Searching over 5,500,000 cases.


searching
Buy This Entire Record For $7.95

Download the entire decision to receive the complete text, official citation,
docket number, dissents and concurrences, and footnotes for this case.

Learn more about what you receive with purchase of this case.

UNITED STATES v. NATL. ASS'N OF BROADCASTERS

March 3, 1982

UNITED STATES OF AMERICA, Plaintiff,
v.
NATIONAL ASSOCIATION OF BROADCASTERS, Defendant.



The opinion of the court was delivered by: GREENE

 This action involves the application of the antitrust laws *fn1" to certain advertising standards adopted by the National Association of Broadcasters (NAB) for television networks and local television stations. The provisions under challenge in this lawsuit, inter alia, impose limitations upon the number of minutes per hour a network or station may allocate to commercials; the number of commercials which may be broadcast in an hour of television time; and the number of products which may be advertised on certain types of commercials.

 Both parties have moved for summary judgment. In its motion, the NAB defends the provisions at issue as simple, voluntary guidelines which, in the public interest, set sensible limits on the commercialization of television. The government replies that the standards, far from serving the public interest, have as their actual purpose and effect the artificial manipulation of the supply of commercial television time, with the end result that the price of time is raised, to the detriment of both advertisers and the ultimate consumers of the products promoted on the air.

 For the reasons elaborated on below, the Court concludes that none of the defenses asserted by NAB in support of the entry of summary judgment in its favor has merit. See Parts VI through IX infra. The government has presented persuasive arguments in support of its motion indicating that the NAB standards represent a broadcast industry combination which has the effect, and possibly the purpose, of raising the price of commercial time, and summary judgment will be entered in its favor as to one of the three sets of standards at issue. See Part V infra. Determination of the validity of the remaining two groups of standards must, however, await the presentation of evidence by the parties at trial. See Parts II through IV infra.

 I

 The National Association of Broadcasters is an industry trade association whose membership includes the three major commercial television networks and over five hundred individual television stations. Since 1952, it has sponsored a Television Code *fn2" which provides broadcasters with guidelines for meeting their statutory obligation to serve the public interest. *fn3" Any television station, whether or not a member of NAB, may subscribe to the Code. *fn4" In 1978, over 65 percent of all commercial television stations did so subscribe, and these stations accounted for an estimated 85 percent of all television viewing. *fn5" Subscribers are permitted to display the "NAB Television Seal of Good Practice." *fn6"

 The NAB Code Authority is charged with enforcing the Code and monitoring subscriber compliance. *fn7" If found guilty, after a formal hearing, of violations of the Code, a subscriber may be suspended. *fn8" Alleged violations are investigated by the Television Code Board, and the final decision concerning suspension is made by NAB's Television Board of Directors. A suspended subscriber loses the right to display the seal of good practice. *fn9"

 The Code includes a variety of standards governing television programming and advertising. *fn10" The government here charges that three types of advertising standards violate the antitrust laws. *fn11"

 The first set of rules which are claimed to violate the law (referred to herein as the time standards) are those Code provisions which limit the amount of commercial material *fn12" which may be broadcast each hour. *fn13" The provisions limit network-affiliated stations to 9-1/2 minutes of commercials per hour of prime time *fn14" (plus 1/2 minute for promotional announcements) and 16 minutes per hour at all other times. Independent stations are allowed more advertising time, and the amount of such material on children's programs also has a different time limit.

 The second group of provisions under challenge (referred to herein as the program interruption standards) set a maximum limit on the number of commercial interruptions per program *fn15" as well as on the number of consecutive announcements per interruption. *fn16" In general, network-affiliated stations may interrupt prime time programs four times per hour; they may schedule a maximum of five announcements consecutively within an interruption (of which four may be commercial announcements); and they may schedule three announcements consecutively within each station break. Public service announcements do not count toward these limits.

 The third Code provision challenged in this action (referred to herein as the multiple product standard) prohibits the advertising of two or more products or services in a single commercial if that commercial is less than sixty seconds in duration. *fn17"

 In passing on the motions for summary judgment, the Court must determine, with respect to each of the three sets of Code provisions at issue, whether either party has established its entitlement to a judgment in its favor at this stage of the proceedings. If neither the government nor defendant can demonstrate such entitlement, a trial is required. Summary judgment may not be granted if there is a "genuine issue as to any material fact." Rule 56(c), Federal Rules of Civil Procedure. If material facts adequate to a final decision have not been developed or if the facts remain in dispute, summary judgment is inappropriate. See, e.g., Nixon v. Freeman, 670 F.2d 346, 216 U.S. App. D.C. 188, slip op. at p. 34 (D.C. Cir. 1982); Worthen Bank & Trust Co. v. Nation Bankamericard, Inc., 485 F.2d 119 (8th Cir. 1973); 10 C. Wright & A. Miller, Federal Practice and Procedure § 2725, p. 501 (1973).

