluate ``the consequences of this merger in conventional terms in
an overall market consisting of Spanish-language media, examining such
traditional criteria as advertising effects [and] the consumer interest
in diversity of sources of political and cultural information.'' AAI
cmt. at 1. AAI also states that the United States' CIS fails to explain
why the proposed Final Judgment does not require the elimination of all
rights Univision currently possesses in Entravision and the divestiture
of all stock Univision holds in Entravision. AAI cmt. at 1 n.2. These
points are similar to SBS's comments on these issues and are addressed
below. Additionally, AAI argues that the Division should have
considered indicia of harm to non-price competition, such as quality
and innovation.
SBS, a Spanish-language radio company that competes in many markets
with HBC and Entravision, states that the United States should have
alleged harm in its Complaint based on purported effects of the
transaction on a ``Spanish-language broadcasting market.'' SBS cmt. at
1-2. SBS further claims that the transaction will increase Univision's
incentives (1) to refuse to deal with or discriminate against Spanish-
language radio competitors who seek to advertise through Univision and
(2) to force advertisers who wish to advertise through both radio and
television to purchase time from both Univision and HBC. Id. at 3. In
addition, SBS argues that the United States' remedy fails to solve the
competitive concerns in the Spanish-language radio markets raised in
the Complaint because, according to SBS, Univision will be able to
exercise undue influence over Entravision. Id. at 1, 4-6.
IV. The United States' Response to Specific Comments
Because both comments raise the general issue of whether the
effects of the merger should be analyzed in light of an ``overall''
Spanish-language media market, the United States will first respond to
that issue. It will then respond to the specific points AAI and SBS
raised concerning whether the remedy addresses the competitive harm
raised in the Complaint.
A. Allegations Not Raised in the Compliant Are Irrelevant to Whether
the Proposed Final Judgment Is in the Public Interest
1. SBS's Proposed Market and Alleged Harm Are Extraneous to the
Competitive Issues Raised in the Complaint
The Complaint alleges that the relevant market consists of the
provision of advertising time on Spanish-language radio stations to the
significant number of advertisers that consider Spanish-language radio
advertising to be a particularly effective advertising medium. See
Complaint ]]12-15. SBS, however, takes the position that the complaint
should have raised additional allegations of harm based on purported
effects in a combined Spanish-language radio and television market. SBS
cmt. at 1-2.
The Complaint's market definition does not extend to the issues
raised by SBS, nor should it. The market definition analysis in the
Complaint properly begins by examining how advertisers individually
negotiate transactions with radio broadcasters such as Entravision and
HBC. The resulting price for advertising time reflects the
circumstances of these individual negotiations and the preferences of
each advertiser. The Complaint's market definition reflects these
individualized negotiations by looking at the options available to
individual advertisers. The Complaint alleges that a significant number
of advertisers exist who do not have reasonable alternatives to
advertising on Spanish-language radio; in other words, these
advertisers cannot effectively switch to other media in the face of a
small but significant increase in the price of advertising time on
Spanish-language radio. This set of advertisers forms the relevant
market alleged in the Complaint.
SBS does not appear to take issue with the theoretical framework
underlying the Complaint's market definition. Rather, it alleges that
there is another market to consider; namely, a purported market
consisting of a set of advertisers that are dependent on
[[Page 66856]]
Spanish-language television and radio. The Complaint, however, makes no
such factual allegation. The proposed market differs significantly from
the one alleged in the Complaint and would require markedly different
supporting facts to be justified. Moreover, market definition is but
one step toward the ultimate goal of determining competitive effects.
The Complaint alleges that the transaction would likely cause
anticompetitive effects with regard to Spanish-language radio
(Complaint ]] 24-27); it makes no such allegations regarding a combined
television and radio market. So, SBS asks not only that the court
redraft the complaint to include an additional market but also that the
court impose a competitive effects analysis based on that new market to
find cognizable harm.
As discussed above, the United States is entitled to deference as
to the case it brings, and, as Microsoft makes clear, it is not proper
during a Tunney Act review ``to each beyond the complaint to evaluate
claims that the government did not make and to inquire as to why they
were not made.'' Microsoft, 56 F.3d at 1459. The Tunney Act does not
authorize the Court to consider allegations not raised in the Complaint
based on concerns raised by a member of the public. Accordingly, SBS's
suggestion that the Complaint is defective for failing to allege harm
in a combined Spanish-language television and radio market should be
rejected as a matter of law.
The CIS Properly Addresses the Market Effects Relevant to the
Allegations in the Complaint
AAI takes the position that the United States has not satisfied its
requirements under the Tunney Act because the CIS fails to identify the
competitive effects of the transaction in an ``overall'' Spanish-
language media market and fails to justify the United States' decision
not to challenge the transaction based on those purported effects. This
position is not valid. Not only is the Court's review limited to the
case actually brought by the United States, there is no requirement
that the United States disclose its decision-making as to cases it
chooses not to initiate. Rather, the Tunney Act provides that the
United States must inform the public about the case it did initiate and
explain how the proposed decree serves to resolve the competitive
effects alleged in the Complaint.
The purpose of a CIS is to provide the public with ``basic data
about the decree'' to allow for informed comment. See generally United
States v. Microsoft Corp., 215 F. Supp. 2d 1, 14-15 (D.D.C. 2002)
(describing legislative history relating to CIS) (quoting 119 Cong.
Rec. at 3452 (1973) (statement of Senator Tunney)). To that end, the
Tunney Act provides that the CIS shall ``recite'' the following:
(1) The nature and purpose of the proceeding;
(2) A description of the practices or events giving rise to the
alleged violation of the antitrust laws;
(3) An explanation of the proposal for a consent judgment,
including an explanation of any unusual circumstances giving rise to
such proposal or any provision contained therein, relief to be obtained
thereby, and the anticipated effects on competition of such relief;
(4) The remedies available to potential private plaintiffs damages
by the alleged violation in the event that such proposal for the
consent judgment is entered in such proceeding;
(5) A description of the procedures available for modification of
such proposal; and
(6) A description and evaluation of alternatives to such proposal
actually considered by the United States.
15 U.S.C. 16(b). The United States' CIS has satisfied all of these
requirements. More specifically, the CIS explains the nature and
purpose of the proceeding (at 1-3), describes the events that gave rise
to the alleged violation of the antitrust law (at 3-9), explains the
proposed Final Judgment (at 9-15), explains the remedies available to
potential private litigants (at 15), explains the procedures available
for modifying the proposed Final Judgment (at 15-16), and describes and
evaluates alternatives to the proposed Final Judgment (at 16-17). There
is simply no requirement that the Government identify purported effects
it did not allege in the Complaint or explain why it did not make
certain allegations in the Complaint. Accordingly, AAI's challenge to
the sufficiency of the CIS fails.
3. The Government's Investigation Did Not Demonstrate the Likelihood of
Substantial Harm in an ``Overall'' Spanish-Language Media Market
Although the United States has no legal obligation to address
matters raised in the Complaint, we note that the United States
conducted an extensive inquiry into the issue of whether the
combination of Univision's Spanish-language television stations with
HBC's Spanish-language radio stations in geographic regions where both
are located was likely to cause significant anticompetitive effects.
The inquiry included numerous interviews of a wide range of advertisers
and review of over a million pages of documents provided by the
defendants and other entities. In the end, the evidence did not support
the claims proffered by the comments.
a. The evidence did not justify a combined media market for
advertisers. The United States has traditionally treated radio and
television as separate antitrust markets. Past investigations involving
general-market (English-language) media mergers revealed that few
advertisers consider the two media to be close substitutes; rather,
most advertisers viewed the two media as separate or complementary
products given the qualitative differences between the two media.\3\ In
examining whether this ``separate market'' conclusion applied in this
transaction, the United States recognized that Univision has a strong
presence in Spanish-language television and that, in certain geographic
markets, there are a limited number of other Spanish-language
television stations with ratings that would be attractive to
advertisers trying to reach Spanish-language viewers. Nevertheless, the
evidence garnered in this investigation showed the same qualitative
differences between television and radio that exist for general-market
advertisers also exist for Spanish-language advertisers. In the end,
the investigation did not produce sufficient evidence to support the
proposition that a significant number of advertisers considered
Spanish-language television and Spanish-language radio to be
sufficiently interchangeable to support the ``combined'' market
proposed by the comments.\4\
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\3\ See, e.g., Complaint ]] 11-14, United States v. Clear
Channel Communications, No. 1:00CV02063 (D.D.C. filed Aug. 29,
2000); Complaint ]] 34-41, United States v. Chancellor Media
Company, Inc., No. CV-97-496 (E.D. N.Y. filed Nov. 6, 1997);
Complaint ] 12, United States v. EZ Communications, Inc., No.
1:97CV00406 (D.D.C. filed Feb. 27, 1997).
\4\ SBS's submission does not provide a basis to establish a
combined Spanish-language television and radio market. The letters
that SBS attached to its comment as Exhibit A for the most part
discuss how certain advertisers depend on Spanish-language media (a
point with which the United States does not disagree). Only two of
the letters, however, discuss the interchangeability of Spanish-
language television and radio (May 27, 2003 letter from Castor A.
Fernandez; May 27, 2003 letter from Caballero TV & Cable sales); the
rest are silent on the issue.
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b. The United States considered non price competition. AAI also
argues that the United States should examine indicia of harm other than
price, such as quality and innovation. AAI cmt. at 4-5. The United
States, in fact, considered such indicia during this
[[Page 66857]]
investigation. In this case, the market is comprised of the competitive
alternatives for certain advertisers seeking to purchase commercial
time on Spanish-language radio stations. Market participants compete on
the basis of both price and service (or ``quality'' or ``innovation'').
See, e.g., Complaint ] 14 (relevant product market defined in terms of
options available to certain advertisers facing ``a small but
significant increase in the price of advertising time on Spanish-
language radio, or a reduction in the value of services provided'')
(emphasis added). As the Complaint and CIS state, Entravision and HBC
heavily promote their stations against each other in an effort to gain
high ratings; they program and format their stations in an effort to
attract listeners away from each other; they aggressively seek to
acquire stations; and they closely monitor each other's competitive
positions. Complaint ] 19; CIS at 6. As explained in the CIS, the goal
of the proposed Final Judgment is to protect such vigorous price and
nonprice competition between Entravision and HBC by foreclosing the
ability of a combined Univision/HBC to improperly influence
Entravision's strategic decision making with regard to its radio
business. See CIS at 9-11. Contrary to AAI's assumption, the United
States considered the many ways in which advertisers benefit from
competition--not just price competition--in crafting its remedy.
c. The consideration of political and cultural viewpoints are
extraneous to antitrust enforcement. AAI also asserts that the United
States should take into account under its antitrust analysis ``consumer
interest in diversity of sources of political and cultural
information'' within a combined Spanish-language television and radio
market. AAI cmt. at 1, 3-4. It is not the role of the United States to
use the antitrust laws to regulate actual content or to establish
quotas for the types of programming that media stations must broadcast.
Accordingly, we do not seek to ensure in the context of a merger review
that media companies provide a balance of political views or a proper
mix of cultural issues as part of their programming. The United States
does seek to ensure that content is determined in a competitive
marketplace, however. The relevant product identified in the Complaint
is the provision of advertising time on Spanish-language radio
stations; the customer is an advertiser purchasing that time. In order
to supply this product, media stations compete to gain audience
ratings, as it is audience access that is being sold to the
advertisers. That competition benefits advertisers as discussed above.
