Broadcasting Telecasting (Oct-Dec 1963)

maintaining high prices, discouraging new entry [into the market] and, in general, impairing, not promoting, socially useful competition. "In sum, the undue emphasis on advertising which characterizes the liquid bleach industry is itself a symptom of and a contributing cause to the sickness of competition in the industry. Price competition, beneficial to the consumer, has given way to brand competition in a form beneficial only to the seller. In such an industry, cost advantages [as P & G-Clorox allegedly enjoy] that enable still more intensive advertising only impair price competiton further; they do not benefit the consumer." TV Benefits ■ The FTC decision, written by Commissioner Philip Elman, declared the merger illegal because it gave P & G-Clorox an unfair advantage in competing with other liquid bleaches because of the size of P & G's total advertising budget. The acquisition gave Clorox important advantages in TV advertising, not available to competitors selling identical chemical products. P & G receives the maximum volume discounts available in television, Commissioner Elman said, and with Clorox part of the P & G product line, Clorox can now obtain at least 33 1/3% more television time for the same expenditure required before the merger. Procter & Gamble's television billings in 1962 totaled $112 million, with $60 million in spot, for all its products including Clorox. "When we reflect that Purex Corp. [Clorox's major competitor], with total sales of almost $50 million in 1957 . . . was evidently unable to obtain any but the minimum volume discounts avail able to large television advertisers, we can only conclude that the large-scale advertising 'economies' involved in this case represent price concession available only to giant firms," the FTC said. Before P & G took over the company in 1957, Clorox was not eligible for any TV discounts since it placed only about $1 million annually, the FTC said. During this same period, Purex received a 15% discount from one network on $2.4 million annual billing and 6% from a second network on a billing of $1.4 million. The point has been reached in the Mr. Morgens An appeal to courts liquid bleach industry at which product identification ceases to promote consumer welfare and becomes wasteful, with mass advertising merely entrenching market leaders, the decision concluded. Clorox, through P & G's large TV expenditures, has gained the additional advantage of program identification which its competitors cannot afford, Commissioner Elman said. A commercial during a program break is "substantially more effective in promoting a product than one during the between-program station break," he said. Clorox, before its acquisition by P & G, could not afford this identification with programs. P & G, "however, can and does buy the sponsorship of such programs in behalf of several of its products . . . and Clorox can realize the advantages of network program advertising at a fraction of the cost that would have been required prior to the merger." Sectional Spots ■ Another unfair advantage for Clorox is that P & G can run commercials for different products in different sections of the country during a single commercial break, the FTC said. "Clorox thereby gains the advantage of association with network television while actually limiting its advertising expenditures to selected regional markets." At the time of the merger, Clorox commanded 50% of all liquid bleach sales with Purex claiming 15%, according to the FTC decision. The decision, which is already being called a landmark case, is the culmination of nearly seven years of litigation. The trade commission first issued its complaint shortly after the 1957 merger. A long series of hearings and two initial decisions preceded last week's final order. the minority views. Signers included Representatives Abner W. Sibal (RConn.), the only Republican; Harley O. Staggers (D-W. Va.), Torbert H. Macdonald (D-Mass.), John D. Dingell (D-Mich.), Robert W. Hemphill (DS.C.) and Lionel Van Deerlin CDCalif.). Power Is There ■ These members argued that the FCC had the power it needed to proceed with a rulemaking on commercials and that such action "could clarify its policy in this important area." FCC Chairman E. William Henry had testified to the committee that the commission did not know what its commercial policy was. "Without any question," the majority said, the commission's power to properly review station commercial performance would not be diminished by enactment of the legislation. The proper occasion for review was on a periodic basis at renewal time, it said. "It must be admitted candidly that this regulatory pattern is difficult to administer," the majority continued. With a plug for self-regulation (the minority favors it, too), the majority harmonized with broadcasters on these themes: ■ No one criterion adopted by rulemaking can generally apply to all stations or classes of stations. ■ "Commission determinations of whether or not certain categories of stations or individual stations should be granted special treatment or individual exemptions would then involve the commission in the consideration of station revenues in a manner alien to the regulatory scheme adopted by the Congress." ■ The commission may neither substitute its own judgment on a day-to-day responsibility for that of the individual licensee nor of the community in which he serves. The majority concluded by underlining its earlier statement that its consid eration of the bill was not on the question of overcommercialization. However, it hinted, if the FCC really wants to get into that area, it should gather information and bring its case to the Congress with a request for remedial legislation. The minority's views were somewhat akin to the FCC's position, especially in agreeing that the commission has the authority to go ahead with its rulemaking. (All commissioners agreed on this point.) It also agreed with the FCC that it would be nice to know just what it — and the Congress's — policy is on commercials. The minority looks gloomily into the future: "In the absence of positive congressional action regarding overcommercialization, a vacuum is left, and in view of high prices paid for broadcast properties the trend is definitely in the direction of more and more commercialization. . . . Listeners and viewers are left without protection against BROADCASTING, December 23, 1963 31