 Beyond that, the Supreme Court has cautioned that, because of the many novel and complicated circumstances that are typically involved in antitrust litigation, summary judgment should not readily be granted in such litigation. Poller v. Columbia Broadcasting System, Inc., 368 U.S. 464, 473, 82 S. Ct. 486, 7 L. Ed. 2d 458 (1962). Even in antitrust actions, however, summary judgment may be appropriate where, unlike in Poller, motive and intent are not centrally involved. White Motor Co. v. United States, 372 U.S. 253, 259, 83 S. Ct. 696, 9 L. Ed. 2d 738 (1963); see generally, 2 P. Areeda & D. Turner, Antitrust Law § 316 (1978).

 It is in light of these principles that the parties' motions for summary judgment must be evaluated.

 II

 Section 1 of the Sherman Act applies only to agreements which are "unreasonably restrictive of competitive conditions." Standard Oil Co. v. United States, 221 U.S. 1, 58, 31 S. Ct. 502, 55 L. Ed. 619 (1911). Over the years, two types of analysis have been developed to determine whether an agreement fits this standard. These may be summarized, as the Supreme Court did in National Society of Professional Engineers v. United States, 435 U.S. 679, 692, 98 S. Ct. 1355, 55 L. Ed. 2d 637 (1978), as follows:

 
In the first category are agreements whose nature and necessary effect are so plainly anticompetitive that no elaborate study of the industry is needed to establish their illegality -- they are 'illegal per se.' In the second category are agreements whose competitive effect can only be evaluated by analyzing the facts peculiar to the business, the history of the restraint, and the reasons why it was imposed.

 In its motion, the government argues that the NAB Code provisions constitute a per se violation of the antitrust laws or, in the alternative, that they are unlawful under the broader reasonableness, or Rule of Reason, analysis. The Court will first consider the government's contention that the time standards and the program interruption standards per se violate the Sherman Act. *fn18"

  There is no question that the fixing of prices is illegal per se. Catalano, Inc. v. Target Sales, Inc., 446 U.S. 643, 100 S. Ct. 1925, 64 L. Ed. 2d 580 (1980); United States v. Socony-Vacuum Oil Co., 310 U.S. 150, 60 S. Ct. 811, 84 L. Ed. 1129 (1940); United States v. Trenton Potteries Co., 273 U.S. 392, 47 S. Ct. 377, 71 L. Ed. 700 (1927). This per se rule is not limited to agreements which fix price directly; it extends to any agreement which "interferes with the setting of price by free market forces." United States v. Container Corp. of America, 393 U.S. 333, 337, 89 S. Ct. 510, 21 L. Ed. 2d 526 (1969); United States v. Socony-Vacuum Oil Co., supra, 310 U.S. at 221, 223. Included under this rubric of per se illegality are agreements between competitors which limit the production or supply of a product, the obvious reason being that an artificial limitation on supply normally has a direct effect on price. See United States v. Socony-Vacuum Oil Co., supra ; *fn19" Hartford-Empire Co. v. United States, 323 U.S. 386, 65 S. Ct. 373, 89 L. Ed. 322 (1945); United States v. Aluminum Co. of America, 148 F.2d 416, 445 (2d Cir. 1945); United States v. American Radiator and Standard Sanitary Corporation, 433 F.2d 174 (3d Cir. 1970); United States v. American Smelting & Refining Co., 182 F. Supp. 834 (S.D.N.Y. 1960).

 Relying upon these decisions, the government contends that, since the time and program interruption standards constitute an agreement limiting the supply of time for the broadcasting of commercial announcements, they fall squarely within the scope of the per se rule, and that judgment holding them to be violative of the antitrust laws should be entered without further inquiry. In the Court's view, such an approach is not justified with regard to these provisions.

 Per se rules are based upon broad generalizations about the effect of certain commercial practices. Continental T.V., Inc. v. GTE Sylvania Inc., 433 U.S. 36, 50 n. 16, 97 S. Ct. 2549, 53 L. Ed. 2d 568 (1977). They are designed to reach only those "agreements or practices which because of their pernicious effect on competition and lack of any redeeming virtue are conclusively presumed to be unreasonable." Northern Pacific Railway Co. v. United States, 356 U.S. 1, 5, 78 S. Ct. 514, 2 L. Ed. 2d 545 (1958). Because the per se approach does not allow the defendant to proffer explanations, *fn20" courts have been cautious in applying it, and the Supreme Court has in recent years emphasized the need for finding the requisite degree of perniciousness inherent in the challenged practice before judging it to be in the per se category. See Continental T.V., Inc. v. GTE Sylvania Inc., supra ; Silver v. New York Stock Exchange, 373 U.S. 341, 83 S. Ct. 1246, 10 L. Ed. 2d 389 (1963).