It also benefits individual audience members (listeners of radio
stations) because stations will compete for their attention by offering
high quality content. In this way, the relief in the Final Judgment
that protects advertising competition also serves to protect individual
audience members by maintaining vigorous competition between the
Spanish-language radio stations owned by Univision/HBC and those owned
by Entravision.
d. The allegation that Univision may refuse to deal with certain
advertisers or impose tying arrangements does not warrant condemning
the transaction. SBS alleges that the merger will provide Univision an
enhanced incentive to refuse to deal with or discriminate against
Spanish-language radio competitors who seek to advertise on Univision
and will also provide Univision the ability to ``tie'' radio and
television advertising time for advertisers who seek to use both
mediums. (SBS Cmt. at 3). The United States did not find evidence upon
which to base a cause of action pursuant to SBS's theory. If Univision
engages in the alleged conduct in the future, and if the conduct
satisfies the requirements of an antitrust violation, then the United
States (or a private plaintiff with standing) could challenge the
conduct at that time. The mere speculation that Univision will violate
the antitrust laws, however, does not justify enjoining this
transaction.
B. SBS's Assertions That the Proposed Final Judgment Will Not Remedy
the Competitive Concerns Raised in the Complaint Are Unfounded
SBS asserts that the remedy will not address the competitive harms
raised in the Complaint because Univision will still have the ability
to improperly influence Entravision's actions to the detriment of radio
competition between Entravision and Univision/HBC. Specifically, SBS
contends that (1) the existence of the television affiliation agreement
between Univision and Entravision will cause Entravision to mitigate
its radio competition with a combined Univision/HBC; (2) Univision's
continued retention of limited shareholder ``veto'' rights in
Entravision might foreclose competition-enhancing transactions; (3) the
time period to complete the stock divestitures called for in the
proposed Final Judgment is too long; and (4) Univision's ability to
hold 10 percent of Entravision's stock will cause Univision/HBC to
compete less aggressively against Entravision. SBS cmt. at 1, 4-6.\5\
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\5\ As noted above, AAI asserts that the CIS fails to explain
why Univision was not forced to relinquish all its shareholder
``veto'' rights in Entravision and to divest all its Entravision
equity. AAI cmt. at 1 n.2. These points are addressed in this
response to SBS's comments.
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Contrary to SBS's assertions, the proposed Final Judgment will
preserve competition between Entravision and HBC by restricting
Univision's ability to control or influence Entravision's radio
business and by significantly reducing Univision's equity stake in
Entravision. See CIS at 9-13 (describing specific means by which the
proposed Final Judgment will preserve competition).
Addressing SBS's first contention, as stated in the CIS, Univision
and Entravision have a long-standing television relationship in which
Entravision broadcasts Univision programming on television stations
owned by Entravision. This relationship is embodied in a pre-existing,
long-term affiliation agreement that assigns rights and
responsibilities to both parties and also provides for Univision to act
as Entravision's national sales representative for television
advertising. In addition to the fact that this vertical integration may
yield certain efficiencies and consumer benefits, there is nothing in
this affiliation agreement that allows Univision to control any
Entravision radio decision, including decisions regarding the
acquisition of radio stations. Moreover, the decree itself mandates
that the two companies act as independent entities and there s no
reason to believe that Univision will violate the terms of the decree
(and thereby subject itself to contempt of court proceedings) by using
its television relationship to influence any Entravision strategic
decision. The Division found no evidence to suggest that the mere fact
that a television affiliation agreement exists between them enables
Univision to unduly influence Entravision's decisions with respect to
its radio business, the only area in which the combined Univision/HBC
will compete with Entravision. Finally, Entravision has every incentive
to operate its radio stations in a fully competitive manner.
As to SBS's second contention, although Univision will maintain a
few limited governance rights in Entravision that it held prior to the
contemplation of this merger, the proposed Final Judgment eliminates
Univision's ability to exercise these rights over Entravision radio
decisions. The rights that are retained relate to the two entities'
television relationship, which is not a basis of concern alleged in the
[[Page 66858]]
Complaint. Univision will retain a modified right to veto a merger or
transfer of ownership of Entravision. Although this right does impact
ultimate ownership of Entravision, it cannot be used to veto or
influence day-to-day decisions relating to radio competition or
strategic decisions such as the buying or selling of individual radio
stations.
With respect to SBS's third contention, while the United States
traditionally requires defendants to divest business assets as
expeditiously as possible to maintain their value and ongoing
capabilities, the relief sought here is for divestiture of stock, the
retention of which does not raise the same spoliation concerns as the
retention of business assets raises. Moreover, based on our
investigation, we concluded that a forced divestiture of equity within
a short amount of time could cause material hardship to Entravision's
vitality as a significant competitor (for example, a ``fire-sale'' of
Univision's stock holdings in Entravision could depress Entravision's
stock price to the point that it would not be able to issue equity to
fund potential acquisitions). Such hardship should be avoided or
minimized if at all possible so as to maintain Entravision as a strong
competitor to the unified Univision/HBC. The time period relfects a
balancing designed to minimize the potential harms to competition that
might arise from a divestiture that proceeds either too slowly or too
rapidly.
Finally, responding to SBS's fourth contention, under the
circumstances of this case, Univision's ability to hold no more than 10
percent of Entravision's equity will not give it control or even
significant influence over Entravision's business decisions. The decree
significantly restrains Univision's ability to participate in
Entravision's governance. For example, Univision will not be allowed:
To suggest or nominate any candidate for Entravision's board of
directors; to have Univision employees serve as Entravision employees;
to participate in any Entravision board of directors meeting ; to vote
its equity; and to have access to any of Entravision's competitively
sensitive information. See Final Judgment, Section VI. Moreover,
Univision's reduced equity stake in Entravision is not sufficiently
large to affect competition between them given the market structure of
the relevant geographic markets at issue.\6\
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\6\ Cf. Archer-Daniels-Midland, 272 F. Supp. 2d at 8 (crediting
the Government's statement in Tunney Act proceeding that factual
investigation showed that two companies operated as independent
competitors notwithstanding one company's partial equity ownership
in the other).
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V. Conclusion
After careful consideration of these public comments, the United
States has concluded that entry of the Proposed Final Judgment will
provide an effective and appropriate remedy for the antitrust violation
alleged in the Complaint and is, therefore, in the public interest.
Pursuant to Section 16(d) of the Tunney Act, the United States is
submitting these public comments and this Response to the Federal
Register for publication. After these comments and this Response are
published in the Federal Register, the United States will move this
Court to enter the Proposed Final Judgment.
Dated this 31st day of October, 2003.
Respectfully submitted,
------/s/----
William H. Stallings,
Litigation III Section, Antitrust Division, United States Department
of Justice, 325 7th Street, NW., Suite 300, Washington, DC 20530.
Certificate of Service
The undersigned certifies that a copy of the foregoing Response to
Public Comments was served on the following counsel, by electronic mail
in PDF format, this 31st day of October, 2003:
John M. Taladay, Howerey, Simon, Arnold & White L.L.P., 1299
Pennsylvania Avenue, NW., Washington, DC 20004-2402;
Neil W. Imus, Vinson & Elkins L.L.P., The Willard Office Building, 1455
Pennsylvania Avenue, NW., Washington, DC 20004-1008;
and on the following entities by facsimile and U.S. Mail, on this same
date:
Albert A. Foer, The American Antitrust Institute, 219 Ellicott Street,
NW., Washington, DC 20008, (202) 276-6002 (phone), (202) 966-8711
(facsimile);
Claudia R. Higgins, Counsel for Spanish Broadcasting Systems, Kaye
Scholer LLP, 901 15th Street, NW., Suite 1100, Washington, DC 20005,
(202) 682-3653 (phone), (202) 682-3580 (facsimile).
------/s/------------------------
William H. Stallings
June 12, 2003
James R. Wade
Chief, Litigation III Section, Antitrust Division, United States
Dept. of Justice, 325 7th Street, N.W., Suite 300, Washington, DC
20530
Ce: Chairman Michael Powell, Federal Communications Commission
Re: U.S. v. Univision Communications, Civ. Action No. 1:03CV00758
Dear Mr. Wade: These constitute the Tunney Act comments of the
American Antitrust Institute (``AAI'') in regard to the acquisition
of Hispanic Broadcasting Corporation (``HBC'') by Univision
Communications Inc. (``Univision'').\1\
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\1\ The AAI is an independent 501(c)(3) research, education, and
advocacy organization described at http://www.antitrustinstitute.org.
---------------------------------------------------------------------------
The Competitive Impact Statement (``CIS'') in this case appears
to reflect an unduly narrow interpretation of the Clayton Act. We
have only minor quarrels with the standard analysis embodied in the
CIS insofar as it identifies horizontal overlaps in the Spanish-
language radio industry and seeks to eliminate these overlaps
through divestitures.\2\ Our principal concern is with what the CIS
fails to address. It should evaluate the consequences of this merger
in conventional terms in an overall market consisting of Spanish-
language media, examining such traditional criteria as advertising
effects. In addition, it should evaluate the consumer interest in
diversity of sources of political and cultural information within
this more general market.
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\2\ For example, we are puzzled by the CIS's failure to explain
why the Proposed Final Judgment does not require elimination of all
shareholder rights that Univision currently possesses in Entravision
and for failing to explain why it allows Univision to retain any
stock in Entravision. If these are simply the best compromises the
Division could get, why not say so?
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I. The CIS Ignores the Elephant in the Room
The CIS states that HBC is the nation's largest Spanish-language
radio broadcaster and that Univision is the largest Spanish-language
media company in the U.S.
Univision is described as having two Spanish-language broadcast
networks, Univision and Telefutura, one cable channel, Galavision,
and several other Spanish-language media operations, including
Internet sites and services, music recording, distribution, and
publishing. Univision also has a 30-percent equity share in
Entravision, which owns or operates 55 mostly-Spanish radio stations
and 49 television stations that broadcast Univision programming. We
are not informed of Univision's market share in Spanish-language
television.
HBC owns or operates more than 60 radio stations, virtually all
broadcasting in Spanish. We are not informed of HBC's market share
in Spanish-language radio. And, of course, we are not informed of
market shares in any combined Spanish-language media market.
The Complaint is limited to the provision of advertising time on
Spanish-language radio stations to advertisers that consider
Spanish-language radio to be a particularly effective medium. This
is the only product market deemed relevant. Six metropolitan areas
are designated as the relevant geographic markets.
The ``elephant in the room'' whose presence has been mentioned
in the CIS but given no antitrust importance, is television. We
recognize that the Antitrust Division has traditionally treated
radio and television as
[[Page 66859]]
separate markets, in that there are so many sources of information
for English-speakers that diversity of sources has not appeared to
rise to an antitrust concern. But here we are potentially face with
a different situation. Should television and radio directed at a
Spanish-speaking audience be deemed a relevant market, not on the
basis of competition for advertising but on the basis of competition
for the consumer's attention? Even though the merger, after the
divestiture of overlap radio markets, will arguably not increase
concentration in either the television or the radio market, will it
reduce in a significant way the diversity of sources of political
and cultural information available to the Spanish-speaking consumer?
