Clear Channel Communications, the country's largest radio broadcaster and the dominant player in the live entertainment concert business, is drawing fire from some Washington regulators.
With holdings that include approximately 1,225 radio stations and 130 concert venues, the company in recent years has amassed unparalleled power in the music and entertainment industries. That power -- and what it means for the music business, as well as for Clear Channel competitors -- has been the topic of heated debate within the music industry for the last year.
Critics insist Clear Channel's size and hardball business policies have effectively shut down competition. Yet company officials deny any wrongdoing and suggest that the charges are being made by competitors hoping to distract the multi-billion dollar media giant.
Still, the allegation of unfair practices seems to be gaining some currency inside the Beltway. Last week, Rep. Anthony Weiner, D-N.Y., became the second congressman this year to write to the Department of Justice and ask for an investigation of Clear Channel's practices.
Also last week, the Federal Communications Commission took the rare step of denying a Clear Channel station purchase. Citing concerns about media concentration, the FCC designated one of its administrative law judges to hear the issue -- the first time that's been done in more than 30 years.
At the same time, the FCC is weighing evidence submitted last year that Clear Channel illegally "parks" or "warehouses" radio stations it's not allowed to own, by selling them to front, or shell, companies. Clear Channel executives adamantly deny the charge, but a former Clear Channel employee now tells Salon the practice goes on in the open.
The accusations indicate a new wave of scrutiny for the billion-dollar media giant.
"The question is, when does being an aggressive company trying to do a good job controlling market share for stockholders, when does that become anti-competitive?" asks Weiner, a member of the Judiciary Committee. In writing to the Department of Justice, Weiner suggested Clear Channel's dominance of the concert business is "harmful to consumers, venue owners and artists."
In January, Rep. Howard Berman, D-Calif., wrote to both the Justice Department and the FCC, urging them to examine several of Clear Channel's business practices. Both agencies responded, telling Berman they were willing to move forward with investigations if they receive evidence of wrongdoing, and would be willing to review any evidence his office receives.
As for Weiner, he says if the Justice Department tells him it has examined the company and is satisfied there is no wrongdoing, he and Berman will likely push for a congressional hearing. Although the House of Representatives and its committees are controlled by Republicans -- who traditionally see no problem with media consolidation -- Weiner says it's "not beyond reason" to suggest a Clear Channel hearing could be scheduled this year.
Weiner's letter centered around a specific allegation involving Clear Channel and how it was able to take a venue contract away from a competitor. The specifics are somewhat complicated, but the allegation is straightforward: When a rival beat out Clear Channel in its attempt to buy a New York-based concert promoter, Clear Channel tried to thwart the deal by turning around and poaching one of the promoter's most important assets, a county-run outdoor amphitheater, with an overly generous contract bid that will cost Clear Channel money in the end.
"We all understand we're competitors and competition is rough, but to us this was completely unparalleled," says Tom Etter, senior vice president of Covanta Energy, which at the time was the majority owner of the Metropolitan Entertainment Group, the New York concert promoter Clear Channel bid on. Clear Channel lost out to Mitch Slater, a well-known New York promoter, who bought Metropolitan.
Then, within weeks of losing out to Slater in February, Clear Channel signed a contract with Lackawanna County in Pennsylvania to operate and book its Montage Mountain Performing Arts Center near Scranton, Pa. The 18,000-seat amphitheater, which Metropolitan helped build and operated exclusively for the last two years, was one of Metropolitan's biggest moneymakers and a key component in Slater's offer to buy the company. "When we called to tell Clear Channel we had decided to go with Mitch Slater they were pretty upset. I heard from many people inside Clear Channel that Mitch would be a formidable competitor and would cost them money. Because if Clear Channel's got to bid for concerts against somebody with a good reputation, like Mitch, it's going to cost them money," says Etter.
Etter accuses Clear Channel, which had just reviewed Metropolitan's financial records for its unsuccessful bid on the company, of taking a loss at Montage Mountain in order to sabotage the Slater/Metropolitan deal and to lock out a competitor. "That was their motivation," says Etter. "Clear Channel hoped the Metropolitan deal would fall apart and it could pick up the pieces. They can't make money off the Montage contract, which will probably lose money every year. So why would they do that? There has to be another motive other than profits."
That allegation is what caught Weiner's attention: "When you start to make deals not in your self-interest and take losses in order to box out the competition, that starts to rise to the level of anti-trust behavior," he says.
A Clear Channel spokesman points out it was the county, unhappy with its Metropolitan relationship, that contacted Clear Channel about taking over Montage Mountain.
He calls the allegation that Clear Channel is willing to lose money on the deal "unfounded," adding, "We're a public company, we're not going to lose money on a facility for the sake of a small competitor. To suggest we've done something wrong here is absurd."
Metropolitan has sued Clear Channel, as well as the county, and is trying to retain exclusive rights to promote Montage Mountain through a court injunction.
Meanwhile, the allegation that Clear Channel "parks" or "warehouses" stations won't go away. Competitors insist the company, as a way to get around ownership limits, has sold off stations to front companies that allow Clear Channel to continue operating the properties. And more important, the shell companies would allow Clear Channel an easy way to buy back the stations if the FCC were to further reduce ownership limits.
"You can only own so many stations in a market. That's the spirit of the rule. Everybody else is playing by the spirit and Clear Channel is allowed to circumvent it," complains one manager who oversees a handful of stations in a top 25-size market. "Everybody's scratching their heads asking, 'How can they do this?' and, 'What is it going to take to get the appropriate government agency to pay attention?'"
