An Arkansas law firm has filed a proposed antitrust class action lawsuit in which it alleges defendants Sinclair Broadcast Group, Tribune Media Company, Tribune Broadcasting Company, LLC, and as many as 20 yet-unnamed companies have illegally colluded to fix and maintain supracompetitive prices in the television advertising market.
For context, the lawsuit explains Sinclair is the largest owner of broadcast TV stations in the United States, with 193 stations in roughly 90 cities under its purview. For its part, Tribune owns 43 stations in approximately 35 cities, according to the suit.
“Together,” the complaint reads, “advertising on [the defendants’] stations reachesover 80 percentof all homes in the nation.”
The plaintiff firm alleges in the 32-page complaint that the defendants—who have been in thenewsin recent months over Sinclair’salleged political leaningsand now face aJustice Department probein the wake of the companies’ failed proposed merger—conspired to fix prices for commercials to be aired on TV stations across the country. Instead of competing with each other on advertising sales prices as would traditional horizontal competitors, the alleged co-conspirators shared proprietary information that allowed them to effectively snuff out market competition, the suit says.
Like a good number of other broadcast TV companies, the complaint goes on, the defendants have experienced “significant slowing in revenue growth” in recent years due to increased competition for advertising dollars. Much of this competition, the suit adds, comes from online ad publishers like Google and Facebook.
The suit alleges that as a means to stop the bleeding, companies like the defendants have sought out mergers with and/or acquisitions of other television broadcasters. Such transactions, however, are subject to stringent Federal Communications Commission (FCC) rules that prohibit companies from “individually owning a group of broadcast stations that enables them to reach more than 39 percent of all U.S. television households,” the lawsuit states. These restrictions pose a problem for companies that look to increase revenue through mergers and acquisitions, per the suit.
“Given this, [the defendants] and their co-conspirators have responded to decreased advertising spending in another way—by colluding on pricing for television advertising, allowing them to artificially inflate such pricing above competitive levels,” the lawsuit alleges.
Together, Sinclair and Tribune ultimately sought to charge supracompetitive prices they otherwise would not have been able to charge on their own without risking losing customers, the lawsuit alleges. The plaintiff law firm is a member of a proposed class of direct purchasers of TV advertising who bought airtime from one or more of the defendant companies since at least 2016.