This also raises the question of the role of other aspects of
Spanish-language media, such as newspaper publishing and the
Internet, which are not discussed in the CIS. An appropriate larger
Spanish-language market should be analyzed not only in traditional
(advertising) terms but also in terms of diversity of content
sources.\3\
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\3\ It is true that for much of radio and TV, the consumer is
not directly charged for consuming the product, although higher
advertising costs may be passed on to the consumer in product prices
and the consumer has opportunity costs that represent a kind of
price to be paid for consumption. Nonetheless, producers of, e.g.,
news, are in competition with one another not only to gain
advertisers, but to gain the consumer's business. Compare this with
doctors who compete with one another for their patient's business,
even though the medical bill may be paid by a third party. Would not
the importance of consumer choice in medical care justify an
antitrust case if the only two medical practices in a community were
to merge, even if the merger would be guaranteed by the doctors not
to affect the fees charged to health insurers?
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II. The Hypothetical of the Dominating Voice
Consider the following hypothetical. There is a substantial
group of Americans who only speak Spanish and whose sources of
information are limited to Spanish-speaking TV, Spanish-speaking
radio, and Spanish-speaking newspapers. A single corporation by
acquisition gains control over all three media. The head of that
corporation would be in the position to wield enormous political and
economic influence by determining what the Spanish-speaking
community will know and believe. He or she could determine what
political candidates will gain exposure to the Spanish-speaking
electorate and whether that exposure will be positive, negative, or
neutral. Being able to sway a substantial part of the Hispanic vote
could determine the outcome of local, state, and national elections
and the owner of this political power would be in position to make
deals with a political party and with an Administration. The same
corporation could dramatically influence within the Spanish-speaking
community which cultural trends, products and services will be
ignored, denigrated or positively portrayed, thereby having a
significant impact on the economy. This is the Hypothetical of a
Dominating Voice.
Are the assumptions of this hypothetical far removed from the
reality of the present acquisition?\4\ Aside from the distinction
that the present merger does not involve newspapers, one can not
tell from the CIS because the implications of putting the leading
Hispanic radio and TV stations under the same corporate control is
not addressed. In the section on Alternatives to the Proposed Final
Judgment, we are only told that the Department considered a full
trial on the merits and a proposal by the defendants for placing
Entravision stock into a long-term trust.
---------------------------------------------------------------------------
\4\ According to various sources, at least 9% of Hispanics do
not speak English at all, and at least 15% do not speak the language
well. Spanish is said to be the language most frequently spoken by
nearly 75% of adults in the top ten Hispanic metropolitan areas. If
these figures are approximately correct, there appears to be reason
to believe that at least a significant section of the Spanish-
speaking community in the U.S. is highly dependent on information it
receives in Spanish and that English is in these situations an
inadequate substitute. There are also studies demonstrating that
commercial information conveyed in Spanish is far more persuasive to
this group than information conveyed in English, even among those
who are bilingual. Arguably, the same would be true of political
information.
---------------------------------------------------------------------------
Having advised the public that the leading Spanish-language TV
conglomerate was acquiring the leading Spanish-language radio
company, the DOJ has the Tunney Act obligation to explain why it has
made the determination that this highly suggestive scenario is of no
antitrust concern. The fact that there are relevant antitrust
markets for Hispanic radio and Hispanic TV does not perclude the
possibility that in certain circumstances there may also be a larger
relevant antitrust market, depending on what types of
anticompetitive effects one is concerned about. There is no
inconsistency in being concerned both with advertising rates in
radio markets and diversity of producers/editors of content in a
more general market for information or specifics categories of
information.
Let us be more precise about what information is lacking.
1. What proportion of Spanish-speaking consumers in the U.S. are
completely or highly dependent upon Spanish-language sources of
information? (Call this the ``highly dependent consumer market.'')
2. What proportion of the highly dependent consumer market pre-
and post-merger depend on the merging parties as a principal source
of information?
3. What options apart from Univision and HBC are available to
the highly dependent consumer market, pre- and post-merger?
4. Using a variety of measures (e.g., advertising dollars,
number of message recipients, contact hours), how substantial are
these options in comparison to Univision and HBC? What are the
relevant market shares and HHI's?
We recognize that these are not easy questions to answer, and
that the answers will depend on the assumptions made about such
matters as the definition of `highly dependent'. Nevertheless, with
answers to these questions and explicitness about the assumptions
used, one can begin to evaluate whether the Hypothesis of a
Dominating Voice represents a realistic threat.
III. Protecting the Public Interest Requires Analysis of the Impact of
This Acquisition on Consumer Choice
Based on what is said in the CIS, there is no evidence that the
DOJ has considered anything other than the probability of short-term
price increases. Why no discussion of such other traditional
antitrust concerns as the effect on consumer choice? \5\ There have
been many antitrust cases in which non-price factors were
considered.\6\ As one example, in United States v. Philadelphia
National Bank, the Court expressed a concern with possible adverse
effects of a bank merger on ``price, variety of credit arrangements,
convenience of location, attractiveness of physical surroundings,
credit information, investment advice, service charges, personal
accommodations, advertising, miscellaneous special and extra
services* * *'' \7\
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\5\ Although the Federal Communications Commission has the
opportunity to stop this merger on ``public interest'' grounds, this
possibility would not relieve the Department of Justice from fully
considering legitimate antitrust theories of competitive harm that
coincidentally have the benefit of protecting First Amendment
values.
\6\ See Robert H. Lande, ``Consumer Choice and Antitrust,'' 62
U. Pitt. L. Rev. 503, 508-512, and cases cited therein.
\7\ 374 U.S. 363, 368 (1968).
---------------------------------------------------------------------------
Theories of possible antitrust liability in First Amendment-
related cases come from many reputable sources. For example, Robert
H. Lande and Neil W. Averitt have argued that consumer choice is no
less a goal of antitrust than competitive pricing.\8\ Maurice E.
Stucke and Allen P. Grunes, two DOJ attorneys, have argued that it
is proper to look beyond price effects to ``the marketplace of
ideas'' in order to consider non-price dimensions of economic
competition, such as diminished quality and choice.\9\ Joseph
Farrell, a former Chief Economist for the Antitrust Division, argued
that price is merely a synecdoche (a part representing the whole)
for what we desire from competition (i.e., innovation, quality, and
price), and that it does not always adequately represent the package
of desirables.\10\ Robert Pitofsky has argued that non-economic
political values such as the First Amendment can be relevant and may
justify a higher degree of scrutiny in certain cases.\11\ FTC
Commissioner Thomas Leary has argued that diversity is an
appropriate goal of antitrust.\12\
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\8\ ``Consumer Sovereignty: A Unified Theory of Antitrust and
Consumer Protection Law,'' 65 Antitrust L.J. 713, 715 (1997).
\9\ ``Antitrust and the Marketplace of Ideas,'' 69 Antitrust
L.J. 249 at 297 (2001).
\10\ ``Thoughts on Antitrust and Innovation,'' Speech to the
National Economists Club, Washington, DC (Jan. 25, 2001), at http://www.usdoj.gov/atr/public/speeches/7402.pdf
.
\11\ Robert Pitofsky, The Political Content of Antitrust, 127 U.
PA. L. REV. 1051 (1979).
\12\ See Thomas B. Leary, ``The Significance of Variety in
Antitrust Analysis,'' based on a speech delivered at the Steptoe &
Johnson 2000 Antitrust Conference, on May 18, 2000, and available at
http://www.ftc.gov/speeches/leary/atljva4.htm:
``It does not make sense to simply ignore the issue, however,
because for many consumers variety may be a more significant issue
than price. Consider the example of two chains of bookstores (or
video rental stores) that compete in myriad neighborhoods, with a
largely local clientele. One of the chains features best sellers or
the most popular films, the other chain has a more eclectic
offering; including a wider range of special interest and
``artistic'' selections. If the first chain were to acquire the
second, there might well be some local price effects, but the most
important effect on most consumers (but, not all) is likely to be
the effect on variety if the combined store adopts the buyer's
business model.
``This reality does not mean that the merger should be attacked
on that account. It might well be, for example, that it is a lot
easier for a potential new entrant to provide variety competition
for the merged enterprise than it would be to provide price
competition. What it does mean is that an initial focus on a
hypothetical price effect, according to traditional Guidelines
analysis, might miss the most important questions.''
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[[Page 66860]]
We are told in the CIS that the Court may only review the remedy
in relation to the violations that the U.S. has alleged in its
Complaint. It might be argued that the DOJ decision not to include a
general Spanish-language media market in its complaint is the end of
the story. But, as the CIS quotes the Ninth Circuit, ``The court's
role in protecting the public interest is one of insuring that the
government has not breached its duty to the public in consenting to
the decree. The court is required to determine not whether a
particular decree is the one that will best serve society, but
whether the settlement is ``within the reaches of the public
interest.'' United States v. Bechtel Corp., 648 F.2d 660, 666 (9th
Cir. 1981).'' Because in practice a complaint is drawn up by the DOJ
at the same time as a settlement order is drafted, the complaint is
to some degree, in reality, not merely the cause of the settlement,
but the result of the settlement. Although we do not want courts to
displace the DOJ role of determining what goes into a complaint, a
settlement that does not deal with obvious antitrust issues should
not be approved until the CIS adequately explains what is going on.
In this acquisition, the Complaint includes facts about the two
companies that would suggest to many observers that there may be
critically important competitive issues that go beyond the radio
market. If the Tunney Act is to protect the public interest,
including the perception that antitrust settlements are not based on
political considerations, both the public and the court must be
provided with sufficient information to determine whether the
complaint itself was unreasonably limited.
The legislative genesis of the Tunney Act was concern that
settlements might be made on the basis of political rather than
strictly professional analysis. To expand the Hypothetical of a
Dominating Voice, if the ownership of the merging parties happened
to be of the same political party as a particular national
Administration, allowing the merger to proceed, subject only to a
mild radio divestiture, with the potential of political gain for the
political party, this would be the type of politicization of
antitrust that the Tunney Act was intended to remove.
We certainly do not charge that this specific merger is being
approved for political gain, but are trying to make a larger point.
In order to protect antitrust from perceptions of political
influence, it is essential that the Tunney Act's public interest
oversight be fully informed, with all relevant major antitrust
theories fully ventilated in the CIS.
Sincerely,
Albert A. Foer
President.
July 18, 2003
James R. Wade
Chief, Litigation III Section, Antitrust Division, U.S. Department
of Justice, 325 Seventh Street, NW., Suite 300, Washington, DC.
20530
Re: United States v. Univision Communications Inc., Civ. Action No.
1:03CV00758
Dear Mr. Wade: Pursuant to the Antitrust Procedures and
Penalties Act, 15 U.S.C. Sec. Sec. 16(b)-(h), Spanish Broadcasting
System, Inc. (``SBS'') respectfully submits its comments on the
proposed Final Judgment filed on March 26, 2003, by the Antitrust
Division of the U.S. Department of Justice (``Department'') in
connection with the proposed acquisition of Hispanic Broadcasting
Corporation (``HBC'') by Univision Communications Inc.
(``Univision'').
A Univision and HBC combination raises serious antitrust issues
that the Department's proposed Final Judgment fails to address. The
draft decree leaves unremedied significant harm to competition and
consumers that surely will result from the combination of the
dominant firm in Spanish-language radio (HBC) with the dominant firm
in Spanish-language television (Univision). Even if, as the
Department of Complaint posits, Spanish-language radio and
television belong in separate markets, the remedy the Department
selected fails to solve the competitive problem it identified:
Univision's significant influence over one of HBC's closest
competitors in Spanish-language radio, Entravision Communications
Corporation (``Entravision''). The settlement only partially and
incompletely disentangles Univision and Entravision. Moreover, the
inadequate remedy the Department selected requires six years to
implement, a period during which the transaction will continue to
harm competition and consumers. Accordingly, the Court should reject
the proposed Final Judgment as not within the reaches of the public
interest.
