Clear Channel Victory

Clear Channel appears to be beating back the host of single-station and small- group owners who have asked the FCC to stop what they say are strong-arm and illegal tactics by the radio giant, which has muscled its way to domination in many markets across the country.

On May 1, the FCC dismissed a petition to block its acquisition of an Ohio radio station on grounds that Clear Channel concealed it already was de facto owner of WFCB(FM) Chillicothe. Also, the FCC found that incomplete listings of Clear Channel properties in the Chillicothe area were not proof that the company intentionally misled the commission. Clear Channel, however, was admonished for sloppy paperwork.

An attempt to block another Clear Channel purchase also appears doomed after the federal appeals court in Washington cancelled May 6 oral arguments in Davis Broadcasting's attempt to undo Clear Channel's 2002 acquisition of six Cumulus outlets in the Columbus, Ga., area. Instead, judges will reach a decision without questioning the parties, which sources say indicates they will dismiss the case due to lack of standing by Davis.

Critics of media consolidation hoped the Georgia case would be a major test of the FCC's oversight of local marketing agreements (LMAs) and other partnerships that allow licensees to turn over aspects of a station's operation to a third party. Some advocacy groups complain that the partnerships allow conglomerates to illegally, and sometimes clandestinely, become de facto owners of more stations in a market than would otherwise be permitted.

If the judges toss out Davis's suit for lack of standing, Media Access Project President Andrew Schwartzman predicts there will be other challenges to the FCC's oversight of radio LMAs and unauthorized transfers of control.

Davis, which owns four stations in the market, unsuccessfully petitioned the FCC to block the Clear Channel purchase on grounds that Cumulus and then Clear Channel failed to disclose de facto ownership of two area stations owned by Solar Communications but operated under an LMA with the larger companies. The arrangements, says Davis, amount to an unauthorized transfer of control from Solar to the larger operators, a serious offense that could result in a license revocation. Attributing the Solar stations to the Cumulus/Clear Channel tally in Columbus would put both over the FCC's local-ownership limit, which in Columbus is six stations.

If the judges agree with Davis, the ruling could be a landmark case that could curtail the use of LMAs and force more investors to reveal the extent of their involvement in partnered stations. But lawyers on both sides of the case acknowledge that there's a strong chance the three-judge panel could throw out the case out on grounds that Davis has no standing to sue.

"If they reach the merits of the case, it could be a very, very significant development," said Schwartzman. "They could address a range of practices the FCC's Media Bureau has winked at for a long time."

The FCC, besides arguing that Davis has no grounds to sue since the acquisition did not diminish competition in the market, insists that similar allegations about LMAs and unauthorized transfers of control were not persuasive.

The FCC also rejected Davis's allegations that Solar's owner, Alan Woodall, intentionally failed to disclose an interest in a then-pending application for a construction permit in nearby Cusseta, Ga., or that Cumulus misrepresented an option to buy those interests.

Davis asserted that the FCC failed to rule on "substantial and material questions" on the qualification of Cumulus, which Davis attorneys dub the "800-pound gorilla of Columbus radio," to hold the Columbus licenses and therefore to sell them to Clear Channel.

The undisclosed construction-permit interests allowed Cumulus to use another's application as a "stalking horse" and undercuts the company's qualifications to hold licenses "anywhere," Davis's attorneys insisted.