As Salon first reported last November, an advertiser in the small Ohio market of Chillicothe filed a petition with the FCC, urging that it deny Clear Channel's proposed purchase of a local country music station, WKKJ. The advertiser, David Ringer, argued the acquisition would give Clear Channel control of all four of Chillicothe's commercially licensed radio stations and would be able to drive up advertising rates. Perhaps more important, Ringer also alleged that Clear Channel has been illegally operating the station for years through a shell company.
Clear Channel answered with its own FCC filing, dismissing Ringer's "scattershot" and "inconsequential" charges. Company executives insist every station transaction they've made has been proper and legal, and that Clear Channel does not try to hides its properties.
Still, in an interview with Salon, a former Clear Channel employee from the Chillicothe area says it was common knowledge among staffers that Clear Channel operated WKKJ.
"It was like a running joke," says Nick Ramsey, who worked for Clear Channel station WSRW and left voluntarily last June. He currently works at WVNU, an independently owned station in nearby Greenfield, Ohio.
Although technically WKKJ had different owners, the feeling among staffers at Clear Channel's nearby stations was that WKKJ was part of the family, says Ramsey. "It never took on the appearance of that was the enemy or a competitor. It was just the other station in town. There was a consensus that something was going on [at WKKJ] but nobody wanted to ask what."
Ramsey says Dan Latham, Clear Channel's general manager who oversaw seven stations in the Ohio region, was on the phone "daily" with WKKJ's G.M. offering advice, and that in 1999 when Concorde Media, the alleged shell company, took control of WKKJ, a Clear Channel engineer was at the station to help solve some technical difficulties.
Ramsey became concerned about the casual overlap with WKKJ because, like all Clear Channel employees, he had signed a noncompete agreement, forbidding him from working for any competing radio stations. Ramsey says he asked his Clear Channel boss if employees weren't violating company policy by doing work for WKKJ, but he did not get an answer.
"It just seems like Clear Channel is overstepping the bounds in Chillicothe," says Ramsey. "They look at what the FCC rules are and bend and shape them as they see fit to get the greatest gain."
Latham could not be reached for comment. A spokesperson for Clear Channel's radio division also could not be reached.
The specifics of Chillicothe may seem minor, considering that Clear Channel operates 1,225 stations in nearly 300 different markets. And in its response to the FCC, the company argues that whatever mix-up may have occurred at WKKJ was due to a "clerical error" committed by a company with such vast holdings. What could prove more damaging to Clear Channel is the allegation made by Ringer and his attorney that the radio giant, in its filings with the commission, has deceived the FCC in order to cover up the fact that it skirted ownership rules.
"The worst thing to do in a deregulated environment is to get caught lying," says Andy Schwartzman, president of the Media Access Project, a public interest group that has been critical of the FCC for not closely scrutinizing further media consolidation.
"When there's less regulation, the onus is on companies to be self-regulating. The FCC relies on people being truthful," says Schwartzman. "The one thing companies can really get in trouble for at the FCC, still, is lying."
In one example cited to the FCC, Ringer notes that Clear Channel filed an application for a license on behalf of what he calls a shell company. The application is signed by Clear Channel's vice president of engineering, as well as by Troy Langham, who lists his e-mail address as "Troylangham@clearchannel.com." Ringer argues that just days later, "realizing that it had made an error," another copy of the same document was filed with the FCC, but gone are signatures from Clear Channel's vice president, and Langham's e-mail address has been changed to "Troylangham@engineer.com."
Wrote Ringer: "Clear Channel's conduct demonstrated a clear intent to conceal material information from the FCC. In this case, and probably others, Clear Channel provided engineering services for front companies and then attempted to conceal its involvement."
The FCC did recently put Clear Channel on notice in a small way, even though it was unrelated to allegation of warehousing stations. Unable to find a public-interest reason to allow the company's proposed purchase of WUMX in Charlottesville, Va., to go forward, the commission announced the request would be decided during an administrative hearing in front of an FCC judge. It's the first time the commission has ordered a hearing to deal with market-concentration issues in a radio station sale since 1969.
The move "was probably a shot across the bow by the commission, an attempt to reassert their relevancy," says one longtime industry veteran who does business with Clear Channel. "The FCC's tired of being told they're toothless and want to show they're not." (In his New York Times column, conservative William Safire, criticizing the pace of media consolidation, recently mocked chairman Powell as a "roundheeled" pushover who's "steering the [FCC] toward terminal fecklessness.")
Others see the move as too little, too late. "It's so incredibly lame," says Schwartzman at the Media Access Project. "It's easy to pick single worst [application] and say we're going to make an example out of you and get a lot of press saying the FCC is cracking down. But how many hundreds of other transactions [like this] has the FCC approved?"
Last year, for instance, former FCC commissioner Gloria Tristani complained when her fellow commissioners, including chairman Michael Powell, OK'ed a station sale in Binghamton, N.Y. It gave just two radio broadcasters control of 91.2 percent of the market's advertising revenue. "Businesses and listeners will face the increasing likelihood that the two dominant owners will engage in advertising price discrimination and other collusive behavior that contravenes the public interest," wrote Tristani, who labeled the FCC's sale approval "regulatory malfeasance."
Yet suddenly the pending sale in Charlottesville, Va., which would have given two companies 94.2 percent market share, has been flagged for the first FCC hearing of its kind in 33 years.
Clear Channel, it seems, has landed on the Beltway.