1. SBS initially notes its disagreement with the Department's
decision to confine its analysis to the product market for the
``provision of advertising time on Spanish-language radio'' (Compl.
] 14). The Department defined this market because ``[m]any local and
national advertises'' would ``not turn to other media, including
radio that is not broadcast in Spanish, if faced with a small but
significant increase in the price of advertising time on Spanish-
language radio'' or its equivalent (Id. emphasis added. The
Department, however, provides no justification for ignoring the many
other advertisers for whom Spanish-language radio and television are
good substitutes.\1\ From the perspective of these advertisers, an
HBC/Univision combination is effectively a merger to monopoly, for
it combines the dominant Spanish-language radio broadcaster (HBC)
with the dominant Spanish-language television broadcaster
(Univision).\2\ This Spanish-language broadcasting market (defined
from the perspective of advertisers for which Spanish-language
television and radio are good substitutes) easily coexists with a
Spanish-language radio-only market (defined form the perspective of
other advertisers). The Department's Complaint and Competitive
Impact Statement are entirely silent on why the Department has
chosen to ignore the interests of advertisers who are vulnerable to
the enhanced market power HBC and Univision will enjoy as a result
of their combination.
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\1\ Letters expressing the views of such advertisers can be
found in a number of letters filed with the Federal Communications
Commission. See, e.g., Letter from Phillip L. Verveer et al.,
Attorneys Willkie Farr & Gallagher to Marlene H. Dortch, Secretary,
Federal Communications Commission (June 2, 2003) (attachments),
available at http://gullfoss2.fcc.gov/prod/ecfs/comsrch_v2.cgi
(proceeding No. MB02-235) (attached hereto as Exhibit A). These
letters demonstrate that there are many advertisers for whom the
relevant market for analyzing this transaction is not properly
confined to Spanish-language radio.
\2\ HBC's 2003 10-K explains that it ``is the largest Spanish-
language radio broadcasting company.'' Hispanics Broadcasting Corp.
Form 10-K (Mar. 31, 2003), available at http://www.sec.gov/Archives/edgar/data922503/000104746903011344/a2107188z10-k.htm.
Univision
``is the dominant broadcaster of Spanish-language television in the
United States, capturing an approximate 81% audience share.''
Entravision Communications Corporation Annual Report for 2001, at
25, available at http://www.entravision.com. HBC's and Univision's combined
dominance is illustrated by letters and charts filed with the
Federal Communications Commission. See Letter from Phillip L.
Verveer et al., Attorneys Willkie Farr & Gallagher to Marlene H.
Dortch, Secretary, Federal Communications Commission (June 11, 2003)
(attached as Exhibit B) and Letter from Andres Jay Schwartzman,
President and CEO, Media Access Project to Marlene H. Dortch,
Secretary, Federal Communications Commission (June 9, 2003)
available at http://gullfoss2.fcc.gov/prod/ecfs/comsrch_v2.cgi
(proceeding No. MB02-235) (attached as Exhibit C).
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Even accepting that Spanish-language radio and Spanish-language
television belong in separate markets, SBS disagrees with the
Department's conclusion that the only competitive harm from this
acquisition flows from Univision's ownership of a significant stake
in both Entravision and HBC. Specifically, Univision's acquisition
of the dominant Spanish-language radio broadcaster, HBC, will give
Univision, the dominant Spanish-language television broadcaster, an
enhanced inventive to refuse to deal with or discriminate against
Spanish-language radio competitors (such as SBS) who seek to
advertise through Univision. Advertising on television is important
for promoting Spanish-language radio stations and thus for
surmounting the high entry barriers in Spanish-radio language that
the Complaint identifies (Compl. ]27).
Moreover, after the merger, Univision/HBC will have the power to
insist that Spanish-
[[Page 66861]]
language advertisers who wish to advertise through both radio and
television purchase time from both Univision and HBC rather than
from the merged firm's rivals, including SBS. Such difficult-to-
detect and subtle tying arrangements or refusals to deal--realistic
possibilities here--impair competition. See, e.g., Lorain Journal
Co. v. United States, 342 U.S. 143 (1951). It is unrealistic to
expect that, following the acquisition, advertisers will stand up to
the HBC/Univision colossus and challenge such practices themselves.
The Clayton Act properly is invoked to restrain these restraints in
their incipiency.
The Department's failure to grapple with any of the competitive
problems posed by combining the dominant Spanish-language radio
broadcaster with the dominant Spanish-language television
broadcaster should cause this Court to conduct an especially careful
Tunney Act review. To be sure, that review is largely confined to
determining whether the remedy the Department selected is a
reasonable one for the competitive problem identified in the
Department's Complaint. See United States v. Microsoft Corp., 56
F.3d 1448, 1461-62 (D.C. Cir. 1995). But when as here, the
Department has exercised its prosecutorial discretion to tailor its
Complaint narrowly to the remedy selected, the Court must pay
special attention to ensure that the fit between remedy and
Complaint is indeed within the reaches of the public interest. As
explained below, the fit here is very poor indeed.
2. The competitive problem the Compliant identifies is that
Univision's significant control over, and its equity stake in,
Entravision will cause HBC and Entravision to pull their competitive
punches once HBC falls under Univision's control. The proposed Final
Judgment seeks to preserve HBC/Entravision competition by requiring
Univision to reduce its equity stake in Entravision and to
relinquish certain rights Univision holds to control or influence
Entravision's competitive activities. For a number of reasons, the
proposed Final Judgment will not adequately protect purchasers of
radio advertising from the adverse consequences of Univision's
proposed acquisition of HBC.
First, the Department's requirement that Univision surrender
certain rights and dilute its stock holding in Entravision fails to
address the most significant way in which Univision influences
Entravision: through the Univision/Entravision affiliate agreement.
As the Department's Complaint explains, pursuant to this ``long-
term'' agreement, ``Extravision broadcasts Univision programming
from Univision's two networks on 49 television stations. As part of
this affiliation agreement, Univision serves as Entravision's sole
representative for the sale of television advertisements sold on a
national basis'' (Compl. ] 23). This agreement is Entravision's
lifeblood. From it, Entravision obtains key programming and
significant advertising revenue. As Entravision's 2001 Annual Report
explains, ``Entravision has benefited enormously from a close
relationship with Univision'' which is ``the dominant broadcaster of
Spanish-language television in the United States.'' \3\ A recent
Entravision securities filing also strikingly illustrates the
importance of the affiliate agreement: Of an overall increase of
$1.5 million in revenue for Entravision over the prior year, ``$1.4
million was attributable to our Univision stations and 0.1 million
was attributable to our Telfutura stations [a Univision
network].''\4\
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\3\ Entravision Communications Corporation Annual Report for
2001, at 25, available at http://www.entravision.com.
\4\ Entravision Communications Corporation 10-Q, at 7 (May 12,
2003), available at http://www.entravision.com.
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The affiliate agreement plainly will give Entravision
significant reason to pull its competitive punches against HBC once
HBC is acquired by Univision. The Department recognizes this; for
the proposed Final Judgment prohibits Univision from ``using or
attempting to use any rights or duties'' under the affiliate
agreement ``to influence Entravision in the conduct of Entravision's
radio business'' (Proposed Final Judgment Sec. VI.A.5). This
remedy, however, is a mirage. Univision need not actually use the
affiliate agreement to influence Entravision's behavior. The mere
fact that Univision might deny Entravision rights under the
agreement, or even create disputes under the agreement, will cause
Entravision to compete less vigorously with HBC.\5\ Strikingly, the
Department has rejected such ``behavioral'' remedies in other
circumstances, even when punishable by contempt if violated.\6\ The
Competitive Impact Statement provides no basis for believing that a
``behavioral'' remedy relating to the affiliate agreement will be
effective here. By contrast, blocking Univision's acquisition of HBC
will preserve competition.
---------------------------------------------------------------------------
\5\ See, e.g., Letter from Arthur V. Belendiuk, Counsel to
National Hispanic Policy Institute, Inc., to W. Kenneth Ferree,
Esq., Chief, Media Bureau, Federal Communication Commission (July
11, 2003) (attached as Exhibit D).
\6\ For instance, the Department rejected Northwest Airline's
suggestion that creating a voting trust for the stock it acquired in
Continental Airlines would prevent a diminution of competition
between the two airlines. The Department explained: ``Courts are
understandably loathe to rely on `behavioral rules' as a substitute
for divestiture, even where the rules are court-ordered.'' Trial Br.
of the United States at 18, United States v. Northwest Airlines
Corp. (No. 98-74611, filed Oct. 24, 2000) (emphasis added),
available at http://www.usdoj.gov/atr/cases/f7200/7288.htm.
---------------------------------------------------------------------------
Second, the proposed Final Judgment would allow Univision to
retain shareholder rights to veto major strategic decisions of
Entravision, including any plans i) to merge, consolidate or
reorganize all or substantially all of its assets; ii) to transfer a
majority of its voting power; iii) to dissolve, liquidate or
terminate itself; as well as iv) to dispose of any interest in any
FCC licenses relating to television stations that are Univision
affiliates (Competitive Impact Statement (``CIS'') at 11). Each of
these actions that Univision can veto may have significant
competitive impact. If, for example, Entravision wanted to sell a
radio station to, or merge with, a rival, the proposed Final
Judgment leaves Univision with the power to prevent possible
competition-enhancing transactions. It plainly harms rather than
benefits competition to require Entravision to obtain its rival's
approval to undertake such actions. The Department should not hinder
the competitive activities of third parties through consent
judgments.
Third, the proposed Final Judgment would require Univision to
reduce its equity stake in Entravision over a very lengthy period:
to no more than 15 percent by March 2006 and to no more than 10
percent by March 2009. The Department acknowledges that this
divestiture is necessary to preserve competition; for Univision's
significant stake in Entravision means that Univision/HBC ``would
receive some significant benefit even on sales it loses to
Entravision'' (CIS at 12). The Department nonetheless is willing to
tolerate the lessened competition and consumer harm for as long as
six years. Although the rapid sale of stock may be difficult to
accomplish and impose costs upon Univision, the costs of
accomplishing the transaction should not be borne by consumers. If
owning the stock is competitively harmful, Univision should be
required to sell the stock as expeditiously as possible. The
Department's explanation for its unprecedented six-year divestiture
period--that requiring a faster sale by Univision protects against
``adversely affecting Entravision's ability to raise capital'' (CIS
at 12)--fails to persuade. If the Department's reasoning were valid,
it would always permit divestitures to be made over the course of
several years; but that is obviously not the Division's policy. And
with good reason: The longer the merging parties hold assets that
must be divested to preserve competition, the longer the period
during which competition and consumers suffer. The speculative fear
that Entravision's ability to raise capital will be harmed by
requiring a shorter divestiture period is no warrant for inflicting
competitive harm on advertisers and others.
Fourth, the divestiture the Department negotiated is
insufficient to preserve competition. If the proposed Final Judgment
is approved, Univision will continue to hold a ten percent stake in
Entravision. Moreover, the Complaint alleges that Entravision and
HBC have combined market shares ranging from 70 percent to as much
as 95 percent in the several geographic markets (Compl. ] 21). It is
plain that Univision will still financially benefit from every
advertising dollar HBC loses to Entravision and, therefore, that
Univision/HBC will compete less vigorously than if Univision's
equity interest were divested completely. The Competitive Impact
Statement fails to explain why a complete divestiture is
inappropriate here.
