Is Clear Channel playing a "shell game"?

Critics of the radio-industry giant charge that it is skirting federal ownership rules with puppet competitors.

By Eric Boehlert

Nov. 20, 2001 | Is Clear Channel Communications, the radio behemoth, playing a "shell game" with the Federal Communications Commission?

That's the charge an Ohio resident is bringing against the company, which, with nearly 1,200 radio stations, is far and away the radio industry's most powerful player.

Clear Channel became that big in a frenzy of consolidation in the last half of the 1990s, in the wake of the industry's deregulation brought about by the watershed 1996 Telecommunications Act. FCC rules limit companies from owning too many stations in one broadcast market, and the commission approved many of those consolidations on the condition that the ever-growing company divest itself of certain stations in some cities.

Now, voices are beginning to charge that Clear Channel may have in fact retained control of some of those stations -- an unprecedented flouting of commission rules.

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In August of 1998, during the height of this dizzying deal making, the antitrust division of the U.S. Department of Justice reached an agreement with a company called Jacor Communications: It could complete its $620 million purchase of a rival, Nationwide Communications, but only if Jacor agreed to sell off eight radio stations. This common DOJ requirement was to prevent Jacor, or any broadcaster, from dominating programming (and therefore advertising rates) in specific markets.

At the time, that sort of horse-trading was routine. Broadcast companies were figuring out how to acquire as many stations as possible without exceeding the FCC's station-ownership limits in any one market. (In big cities, broadcasters can own up to eight FM stations; the number goes down in smaller markets.) It was common for a company to agree to buy up a competitor's entire roster of stations, knowing it might have to shed some later in order to get a green light from the DOJ.

Jacor agreed to sell the eight stations to a competitor. One of the stations in question for Jacor was a country-music station with the call letters WKKJ in Chillicothe, Ohio, 40 miles south of Columbus. Later that year, Jacor itself was acquired by Clear Channel Communications, which agreed to honor the DOJ agreement concerning WKKJ.

Fast-forward to August 1999, when Concord Media, a small Florida-based radio company, entered into a time-brokerage agreement with WKKJ's new owners. The deal handed over day-to-day control of the station -- programming, advertising, promotions, etc. -- to Concord, which in exchange paid the station's real licensee a fee.

Meanwhile, Clear Channel still owned three of Chillicothe's four commercially licensed stations.

But now, in what may be the first FCC filing of its kind, a Chillicothe advertiser has petitioned the Federal Communications Commission, charging that WKKJ's Concord Media "is nothing more than a shell company operated entirely for the benefit of Clear Channel." The petition also alleges that Clear Channel has been "playing an elaborate shell game with its radio station assets" to avoid antitrust prosecution.

In other words, one year after promising the DOJ it would not operate WKKJ, Clear Channel effectively took control of WKKJ via Concord Media, the petition alleges, and now controls four stations in the market.

As evidence, the petition charges that Clear Channel employees work at every one of Concord Media's stations and that, according to Clear Channel's own FCC filings, WKKJ employees are paid by Clear Channel, not Concord Media.

A Clear Channel spokesperson had no comment. The company has until Dec. 5 to file its response with the FCC. Concord Media president Mark Jorgenson did not return a phone call seeking comment. According to FCC filings, Concord Media owns nine radio stations. Most of them were purchased from Clear Channel at times when the company had to divest stations. Jorgenson also runs his own media brokerage company, often handling station sales for Clear Channel.

The FCC complaint gives voice to a widely held, if previously only murmured, belief inside the radio business that San Antonio-based Clear Channel, known for its aggressive expansion strategy, has been openly skirting ownership laws. One frustrated California broadcaster tells Salon he recently met with FBI officials to lodge that complaint in his market.

Another broadcast representative tells Salon he recently had a confidential meeting with Justice Department officials where the same accusation -- phony radio holding companies working on behalf of Clear Channel -- was detailed. "They were clearly concerned," says the source.

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