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Hearst, Sinclair, Other Broadcasters Local Advertising Rates Antitrust Class Action

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Online media sites, such as Facebook and Google, have captured a great deal of advertising revenue that once went to television broadcasters. Broadcast audiences are also older than they used to be, as young people spend more time online and with cable television. The complaint for this class action claims that a number of broadcasters conspired to fix and/or raise prices for local advertising, in order to stop prices from falling.

The class for this action is all persons who bought local television advertising in the US directly from the defendants in this case, or any subsidiary, affiliate, or agent of the defendants, or any co-conspirator, between January 1, 2014 and the present.

The defendants in this case, Gray Television, Inc., Hearst Communications, Nexstar Media Group, Inc., Tegna Inc., Tribune Media Company, and Sinclair Broadcast Group, Inc. own television stations around the US. Each is affiliated with a network, such as ABC, CBS, NBC, Fox, or CW.

This relationship allows them to show the network’s programs and obligates them to run the network’s national advertising. However, time is allowed for the stations to sell and run local advertising, a big source of revenue for them.

Although different shows have different levels of popularity and therefore command different prices, rates are typically based on a system of Gross Rating Points (GRP). The complaint says that GRP is based on “the percentage of the market an advertisement is predicted to reach multiplied by the number of times the advertisement runs a week.” The reach of the ad is based on the Nielsen ratings during the same time the previous year. So an ad thought to reach 40% of a given market that runs five times a week has a GRP of 200.

GRP is the total number of “points” an advertiser buys. The amount required to buy one of these points is the Cost Per Point (CPP). This will vary by time of day and program, so that prime time and sports programs have the highest CPPs.

The complaint contends that the defendants avoided the downward pressure on prices by colluding to fix prices, so that buyers could not go to another station to get lower prices. This, the complaint says, deprived class members of the benefits of a truly competitive market and caused them to pay higher prices for advertising than they would otherwise have paid.

Those bringing this case are not the only ones to suspect antitrust behavior on the part of the television stations. On July 26, 2018, the Wall Street Journal said that the Department of Justice (DOJ) Antitrust Division is investigating local television advertising rates. The complaint says, “DOJ’s probe is reportedly focused on communications and the exchange of proprietary, competitively sensitive information between Defendants’ ad sales teams.”

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