Thus, for several reasons, the proposed Final Judgment leaves
Entravision entangled with Univision in ways that will seriously
harm competition. The Court accordingly should find that the
Department's proposed Final Judgment is not within the reaches of
the public interest.
Respectfully submitted,
Claudia R. Higgins
Kaye Scholer LLP
901 15th Street, NW., Suite 1100, Washington, DC 20005, (202) 682-
3653, Counsel for Spanish Broadcasting System, Inc.
[[Page 66862]]
Dated: July 18, 2003.
Exhibits Attached.
United States v. Univision Communications, Inc., Civ. Action No.
1:03CV00758, Comments on Behalf of Spanish Broadcasting Inc., July 18,
2003, Exhibits A-D
Exhibit A
June 2, 2003
Marlene H. Dortch
Secretary, Federal Communications Commission, 445 12th Street, SW.,
Washington, D.C. 20554
Re: Applications for Transfer of Control of Hispanic Broadcasting
Corp., and Certain Subsidiaries, Licensees of KGBT (AM, Harlingen,
Texas et al. (Docket No. MB 02-235, FCC File Nos. BTC-20020723ABL,
et al.)
Dear Ms. Dortch: Spanish Broadcasting System, Inc. (``SBS'') has
asked more than twenty advertising agencies and advertisers with
special knowledge of the Hispanic community to address the nature
and extent of the media marketplace in which they conduct their
business. Their responses are attached.
All of the responses indicate that English-language broadcasting
and Spanish-language (Hispanic) broadcasting constitute separate
markets. Many of them observe that the Spanish-language broadcasting
market includes both radio and television.
These propositions are fundamental to the Commission's analysis
of the proposed Univision Communications, Inc.--Hispanic
Broadcasting Corp. merger. The agency and advertiser perspectives on
the market address both competition and diversity, just as the
Commission must in connection with its public interest determination
on the permissibility of requested transfers.
The conclusions of the agency and advertiser executives conform
with those the Commission has reached in other contexts. The
Commission often and recently has recognized the existence of a
separate Spanish language broadcasting market. It also has
recognized that television and radio are part of the same product
market for fundamental Communications Act purposes.
The separate nature of the Hispanic broadcasting market means
that the FCC may not rely exclusively on its cross-ownership and
multiple ownership rules in making its public interest
determination. These heuristic devices may be a sufficiently
reliable basis for decision where transfers implicate majority-
language broadcasting. Their reliability cannot be assumed where
minority-language broadcasting is concerned. In this case, the
proposed merger moves the Hispanic market very decidedly in the
direction of monopoly. Both the statute and ordinary prudence
require that the decision in this matter be the product of careful
analysis of record evidence and that it be reflected in a reasoned
explanation.
In this regard, SBS will respond to the many factual assertions
contained in the May 14, 2003, Univision submission shortly.
Unsurprisingly, we do not find Univision's propositions probative of
the substantive issues nor do we find Univision's legal and policy
points relevant to the resolution of this important matter. (We note
that the submission, inexplicably, is not posted on the ECFS site
and thus remains unavailable to anyone seeking to follow the
proposed transaction through the Commission's Web site).
Finally, we note the unusual circumstance presented by today's
Commission vote fundamentally changing its principal media ownership
regulations (following the most exhaustive and comprehensive review
of [the] broadcast rules ever undertaken'') and the pendency of this
major broadcasting transfer application. As we are able to learn the
details of the new ownership rules, we will submit our analysis of
their significance for the Univision proposal.
Respectfully submitted,
/s/ Philip L. Verveer
Philip L. Verveer
Sue D. Blumenfeld
Michael G. Jones
David M. Don
WILLKIE FARR & GALLAGHER, 1875 K Street NW, Washington, DC 20006,
Telephone: (202) 303-1000, Facsimile: (202) 303-2000
and
Bruce A. Eisen
Allan G. Moskowitz
KAYE SCHOLER FIERMAN HAYS & HANDLER, LLP, 901 15th Street NW, Suite
1100, Washington, DC 20005
Attorneys for Spanish Broadcasting System, Inc.
cc: Chairman Powell, Commissioner Abernathy, Commissioner Copps,
Commissioner Martin, Commissioner Adelstein, Susan Eid, Stacy
Robinson, Jordan Goldstein, Catherine Crutcher Bohigian, Johanna
Mikes, Ken Ferree, David Brown, Scott R. Flick, Counsel for
Univision Communications, Inc., Roy R. Russo, Counsel for Hispanic
Broadcasting Corp.
May 27, 2003
To Whom It May Concern
Dear Sir or Madam: I have been involved in the Hispanic Market
USA since 1966 and have owned my own firm for over 31 years.
During that time, I have placed national and local ads for a
very wide variety of companies, government agencies, and other
public and private institutions, large and small including Coca
Cola, McDonald's, Procter & Gamble, General Motors, Anheuser Busch,
Castrol, Pizza Hut, Burger King to mention just a few. I am also the
single largest individual receiver of Creative Awards in the
industry, and was placed in the Hispanic Market Hall of Fame (only 4
recipients so far), in 2002.
I have been asked to address two issues:
First: Is there a separate advertising product market defined by
the Spanish language? In other words, are Spanish language media and
English language media substitutable for one another?
The answer is an unequivocal: NO! English language media and
Spanish language media are NOT substitutable. There definitely is a
separate advertising product market defined by the Spanish language.
Let Me explain: One could safety say that for the first time in
U.S. History, there has been a CATERING to Spanish language, not so
much out of a sociological sense of responsibility, but out of the
dire necessity of the large and small American corporations to open
new markets to replace maturing ones in the U.S. They do this by
attracting an ever growing group of people (the largest single
minority in the U.S.) which could not be otherwise addressed. There
are 27 Latin American countries with endless political and economic
travails, which only serve to increase the CONTINUOUS, NON-STOPPING
Immigration WAVE to the LAND of opportunity.
Second: Are Spanish language video (television and cable) and
radio substitutes for one another?
I have no doubt that Spanish and English language media are in
different markets from the perspective of advertising buys. A small,
but significant non-transitory increase in price in English language
media will not induce the advertisers with whom I am familiar to
shift their advertising to Spanish language media. Instead, they
will absorb the price increase.
The reverse also is true. The reason is that for many products
the target audience simply cannot be reached unless it is addressed
in their familiar language. Among other obvious bits of evidence,
the major television networks virtually never present a commercial
in Spanish (or any language other than English, for that matter).
Spanish language video and radio are substitutes for many
advertisers. Many advertise on both. Many sponsors are quite willing
to allocate and reallocate percentages of their ad budgets to video
or to radio depending upon shifts in the price and ratings of one or
the other. A small, but significant increase in price in one will
shift purchases to the other for many products.
It is very common in negotiations over advertising rates, for
agencies and clients to make the claim, for example, that if
concessions in price are not made, the advertising will be placed on
the other medium, video or radio as the case may be.
I hope that you find this information helpful. I would be happy
to discuss it at greater length if you would find it useful.
Sincerely,
Castor A. Fernandez,
President/Creative Director, Castor
May 27, 2003
The Honorable Michael K. Powell
Chairman, Federal Communications Commission, Washington, DC 20554
Dear Mr. Chairman, My name is Eduardo Caballero, President/CEO
of Caballero TV & Cable Sales, an independent-Spanish TV stations
sales representative.
I started selling Spanish Media in February of 1962, as a local
salesman for Radio Station WBNX, New York City. I became its General
Sales Manager that same year.
I resigned in March of 1968 to become General Sales Manager of
Spanish TV Station WXTV, Channel 41, New York Market (licensed to
Paterson, NJ).
Also in 1968, I became a VP and Director of National Sales for
Spanish International
[[Page 66863]]
Network (S.I.N., the predecessor of Univision), with affiliate
stations in San Antonio, Los Angeles, Fresno, New York, Miami, San
Francisco and Chicago.
In 1973 I resigned that position, as the first--and only--
Hispanic to be in charge of national sales for any ``national
network'' in U.S., to start the first Spanish Radio National Sales
Representative in this Country (Caballero Spanish Media, Inc.),
representing over 140 Spanish radio stations.
Amongst stations represented by CSM were those owned and
operated by Heftel Broadcasting, Tichenor Broadcasting Co. (both of
these Companies were the predecessors of the actual Hispanic
Broadcasting Company--HBC), Spanish Broadcasting System, Liberman
Broadcasting, Excel Broadcasting, the Z Network, etc.
CSM was sold in 1995 to the Interep Company (a General Market--
English language--radio representative). Interep has kept CSM, to
this day, as a separate Spanish division.
I remained with the Company until 1998, when I undertook the
creation of a TV (low power stations) Network--MasMusica TeVe--to
broadcast Spanish music, 24/7. At the present moment this
programming is broadcast over 21 Spanish TV stations within the U.S.
Most recently, since there is no any advertising sales
organization representing independent TV stations--including mine
and others--I have started a new--and only--independent Spanish TV
representative sales organization, Caballero TV & Cable Sales.
I have been selling time for Spanish Media in United States
(both radio and TV), for the last 42 years, uninterruptedly. I can
say, unequivocally and based on my professional experience, the
following:
Unless an advertiser makes the decision to promote its products
or services to the Hispanic consumer, in Spanish and, subsequently,
creates a ``Hispanic Budget'', there will not be schedules placed on
any Spanish Media.
Unfortunately, that ``Hispanic Budget'', when it does exist,
amounts, at best, to a 1 to 3% of the ``general market budget''
(although Hispanic consumers represent about 14% of the total U.S.
population, according to the Census Bureau). That brings, as a
result, the situation where many of those advertisers' Hispanic
budgets cannot afford both television and radio schedules.
Many of those advertisers are willing to allocated and
reallocate parts of their Hispanic budgets to TV or to radio,
depending on changes of rates and the ability of a particular medium
to negotiate those rates. The fact is that Spanish language TV and
radio are substitutes for many advertisers.
Every advertiser in the U.S. considers this to be a SEPARATE
AND DISTINCTIVE MARKET. In fact, most, if not all, of the still very
few advertisers who have decided to advertise in the Spanish
language have, first, funded a SPANISH ADVERTISING BUDGETS, then
created a SPANISH MARKETING DEPARTMENT and, lastly, chosen a SPANISH
ADVERTISING AGENCY. Without those three elements, the Spanish
speaking consumer does not play any role in the marketing plans of
ANY of the hundred of national advertisers who are NOT advertising
in the Spanish language, simply because the Spanish market is not
integrated in their general market strategy, and as they say, ``it
has to be treated differently'', language and otherwise.
Many times we were confronted with situations when general
market agencies placed schedules on some of our represented
stations; when they found out that we were broadcasting in Spanish,
they canceled that schedule because, according to them, they were
buying ``radio'' not ``Spanish radio'' or they were buying
``television'' not ``Spanish television''.
Still, today, we confront many situations where most national
(or general market) advertisers do not buy any Spanish language
media because they (the advertisers) are not ``prepared'' to go into
the Spanish market.
Another point I want to make is the following. A General Market
Network (radio or television), to be considered as such, has to
guarantee advertisers to cover about 80% of the total U.S.
population. In the case of Spanish Networks, they are required to
cover ONLY ABOUT 80% OF THE HISPANIC POPULATION. Certainly, those
Hispanic ADIs where about 80% of the National Hispanic population
resides do not even get close to cover 80% of the General Population
of the U.S. This marks another very clear separation between the
General and the Spanish Markets.