 For these reasons, it is generally held that the per se approach should be employed only after a determination that the theoretical generalization underlying the rule would probably apply in fact to the particular agreement at issue. United States v. Studiengesellschaft Kohle, M.B.H., 670 F.2d 1122, 216 U.S. App. D.C. 303, slip op. at pp. 16-17 (D.C. Cir. 1981); United States v. Realty Multi-List, Inc., 629 F.2d 1351, 1363 (5th Cir. 1980); Virginia Academy of Clinical Psychologists v. Blue Shield, 624 F.2d 476, 484-85 (4th Cir. 1980). Thus, the per se rule against price fixing should be limited to situations where the effect of the challenged practice is

 Broadcast Music, Inc. v. Columbia Broadcasting System, Inc., 441 U.S. 1, 19-20, 99 S. Ct. 1551, 60 L. Ed. 2d 1 (1979).

 The necessary corollary to these principles is that the per se approach is inappropriate in industries which possess characteristics which appear to contradict the anticompetitive effect presumed by the rule. See, for example, Broadcast Music, Inc. v. Columbia Broadcasting System, Inc., supra, 441 U.S. at 19-24, where the Court carefully examined the music licensing market and, upon finding that it had special characteristics, *fn21" declined to apply the per se rule although price fixing was implicated in the licensing agreement at issue. *fn22" The per se approach has also been rejected where the industry in question was subject to government regulation, because such regulation might, again, endow the industry with special characteristics that could well affect the generalization underlying the per se rule. See Silver v. New York Stock Exchange, supra ; Jacobi v. Bache & Co., 520 F.2d 1231, 1237-39 (2d Cir. 1975).

 The per se rule is thus inappropriate in a supply limitation case if the industry which is the subject of the litigation possesses attributes which in a fundamental way contradict the assumed link between supply and price that underlies the per se treatment of supply restrictions. See note 52 infra. An examination of television broadcasting reveals that it possesses unusual characteristics which may be disruptive of that linkage.

 In the first place, the broadcast media pose "unique and special problems" because they are "subject to an inherent physical limitation. Broadcast frequencies are a scarce resource; they must be portioned out among applicants." Columbia Broadcasting System, Inc. v. Democratic National Committee, 412 U.S. 94, 101, 93 S. Ct. 2080, 36 L. Ed. 2d 772 (1973). See also Red Lion Broadcasting Co. v. FCC, 395 U.S. 367, 388-89, 89 S. Ct. 1794, 23 L. Ed. 2d 371 (1969); National Broadcasting Co. v. United States, 319 U.S. 190, 226-27, 63 S. Ct. 997, 87 L. Ed. 1344 (1943). *fn23" There is also the somewhat related factor that, unlike most industries, broadcasting is faced with an absolute physical limitation on its product; there are, after all, only sixty minutes to each hour. *fn24" Like the absolute limit on the size of the broadcast spectrum, this factor is, at a minimum, an unusual complication to be taken account of in an antitrust analysis. Finally, the industry is subject to government regulation and, in order to retain their licenses, broadcasters must operate their stations in the "public interest." See note 3 supra ; see also Red Lion Broadcasting Co. v. FCC, supra. Because of this public interest requirement, the amount of time which may be devoted to commercials and other nonprogram material is necessarily limited. See 47 C.F.R. § 0.281(a)(7) (1980), as amended 46 Fed. Reg. 13888 (1981); In re WMOZ, Inc., 36 F.C.C. 201, 241 (1964).

 These factors on their face appear to limit the free play of market forces in the broadcasting industry so that, even in the absence of the Code, the supply of commercial time might not, or perhaps could not, expand in response to a high demand. Since it may well be that on this basis the supply of broadcast time does not result from the NAB Code but from unrelated factors, it would be improper to presume conclusively that the time and program interruption provisions have the effect on the price of commercial time which the per se rule seeks to prevent. In short, the per se rule is not logically, and hence not legally, applicable. *fn25" It follows that a broader inquiry than is possible under that rule is necessary to determine whether the time and program interruption standards actually have an anticompetitive effect. That analysis must and will be conducted under the Rule of Reason doctrine.

 III

 The basic inquiry under the Rule of Reason *fn26" is "whether the challenged agreement is one that promotes competition or one that suppresses competition." National Society of Professional Engineers v. United States, supra, 435 U.S. at p. 691. See also White Motor Co. v. United States, supra, 372 U.S. at pp. 261-62; Chicago Board of Trade v. United States, 246 U.S. 231, 238, 38 S. Ct. 242, 62 L. Ed. 683 (1918). In making this determination, the Court must examine all the evidence regarding the impact of the agreement upon competition, including "facts peculiar to the business to which the restraint is applied; its condition before and after the restraint was imposed; the nature of the restraint and its effect, actual or probable." Chicago ...


Buy This Entire Record For $7.95

Download the entire decision to receive the complete text, official citation,
docket number, dissents and concurrences, and footnotes for this case.

Learn more about what you receive with purchase of this case.