Competition, Competitors and the Government's Suit against the Television Networks

• Date: 01 September 1977
• DOI: 10.1177/0003603X7702200302
• Author: Jay N. Fastow
• Published date: 01 September 1977
• Subject Matter: Article

COMPETITION,

COMPmTORS AND

THE

GOVERNMEN,T'S

SUIT

AGAINST

THE

TELEVISIO,N

NETWORKS

by

JAY

N.

FASTOW*

INTRODUCTION

On December 10, 1974 the Department of Justice filed a

civil

antitrust

suit against each of the three national tele-

vision networks in the District Court

for

the Central District

of California.' The complaints

are

the culmination of an in-

vestigation of the

industry

which began over 20 years ago."

They

are

substantially similar to a set of 1972 actions which

were dismissed "without prejudice," due to the Government's

failure to comply with discovery orders calling for the iden-

tification of presidential documents." The Department's ac-

tion is intended to supplement certain FOC orders issued over

the

last

seven years under

that

agency's concurrent jurisdic-

tion over the television industry.'

The gravamen of the essentially identical complaints is

that

the networks have violated Sections 1

and

2 of the

Sher-

man Act" by utilizing

their

control over access to network

air

time to unreasonably restrain,

attempt

to monopolize,

and

monopolize the production, distribution,

and

sale of prime-

time television entertainment programs. These results have

allegedly been accomplished by defendants' use of their down-

stream

power

to:

exclude from network broadcast those pro-

grams

in which the networks have no ownership

interest;

compel outside

program

suppliers to

grant

the networks

financial interests in shows

and

series which they accept

for

exhibition; refuse to offer

air

time to advertisers and other

outside programmers seeking to have their own productions

shown on the networks; and obtain competitive advantages

•J.D., Yale Law School, 1977.

517

518

THE

ANTITRUST

BULLETIN

over other producers and distributors of prime-time enter-

tainment shows."

In November 1975 the networks moved for summary judg-

ment. While these motions were pending, the United States

and

NBC signed asettlement agreement.' On

February

9,1977

Judge

Kelleher denied the remaining defendants' motions. In

a one-page, unpublished opinion he found material issues of

fact and recognized the courts' general reluctance to

grant

summary judgment in complex

antitrust

litigation. Accord-

ingly, the cases against ABC and CBS will proceed to

trial

on the merits.

The Government's charges relate directly to the two major

motifs in

antitrust

law. One theme involves the desire to pre-

vent practices which injure competition, i.e., which

are

dele-

terious to economic efficiency,

proper

resource allocation, and

consumer welfare. The other is concerned with the protec-

tion of competitors; its object is to prevent firms

from

fore-

closing rivals from the opportunity fully to participate in the

market," Often the two overlap; by creating

barriers

to entry

or limiting the number of buyers or sellers, those who injure

competitors may also reduce efficiency.

But

the motifs can be

inconsistent as well. Guarding the interests of competitors,

e.g., small businessmen, may dictate the maintenance of rela-

tively inefficient units in the industry and thus diminish over-

all consumer satisfaction. The "competition" analysis held

the stage for much of the early history of

antitrust

law in this

country. The courts' emphasis on

that

formulation has de-

clined somewhat in the

past

few decades, however, and the

"competitor" theme seems to be predominant today in many

areas, especially those concerning vertical relationships. Not-

withstanding this trend, the Government may argue

its

cause

and

the court may test the merits of plaintiff's allegation on

either or both of these grounds.

'The purpose of this article is to analyze the

Justice

De-

partment's case. A discussion of the milieu in which

the

net-

works and

program

suppliers operate and the practices of

which the Government complains is essential to this goal. So