If I can be of any help to this Commission, please, do not
hesitate to have any of your associates to contact me.
Sinceramente,
Eduardo Caballero, Personal Bio
Eduardo Caballero was born in the Oriente Province, Cuba. Went
to school in Sagua de T[aacute]namo and Havana, where he obtained a
Degree as Doctor in Law from the Jose Marti University.
Started his own law firm with his wife, Raquel Miller-
Caballero, also a lawyer, and practiced that profession in Havana,
until the end of 1961, when, in view of the political situation in
his country, decided to come to the United States as a political
refugee.
Under a program of relocation sponsored by the U.S. Government,
he and Raquel went, first, to Dallas where he worked,
simultaneously, at a restaurant, as a host, and at a department
store, as a salesman; later on, they went to New York where, in
1962, Eduardo started his career in broadcasting, landing a job as a
salesman for a local Spanish radio station (WBNX), through the
offices of a client of his former law firm in Cuba.
Soon he became the first Hispanic in USA to hold the position
of General Sales Manager of a radio station.
In 1968 he helped to create what was known as Spanish
International Network (SIN), today Univision. He was appointed first
General Sales Manager for WXTV, Channel 41, New York and soon after
that, in 1969, he became an Executive VP and Director of National
Sales for the Network.
In March of 1973 he resigned his position, and, again, together
with wife Raquel, started Caballero Spanish Media Inc., the Spanish
media sales representative in this country.
His company started representing four Spanish TV stations (all
of the independent Spanish stations existing at that time), and
fourteen Spanish radio stations (out of less than 35 existing
stations). Eduardo also syndicated a weekly Spanish movie, which ran
in twenty-nine television stations, almost all of them general
market stations, using Ricardo Montalban as the presenter, and with
the sponsorship of the Bristol Myers company.
In 1976 Eduardo decided that he should be involved exclusively
in radio, where he saw the greatest potential for C.S.M. His company
grew to represent over 140 Spanish radio stations from coast to
coast, covering over 95% of the Hispanic consumers in the country,
opening opportunities for new radio operators and hundreds of jobs
for both, Hispanics and non-Hispanics.
In 1995, Eduardo sold C.S.M. to Interep, and remained with the
Company until the beginning of 1999, when he left work on his new
project, Caballero Television, owner and operator of twelve LP
television stations, all of them located in Central California and
Texas. He created his own network--Mas M[uacute]sica Teve-
broadcasting 24 hours of music videos. Caballero Television has
offices in Dallas, New York Miami and Bakersfield, CA. Recently, the
Broadcasters' Foundation presented to Eduardo, The American
Broadcast Pioneer Award, as the first Hispanic to receive this
award.
In September 2002, Eduardo was honored by the American
Advertising Federation with the Mosaic Award.
Eduardo lives with his wife of 41 years, Raquel, in Miami,
Florida. They have a daughter, Rosamaria, also a lawyer, who
graduated from Georgetown Law School. Married, with two daughters,
Sofia and Paloma, she lives, with husband P.J. Stafford, in New York
City.
Eduardo is, or has been, involved in the following
organizations:
Chairman-founder of the Hispanic arm of the Media Partnership
for a Drug Free America.
Member of the U.S. Postal Service Marketing Advisory Board.
Founder of the Spanish Radio Association of America.
Former Member of the Board of the Stations Representative
Association (S.R.A.).
Former Member of the Board of Directors of the Advertising
Counsel.
Former Member of the Arbitron Bi-lingual Advisory Committee.
Founder of the Association of Hispanic Advertising Agencies
(A.H.A.A.).
Former Member of the Board of Trustees of the National Hispanic
University (San Jose, CA).
Former Member of the Board of the National Drop-out Prevention
Foundation.
He is also a proud member of the N.A.B. and of the Pioneer
Broadcasters, among many other organizations.
Hi Albert, as per your request, following are my thoughts on why
the Hispanic market should be treated separately from the general
market. As you know, I have over 15 years in the industry. Most of
these years have
[[Page 66864]]
been with agencies specializing in Hispanic marketing and
advertising. I am currently with Diario Las Americas, South
Florida's first Hispanic daily newspaper.
The U.S. Hispanic media market should be treated separately from
the non-Hispanic media market. Hispanics differ in many ways from
non-Hispanics:
[sbull] Larger households 3.4 vs. 2.5.
[sbull] Hispanics are younger 27.6 vs. 37.2.
[sbull] More HH with children 18 58% vs. 34%.
[sbull] Religion is more important in their lives, 80% vs. 46%.
[sbull] Language preference--over 90% of Hispanics speak some
Spanish, over 70% prefer to speak Spanish at home and over 50%
prefer to speak Spanish on social occasions.
Sources: Nielsen Universe Estimates 2002, Strategy Research,
Yankelovich 2000, Center for Media Research 10/7/02.
Advertising in Spanish-language is proven to be far more
effective with Hispanics. According to the Roslow 2000 study on
advertising effectiveness among U.S. Hispanics: ad recall rises 61%
for those viewing in Spanish, communication is 57% more effective
and persuasion is 5 times greater.
Marketing to Hispanics should not only be in Spanish-language
but should also be culturally relevant. Translation of general
market copy is not an effective or efficient approach for delivering
the target. Advertising should be culturally relevant and dialect
sensitive. Agencies specializing in Hispanic advertising and
marketing understand that accents and terminologies differ based on
country of origin. They exercise sensitivities to these differences
when creating an advertising message. Important, as well, is not to
stereotype this market.
Spanish language preference has not decreased throughout the
years as many had predicted. It has actually increased. One
contributor to the increase could be the increasing acceptance of
Spanish-language, as well as, what many are calling `retro-
acculturation.' Latinos are feeling more comfortable with their
culture and the use of Spanish-language. Great contributions by
Latinos in the areas of sports, entertainment, and business have
laid out a new dynamic for Latino youths. They are more proud to be
a part of the Hispanic community and to be considered Latinos.
[GRAPHIC] [TIFF OMITTED] TN28NO03.004
The Hispanic market is separated from general market by language
and culture. Hispanics have different viewing and listening
patterns. That is why the top rated programs (overall--Hispanic &
general market--source Nielsen Hispanic Station Index) on television
for Hispanics are `novelas' on Univision; and why the top radio
stations in major Hispanic markets are Hispanic stations. Some
Hispanics can be reached through general market advertising efforts
(spill), but the effectiveness and impact of the message is not the
same (per Roslow 2000). Hispanics are more likely to buy brands that
advertise to them in Spanish-language. Many advertisers have become
saver to the fact. In November Burger King Inc. set aside swathes of
aisle space in nearly 1,000 of its stores for videos dubbed in
Spanish. In December, Kmart Corp. announced the launch of an apparel
line named after Mexican pop star Thalia. P&G created a magazine-
style direct mail piece specific to Hispanics.
Some companies early to see the potential are cashing in Sales
of Ford brand cars and light trucks to the Hispanic market grew 40%
in the past five years. After the company started using Mexican
bombshell Salma Hayek to market its Lincoln brand last year,
Hispanic purchases of Lincoln Navigators grew 12%, while sales to
non-Hispanics were flat, says a Ford Motor Co. spokeswoman. At Honda
Motor Co.'s American arm, Latino purchases grew to 8.4% of all
vehicles sold last year from about 7% five years ago.
With the nation's economy as a whole stagnating, the U.S.
Hispanic population is emerging as one of the most promising motors
for growth. Driving the growth is the population's higher-than-
average birth rate and immigration. Additionally, Hispanic household
incomes are starting to catch up with national averages. The Global
Insight report estimates that Hispanic household incomes should grow
from 77% of the national average in 2000 to 82% by 2020. The Selig
Center for Economic Growth at the University of Georgia says
Hispanic disposable income will reach $926 billion in 2007, up some
60% from $580.5 billion last year. Meanwhile, non-Hispanic buying
power will grow less than 28%, to $8.9 trillion. The Selig Center
estimates that in five years Hispanics will account for 9.4% of the
nation's disposable income, up from 5.2% in 1990.
Both television and radio have seen the growth. Advertising on
Spanish-language TV grew 16.5% last year, over twice the 7.6% growth
by all broadcast TV, estimates Gordon Hodge of investment bank
Thomas Weisel Partners. Today there are 8 times the number of
Hispanic radio stations than there were 20 years ago.
1980: 67 Hispanic Radio Stations
2002: 600 Hispanic Radio Stations
Get the picture? It seems some major companies have, and it sell
$$$. They understand the importance of the Hispanic market. They see
it as a separate market, and so should we.
Sincerely,
Leticla R. Pelaez
Director of Advertising
May 22, 2003
Federal Communications Commission
445 Twelfth Street South, Washington, DC. 20554
To Whom It May Concern, My name is Raquel Tomasino, I am Media
Director of Castells & Associados and have been asked to comment on
whether the U.S. Hispanic media market is a separate market for the
purpose of assisting the FCC in its ongoing review and analysis of
the pending merger of Univision Communications and Hispanic
Broadcasting Corporation.
From a marketing standpoint the US Hispanic market is a separate
marketplace. Marketing to Hispanics requires understanding of the
cultural differences that exist versus the General Consumer,
understanding that creatively Spanish-language commercials need to
reflect Latino cultural nuances and queues to be fully effective in
producing similar results versus the General English-language
commercials.
More than 50% of the US Hispanics are Spanish-dominant. In the
West Coast that number is closer to 60%. While long time residents
and US born Latinos speak English so that they can function in
mainstream America, various factors which include, the growing
population, strong Hispanic communities, and immigration keep
fueling the desire for Hispanics to hang on to their culture, their
language and entertainment preferences.
The Hispanic market is not one Monolithic segment of the
population, it is a complex group comprised of many segments with
different cultural nuances and origins, united by one language.
Spanish-language media plays a very big part in reaching out to
the different segments of the population by continuing to supply
programming that feature relevant content that speak to the Latino
preferences.
In the case of Spanish-language TV, Experience has shown that
original productions with familiar content such as Latino
entertainers, International dramas and Futbol/Soccer is a formula
for success. The English-TV programming, such as ``Charlie's
[[Page 66865]]
Angels'' and ``Reyes Y Ray'' (Starsky & Hutch) remakes in Spanish
that some networks tried to reproduce and run on Spanish-TV proved
to be unsuccessful.
Radio has become the optional source of information and news not
only about our homeland but our communities, with commercials that
we can actually understand and follow in our language. Radio also
offers the variety in programming needed to finely target the
different segments of the Hispanic communities.
Like the Central American who listen to Cumbias, the Caribbean's
who prefer Salsa, the South American's like Spanish-Rock and the
Mexican Community who love their Rancheras and traditional sounds of
Mexico.
As an agency it is important for us to educate our clients on
the most effective way to reach the Hispanic consumer. We are
responsible for creating advertising that is compelling, that builds
awareness and consumer loyalty and at the end of the day we need to
deliver these through the various, relevant forms of media vehicles.
That's why we have a list of ten things to avoid when marketing
to Hispanics. Below is a top line of the top ten things not to do by
Liz Castell-Heard, President of Castells & Asoicado:
10. Approaching the Market as if It Were a Monolithic Segment
``One-Size Fits All'' Approach No Longer Works, Unless It's just
the Start. Hispanic marketing has evolved from the `70's ``orphan''
to the ``childish'' `80's regional efforts; the post-pubescent 90's
of homogenization; and now to bicultural segmentation, as
``Hispanic'' grows up as an adult rich with complexities. It's
beyond country of origin--one generic ``broadcast'' Spanish can be
effective. It's knowing what makes us tick; foreign-born (58%) or US
born; Spanish-dominants (58%) or reaching bilinguals/English-
dominants with culturally-relevant English ads (like African-
American). It's targeting various age targets and influencers.
