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The Department of Justice is considering a novel antitrust theory that could make it tougher for Univision Communications Inc. to secure approval for its $2.4 billion acquisition of Hispanic Broadcasting Corp. Sources said the antitrust division may define a joint market for Spanish-language radio and television advertising. Such a move would represent the first time in an antitrust review that the Justice Department has included radio and television within the same market. Lawyers for the regulatory agency have tailored the procedural “second request” for more details on the deal to extract the data required to advance a single-market theory, sources said, but they have not made a final decision on whether to proceed with the controversial approach. Consideration of the joint-market theory adds a second antitrust hurdle to a deal that already was getting a careful review. Univision said it expects few problems completing the deal. “The companies intend to work with the DOJ,” Univision said in a statement. “The companies continue to expect the transaction to close by the end of the year.” Typically, a joint radio-television market would make it easier for merging media companies to secure regulatory clearance. That is because most television companies buy other television stations, while most radio companies buy other radio stations. So expanding the market to include both media would reduce overall concentration levels. In this case, the opposite would occur. The deal would represent the combination of the two largest Spanish-language broadcasters. Though market share data is confidential, sources said the resulting concentration levels would be well above the threshold that worries antitrust enforcers. Sources said the antitrust division is testing the legitimacy of its theory in just a handful of markets rather than in every market where Univision and HBC operate. If it finds that either company restrains the ability of the other to raise prices, then the agency is likely to oppose the merger. Robert Doyle Jr., a partner at Powell, Goldstein, Frazer & Murphy in Washington, D.C., said the Justice Department could establish a precedent for dealing with narrow advertising markets. “If you have a small segment of consumers, then television and radio may be alternatives,” Doyle said. “But if you have a broad market, they are less likely to be competitive.” Supporters of the deal argue that there is no reason to consider a joint TV-radio ad market for Spanish-language programming because it does not constitute a distinct segment from English-language programming. They note that more than 60 percent of Hispanics in the United States watch English-language networks. That means Univision is competing against NBC, ABC and CBS for television advertising dollars. Proponents also said that of the 350 advertisers participating in the “upfront” TV market, meaning ads sold before the start of the programming season, only 120 buy spots on Univision. That means the network is under pressure to lower rates to attract more of the upfront buyers, and it does not have the power to profitably impose a price hike. Albert Foer, president of the American Antitrust Institute, said what matters is the percent of Spanish-language viewers who watch only Spanish-language programs. If that amount is only, say, 5 percent, of the viewing public, then effectively there is no separate Spanish-language market. But as the percentage rises, the question becomes harder to answer. “This is very fact-intensive,” Foer said. “These are the right questions to ask.” Even if the antitrust division drops the controversial joint-market argument, the companies could still encounter troubles. Univision owns a 30 percent stake in Entravision Communications Corp., a Spanish-language operator of 54 radio stations and 21 television stations. The television outlets are not expected to draw much regulatory interest — Univision already has its stake in Entravision, so the merger would not result in greater consolidation. But the radio stations could pose a problem. Univision and Entravision have competing stations in 12 markets, including Dallas, Los Angeles and Phoenix. Univision is expected to argue that its stake in Entravision is “passive,” so its stations should be excluded from the antitrust analysis. If regulators rejected that claim, then approval of the deal would likely require Univision to either unload its stake in Entravision or to sell HBC radio stations that compete with Entravision stations. Los Angeles-based Univision agreed in June to acquire Dallas-based HBC in a deal originally valued at $3.5 billion. Copyright �2002 TDD, LLC. All rights reserved.

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