Suits challenge Fox TV station, threaten license.

Suits challenge Fox TV station, threaten license

Two lawsuits filed against Fox Television could jeopardize the emerging network's license to operate Los Angeles television station KTTV, Channel 11. Walt Disney's Buena Vista Television and Hispanic-owned Rainbow Broadcasting have filed suits against Fox alleging that the Hollywood-based company is guilty of fraud and anti-competitive business practices.

The suits pit two entertainment industry behemoths at odds and casts Rainbow Broadcasting in the role of a David seeking to make off with Goliath's television broadcasting rights.

The Buena Vista suit was filed Feb. 21 in U.S. District Court in Los Angeles.

It charged Fox threatened to drop its independently owned affiliate stations if they renewed their subscriptions to "The Disney Afternoon," a popular two-hour children's program. Fox, which reportedly plans to launch its own afternoon show for kids during the same time block, is accused by Buena Vista of attempting to monopolize children's afternoon programming.

The suit points out that Buena Vista has evidence that Fox's alleged tactics are diminishing the market share for "Disney Afternoon." In the top 100 markets, 81 percent of non-Fox affiliates already carrying "Disney Afternoon" have renewed through the 1992-93 season, the suit claims. Yet, only 9 percent of Fox affiliates in those same markets already carrying the program have renewed. Buena Vista is requesting an unspecified amount of compensatory damages and a permanent injunction against Fox's alleged conduct in the matter. A statement issued by Buena Vista President Robert Jacquemin to independent television station executives said: "This fall, Fox is offering a single half-hour animated children's show. Next fall, it plans to offer a one-hour block. There is no reason, at least for the time being, that the Disney programming and Fox programming cannot co-exist. The current problem arises only because Fox is suddenly insisting that its affiliates air `Peter Pan' at 4:30 p.m., thereby forcing them to place blind faith in Fox's unproven programming and choose it over Buena Vista's programming of proven Disney hits."

Rainbow Broadcasting filed its own suit against Fox on March 1 and with the Federal Communications Commission. The Rainbow suit charges Fox with fraud and anti-competitive behavior. It requests that the federal agency's administrative court system strip Fox of its operating license and award it to Los Angeles-based Rainbow Broadcasting. The suit also asks that the FCC levy its maximum fine of $250,000 against Fox.

Fox officials did not return telephone calls to comment on the suits. Mace Rosenstein, the company's Washington, D.C.-based attorney, also declined comment. Rosenstein instead dispatched copies of Fox's response to the suits, but they did not reach the Business Journal before press time.

Rainbow attorney Robert Lewis Thompson, of the Washington law firm Pepper & Corazzini, told the Business Journal that Buena Vista's allegations against Fox are just the tip of the iceberg.

"These guys (Fox) have engaged in a lot of anti-competitive behavior," Thompson commented. "The anti-competitive behavior alone is probably sufficient to strip Fox of its license."

But the attorney said he would not disclose specific instances of fraud and anti-competitive behavior committed by Fox until he has presented the evidence to an FCC administrative law judge. The opportunity to make the case has been delayed, Thompson said, because Fox "has bogged down the process with filings that violate [FCC] rules."

Thompson estimated that the case will go to hearing by the end of this summer.

Rainbow Broadcasting was formed two years ago by a group of 14 Hispanics, many of whom claim media experience. Rainbow President Esther Renteria said the company was originally formed and challenged Fox's operating license as a means for pressuring it into hiring more Hispanic employees and producing more Hispanic-oriented programming.

However, Renteria contends that Rainbow investigation into Fox's operations uncovered so many incidences of alleged fraud and anti-competitive practices, that Rainbow will now settle for nothing less than Fox's operating license.

If Rainbow is awarded the Channel 11 license, Renteria said it would purchase and lease the necessary facilities and could begin broadcasting English-speaking programming within three months. The 14 founding members would become the broadcasting company's investors, Renteria said. Rainbow also has a letter of commitment for financing from Bank of America, she said.

Renteria claims that on two occasions Rainbow officials have been approached by Fox representatives asking what type of settlement it would take for Rainbow to withdraw its challenge.

"At first fox said we filed suit because we wanted money," Renteria said. "But when Fox asked us what it would take to settle our response was non-economic. We weren't interested in Fox's money."

Renteria said to her recollection, Fox never did advance a monetary settlement offer. She pointed out, however, that Fox reached an $80,000 settlement with a company named Citylight Communications in June after it also challenged Fox's license.

Thompson said interviews with former employees of Fox Television have convinced him that Chairman Barry Diller has made the mistake of believing that he can operate Fox like a movie studio.

"Fox was first and foremost a movie studio," Thompson observed. "Barry Diller is a movie mogul . . . Past employees say Barry Diller and his little group are running Channel 11 like a movie studio. They really have not paid attention that they are operating under a license."