Companies like McDonald's who do this well, have very strong
Hispanic positions.
9. Not Understanding Your ``Hispanic'' Category
Category Dynamics Don't Automatically Apply. Know & Embrace The
Differences. Your ``Hispanic'' category is not at the same point of
its lifecycle development; and Latinos are often behind on the
learning curve. Cultural and lifestyle differences affect
perceptions, needs, motivations and advertising. Demographic
barriers may not exist; but perceptual barriers need to be
addressed, like in cable or banking.
8. Not Having a Long-Term Hispanic Market Plan
Have a Consistent & Integrated Hispanic Strategic Branding and
Retail Plan. You need to have bilingual training, people,
operations; multi-media advertising, promotions and PR. Some believe
you don't need a Hispanic branding campaign due to the myth of
Hispanic brand loyalty. Hispanics will respond and brand-switch. You
can't assume your established General Market or Latin American
efforts will bleed over. Classic examples are Colgate-Palmolive left
behind by P&G, or Toyota topping Chevrolet. Continual short-term
messages lead to poor brand perception, discounting and brand
erosion. You need a branding campaign with ``legs'' and a multi-
media mix, beyond TV to radio, OOH, DR, on-line, print, etc.
7. Consistently Opting for General Market ``Transactions''
Stay True To The Brand, Seek Synergies With Hispanic Consumer
Relevance. Look for synergies and commonalities between General and
Hispanic consumer segments, but don't force-fit. Transcreating GM
strategies or creative may work when the concept transcends
ethnicities or for short-term promotions, but consistently employing
this approach becomes ineffective. Just think about all the GM money
you spend to identify that key consumer nugget, or that breakthrough
ad. Know the cultural nuances that affect your direction and define
ad relevance.
6. Oversimplifying and Underestimating the Potential of the HCM
Quantify the Hispanic Business Potential With Sound Research and
Analysis. Put the stats to work and figure out the actual potential,
by market, by account. Once you assess the huge potential,
``package'' it internally. Call it a profitable ``division'' or
establish a multi-discipline Hispanic committee to facilitate its
viability.
5. Inadequate Allocation of Company Resources to ``Hispanic''
Proper Allocation of Hispanic Marketing Budgets and Resources Is
Key. Inadequate pre-planning, sub-standard concepts, limited ``test
efforts,'' poor tactical executions and lack of performance metrics
devalue Hispanic potential. Don't say, ``This is all we have for
Hispanic this year.'' Hispanic should be an integral part of the
budget pre-planning process. Assess Hispanic share vs. the GM; and
weigh the trade-offs of where you spend. The $2.4 Billion spent in
Spanish is still less than 4% of all ad dollars--But it's changing
quickly as companies spend more; traditional categories like
packaged goods, newer categories like telecomm, health, travel,
entertainment, or high-tech.
4. Thinking Hispanics Are Effectively Reached Via English Media
Spanish Ads are Critical; English-language Spillover Is Not
Necessarily Effective. Don't say, ``Half of Hispanics see our spots,
they're the ones with the money.'' Spanish media continues to grow;
70% of Hispanic TV viewing goes to Spanish, up from 45% in 1995.
Spanish broadcast gets the majority of share even among bilinguals.
To know what to spend, apply a systematic budget formula that
accounts for Nielsen spill, Roslow comprehension, population and
CPP's. Nationally, 10% of total dollars should go to Spanish, 4% to
English-Hispanic; in L.A., 30% to Spanish, 11-18% to English-
Hispanic. Hispanic median income is $49K (85 index vs. GM), so it's
highly likely Hispanics can afford your product.
3. Recruiting a Native Spanish Speaker To Critique Your Agency's
Creative
Just Like the General Market, Let the Hispanic Consumers Be The
Judge. Please don't say, ``Juanita Garcia says the words are not
right.'' Regis & Kelly are not asking you to write their monologue,
so don't rely on your housekeeper to critique the work done by a
creative with a Masters and 15 years experience. Do the same type of
copy research as the GM, qualitative or quantitative, it all exists.
Assure your Hispanic ads deliver the strategic and communication
goals.
2. Hispanic Programs Must Pay Out in Incremental Volume
Have a Measurable, Realistic and Agreed-Upon Hispanic ROI and
Report Card. There is a base cost for customer retention and
maintaining brand share, and the Hispanic program should not payout
solely on incremental sales. The reprt card should be based on
cumulative measures; Hispanic sales tracking, field surveys and pre/
post quantitive tracking studies. Don'trelegate Hispanic research to
the back shelf. Employ the proper research size and methodology to
ensure the Hispanic sub-segments are well defined and represented.
1. Not Allowing Your Hispanic Agency To Challenge Status Quo
Demand High Performance From Your Hispanic Agency. Demand the
same level of excellence as your General Market agencies. Be
inclusive with your agency and set clear goals and expectations.
Think of your agency as a marketing partner, as the more knowledge
shared, the better the work. Allow Hispanic programs to evolve,
flourish and increase. Hire a true Hispanic agency, not a Hispanic
``division,'' or one--like Castells & Asociados.
Sincerely,
Raquael Tomasino,
EVP, Director of Media Services
The Honorable Michael Powell, Chairman
Federal Communications Commission, 445 12th Street, Southwest,
Washington, D.C. 20554
Dear Chairman Powell: My name is Linda Lane Gonz[aacute]lez,
president of The VIVA Partnership, Inc., a Miami-based advertising
agency specializing in the U.S. Hispanic market. My professional
experience over the past 15 years has been almost exclusively in the
U.S. Hispanic market, having worked with some of the greatest
pioneers of our field, Lionel Sosa, Carlos Montemayor, Paul Castillo
and others over the years on a variety of accounts including
Chrysler, Builder's Square, Cuervo, CBS, Verizon Wireless, Uniroyal,
Meow Mix, and Entenmann's.
I have been asked to comment on whether or not I believe the
U.S. Hispanic media market is actually a separate market. My answer
is an emphatic yes. To which could be added an emphatic of course!
Hispanics are different in many ways: be it culture, language, or
the numerous customs and traditions. Research shows that in-language
programming is more impactful to the Hispanic target when it
connects on a deeper level, in language and culturally relevant.
[[Page 66866]]
The Hispanic media market and its numerous vehicles are a
separate, relevant entity. From Nielsen to Arbitron--media is
adapting and adjusting to the ever-growing Hispanic population.
Nielsen has adjusted the way it measures audience levels due to the
exploding Hispanic numbers. Arbitron continues to be challenged and
is currently modifying their methodology on how to accurately
measure Hispanic audience levels.
I hope my comments will be useful in the commission's
consideration of the U.S. Hispanic media market as a separate and
relevant entity and in its review of the Univision/HBC merger.
Very sincerely yours,
Linda Land Gonz[aacute]lez,
President, The VIVA Partnership, Inc., 4141 N.E. 2nd Avenue, Suite
203E, Miami, FL 33137
May 27, 2003
The Honorable Michael K. Powell
Federal Communications Commission, 445 12th Street, SW, Washington,
20024
Dear Chairman Powell: My name is Tere Zubizarreta, President &
CEO of Zubi Advertising.
I have been asked to comment on whether the U.S. Hispanic media
market is a separate market. There's no doubt that the Hispanic
media market is an entity completely separate from the ``general
market''.
As will be shown below, there is ample evidence and factual
corroboration to conclude that the U.S. Hispanic media market is a
separate market.
The Hispanic media market stands alone since it caters strictly
to those U.S. residents (33 million by 2000 census). In their native
language, taking into account cultural idiosyncrasies and family
values.
The media availability to address this market is professional in
its programming and formats are according to the demographics in
each of the major Hispanic markets.
This fact is particularly important when looking at the radio
and TV networks as the primary source of communication with this
fast growing market.
I hope the information provided will be useful in the
consideration of the U.S. Hispanic media market as a separate
relevant market.
Sincerely,
Tere A. Zubizarreta
May 21, 2003
To Whom It May Concern, I'm Richard Cotter, Senior Partner and
Director of Local Broadcast for Mindshare. We're one of the largest
buyers of time on radio and television stations in America.
I've been asked to weigh in on the question if Hispanics in the
United States represent a discreet market. The question is important
because it's being used in the analysis by the F.C.C. concerning the
proposed merger of Univision Communications and Hispanic
Broadcasting Corporation. There's ample evidence and factual
corroboration to conclude that the U.S. Hispanic media market is a
separate market.
First, the Hispanic media market is separated from the rest by
it's own radio and television stations broadcasting in their own
language. The Spanish language radio and TV stations serve a
distinct consumer base with different brand awareness, tastes and
preferences. To be sure it's a separate population with different
growth rates.
As the F.C.C. reviews the Univision/HBC merger I hope the
information highlighted here will help provide direction and the
right decision to this important question.
Sincerely.
Richard Cotter
Senior Partner, USA Director of Local Broadcast
May 2003
As a media executive, I've been asked to comment on whether the
US Hispanic media market is a separate market from the general
market. There is no question that the Hispanic market is indeed
separate and should always be considered as such.
There is ample evidence and factual corroboration to conclude
that this to be true. The language of preference for many Hispanics,
whether they are recent arrivals or US born, is Spanish. The
importance of the culture to Hispanics is such that parents instill
pride in language, customs, music and dance to their children. In
the mid seventies, the US had about 50 Spanish-language radio
stations in the entire country. Today over 600 radio stations dot
the landscape with stations cropping up in markets where just 10
years ago no one would have guessed the need for Spanish formats
would be.
The same holds true for Spanish-language TV. We've seen the
growth in the number of networks and independent stations
everywhere. Some markets, such as Chicago, Miami and Los Angeles
have at least five Spanish-language TV options.
The bottom line is, if you don't speak Spanish, chances are you
ignore Spanish-language media. Similarly, if you don't speak
English, or just simply prefer Spanish, chances are you ignore
English-language media. So if you're not speaking to me in the
language I prefer, I'm not listening to your message. Few
advertisers can afford to ignore this market.
There is no question as to the relevance of this market, and
ample evidence exists that it reached through Spanish-language
media.
Emma Moya
VP/Client Services, Amistad Media Group, 815 Brazos Street, Austin,
Texas 78701
May 21, 2003
Ladies and Gentlemen: I am the Marketing Director for the
Historical Museum of Southern Florida. My career in marketing and
advertising expands more than twenty years of experience in TV,
radio and major publications in the Caribbean and United States.
I have been asked to offer some observations about whether
Hispanic media in the United States should be considered a separate
market venue from that of the general market. My answer is a
definite, si, por surpuesto.
For the last two decades, major U.S. corporations have debated
whether or not to consider Hispanics just a minority group who will,
in time, assimilate to the American culture or a growing consumer
powerhouse loyal to their ethinicity. Time has proven that the
latter is the correct assessment of this market. Almost everyday,
articles are published in major newspapers throughout the United
States confirming the importance of reaching Hispanics in their own
language, showing sensitivity to their particular customs.
The Hispanic market has evolved into a rich mosaic of cultures.
Each segment with its own set of goals, music preferences and
interests. There are two common denominators: Language and pride of
culture.
Endless research has shown time and time again that Hispanics
respond better when approached in espa[ntilde]ol. The message is
even more effective if it is tailored to their particular cultural
background. Hispanic media, particularly radio and TV play a key
role in the success of any promotional effort targeted to this
important market. Hispanics depend on radio and TV for their news,
entertainment and lifestyle trends. Hispanic radio and TV are their
emotional link to their roots.
Hispanic media, in particular radio and TV, has evolved into a
market in itself. Using the most efficient technology and combing it
with the characteristics of the Hispanics' simpat[iacute]a, makes it
stand out and be different from any other mass communication venue.
I trust that the views offered here may be useful in the
consideration of the U.S. Hispanic media market as a separate and
relevant venue.
May 27, 2003
To Whom it May Concern: My name is Pat Delaney. I am President
of DMA and have been in the advertising industry for over 27 years.
I have planned and purchased all mediums throughout the US for
clients such as: Reebok, Wendy's International, BMW, AutoNation,
Terminix, Rite Aid Drugs, Toys R Us, just to name a few.
I have been asked to comment on whether the US Hispanic media
market is a separate market. Also, whether there is ample evidence
and factual corroboration to conclude that the US Hispanic media
market is a separate market:
The US Hispanic market is a separate market. Hispanics listen
and watch various mediums differently than Anglos. With the
available research on Hispanics, it clearly shows that while many
Hispanics are bilingual, they still speak Spanish at home and do
listen or watch Hispanic radio or TV. It's also substantiated by
research that the number one radio or tv station in a given market
(eg. Los Angeles, Miami, etc.) is Hispanic. This reflects all
stations in a market, not just Hispanic and indicates to an
advertiser that a large percentage of their potential customers are
being missed if Hispanic media is not being purchased. In many
markets, Hispanics account for over 50% of the market.
Over the years I have found that with the available research an
advertiser can effectively reach their potential customers by using
both Hispanic and Anglo mediums. The research provides duplicated
and unduplicated listenership/viewership of the media purchased to
assure full coverage of
[[Page 66867]]
both Hispanics and Anglos. Without this research it would be a shot
in the dark.
I hope this information provided will be useful in the
consideration of the US Hispanic media market as a separate relevant
market.
Sincerely,
Pat Delaney
May 23, 2003
To: Federal Communications Commission, Honorable Michael Powel
I am Mike Herrera. My experience is Florida Distributor
Coordinator. I have worked in the Florida Market for 17 years in the
beer Industry. Fourteen years with Anheuser Busch and the last three
with Presidente U.S.A. Presidente Beer is one of the leading beers
in the U.S. that markets to Hispanic consumers across the country.
I have been asked to comment on whether the U.S. Hispanic media
market is a separate market.
There is ample evidence and factual corroboration to conclude
that the U.S. Hispanic media market is a separate market. Research
companies such as Simmons measures media habits, product and service
usage, demographics and psychographics of Hispanic consumers across
the country.
In addition to the Nielsen media research is one of the market
leaders in terms of providing quality measurement of Hispanic TV
audiences.
When Presidente Beer commences its marketing planning and
forecast our strategic approach is to identify the key markets
within our Demographic group and separate within each market the
hispanic and general market. This strategic marketing approach is
used in all of our key markets across the United States.
I hope the information provided will be useful in the
consideration of the U.S. Hispanic media market as a separate
relevant market.
Sincerely,
Mike Herrera
Presidente U.S.A.
To: Ana Figueroa
From: Nelson Quintero
Date: May 22, 2003
Re: Hispanic Survey
In reference to your questions regarding the Hispanic media
survey my personal opinion is that Hispanic media should be
maintained separate from the general market. The Hispanic market is
a different segment and should be targetted differently. In the beer
industry we face these challenges everyday trying to cross over to a
complex ethnic market with such a Latin American influx and
diversity. We are struggling trying to convey the same message.
In reference to Radio, the audience of most listeners are
probably working people or traveling in vehicles. During the most
busy traffic hours and lunch time most people are listening to the
radio. This is a key time for messages and commercials to get
across. For example; lunch hour at any restaurant, bar or
caf[eacute] usually has a radio station playing. I think today's TV
viewer's are looking for specific shows, movies or the nightly news.
Ana, I hope this information helps you with your survey and
please understand this is my opinion and not of Labatt USA.
Sincerely Yours,
Nelson Quintero
District Manager Southeast Florida
May 21, 2003
Federal Communications Commission
445 Twelfth St. South, Washington, DC 20554
To Whom It May Concern: My name is Marci Neill I am the
advertising coordinator for Glendale Nissan/Infiniti.
I have been asked to comment on whether the U.S. Hispanic media
market is a separate market, for the purpose of assisting the FCC in
its ongoing review and analysis of the pending merger of Univision
Communications and Hispanic Broadcasting Corporation.
The first and most obvious example would be separate languages.
From there the list goes on and on to include the following,
separate location, population, growth rate, income level, brand
preferences, and cost basis, to name just a few of the reasons why
as an advertiser it is critical to able to target Hispanic media,
both TV and Radio as a separate market.
I hope the Commission will take these factors into consideration
when reviewing the Univision/HBC merger.
Sincerely,
Maric Neill
Advertising Coordinator.
To Whom It May Concern, my name is Jaime Amoroso, general
manager of Toyota of Manhattan. I've been in automotive sales for
over 15 years.
I've been asked to give my opinion on the question, ``Do
Hispanics in United States represent a unique market?'' The question
is been used in the consideration of the pending merged between
Univion Communications and Hispanic Broadcasting.
The answer is clearly ``YES''. While we are Americans we are
also Hispanics with so many different things that make us unique
such as the foods we eat, our traditions, our culture and so much
more. We have our own separate language with our own tastes,
preferences and brand awareness. We have our own population with
it's own unique growth rate.
We have distinct radio, television stations, and programs that
appeal specifically to us. These stations and programs broadcast
directly to our community in our language with it's own cost base,
discreet demographics and targets. It is unique and separate.
As the F.C.C. reviews the Univision/HBC merger I hope the
information highlighted here will help provide direction and the
right decision to this most important question.
Sincerely,
Jaime Amoroso
June 2, 2003
To Whom It May Concern: I've owned and operated a radio and TV
buying service in New York City for many years.
I'd like to share my thoughts with you concerning the Hispanic
market in the hopes my comments will be useful in the Commissions
consideration as it reviews the Univision/HBC merger. The central
point is the US Hispanic media market is a separate entity. First,
the radio and TV stations which make up this market deal a separate
consumer base and communicate to it in a different language.
Secondly, the markets population base differs as does its brand
awareness and cost structure.
Turn the channel-tune your radio. Your eyes and ears should
convince your mind and heart this truly is a distinct market.
Sid Paterson
Miami, May 21, 2003
To Whom it may concern: I am Gonzalo J. Gonzalez, Managing
Officer at BVK/Meka in Miami. My experience in the advertising
industry includes over 15 years working with most product categories
in the United States, Spain and Latin America.
BVK MEKA is one the leading Hispanic advertising and Public
Relations marketing firms, and the Hispanic Division of BVK in
Milwaukee, ranked among the top 50 Advertising Agencies in the
United States.
Our current client list for the US Hispanic market include
SouthWest Airlines, Sprint PCS, Pfizer, South East Toyota,
Samsonite, Samsung and the Florida Anti-Tobacco campaign among
others.
I have been asked to comment on whether the U.S. Hispanic media
Market should be considered as a separate market. Not only for the
proven effectiveness of the Spanish Language in communicating
messages, but also because of the different media habits and
cultural relevance of programming, the Hispanic media is and should
be considered separate when planning, buying and evaluating
broadcast media.
This fact has been proven by numerous research developed by the
most prestigious research companies, such as Nielsen, Roslow
Institute, Scarborough, Strategy research, among others.
As a result of this, companies that measure and monitor
broadcast media, such as Nielsen and Arbitron, has adapted their
methodology in term of measuring Hispanics across the country,
publishing separate Hispanic books with the results of their
surveys.
I hope the Point of View will be useful in the consideration of
the U.S. Hispanic media market as a separate relevant market, and
feel free to contact me should you need to further discuss this
matter.
Sincerely,
Gonzalo J. Gonzalez,
Managing Officer.
May 21, 2003
Federal Communications Commission
445 12th Street, SW., Washington, DC 20554
To Whom It May Concern: It is with great concern that our firm
has approached you regarding the proposed merger between HBC and
Univision.
As a boutique firm in Coral Gables providing counsel in the
areas of Advertising, event marketing and public relations, we
foresee the ramifications of this proposed merger. We are a young
firm, comprised of individuals who have been active in the
advertising industry in the South Florida
[[Page 66868]]
marketplace for over a decade, particularly in Hispanic media. We
live in this market, and understand the unique elements it's
comprised of including how cyclical it is. The South Florida market
will severely suffer if this merger happens.
Our philosophy rests on the shoulders of innovation and we stand
strong in our focus on providing unique and cost effective methods
for our clients to achieve their marketing goals. However, we
believe that the uniting of the nation's number-one Spanish-language
television operator and the number-one Spanish-language radio owner
resembles the Clear Channel model. Formulas such as this have truly
made it difficult for agencies and local businesses such as ours to
thrive in a marketplace where as it relates to placing media, there
are very few competitors.
We are convinced that with such a merger taking effect, many
areas of our industry will be directly affected. Our concerns are
the strong negative effects on both the general as well as the
Hispanic market. We are specifically concerned about the business
practices and methodology that will ultimately impact the consumer.
We would also like to comment on the issue of whether the
Hispanic media market is a separate one. Our firm firmly believes it
is. Just to begin, this is a market that has its own consumer base
that possess their own tastes, brand awareness, brand preferences,
media, cost basis, population and language. How can one ignore the
facts listed above? Including both television and radio, it is
evident that this market has its own unique set of separate
characteristics, its own buying power, and its own consumer
psychographics.
We implore the Commission to consider the ample evidence
aforementioned. My firm could not feel more strongly about this
matter. We respectfully seek your assistance in protecting the
industry comprised of agencies and advertisers alike who realize how
critical this matter is and how this proposed merger will affect the
future of our industry. We trust in the judgment of the Commission
and rely on its plight to protect the overall public's interest.
Please take our plea into consideration. If need be, our firm is at
your disposition as it relates to the Commission's consideration of
the U.S. Hispanic media market as a autonomous market and its review
of the Univision/HBC merger.
Sincerely,
Liza M. Santana,
President, Creativas Group Inc.
May 22, 2003
To Whom It May Concern: As an advertising agency in the South
Florida market for over 7 years, and as an advertising professional
for over 13 years, I am always asked the same question from many of
my advertisers: ``How can I reach the Hispanic market?''
The question would seem to have a simple answer: ``Just through
some budget dollars to a couple of Hispanic stations, translate our
current spot (some advertisers actually use their English spot in
Spanish language stations), and go with it!''
The more I see the situations occur, the more I realize that
there are still many people in South Florida and the U.S. that still
don't get it.
The Hispanic market is more than just a true and separate market
from the general market. It has several ``sub-markets'' within
itself. It is more suffice to think that with just one campaign, or
one spot, or one theory, we can reach the entire Hispanic market.
Hispanics in the U.S. are truly diverse. South Florida alone has
possibly the most diverse Hispanic market in the country, comprised
mostly of people from the Caribbean, Central and South America.
Unquestionably, the same applies to all the Hispanic markets
across the U.S. Hispanics have become an important part of our
population with their rapid growth, as well as their increasing
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