ARCHIVED -  Decision CRTC 95-119

Decision

Ottawa, 27 March 1995

Decision CRTC 95-119

Les Entreprises de Radiodiffusion de la Capitale Inc.

Quebec City, Quebec - 940839400 - 940840200 - 941598500 - 941609000Quebec City, Quebec - 941517500

Transfer of control and assets of CHRC - authorized

Following a Public Hearing in Montréal beginning on 19 December 1994, the Commission approves the applications for authority to transfer effective control of Les Entreprises de Radiodiffusion de la Capitale Inc. (ERC) and the assets of CHRC Quebec City owned by ERC, and for a broadcasting licence to continue the operation of this undertaking. These transactions involve the following:

A. The transfer of the issued and outstanding class A shares of ERC, belonging to Mr. André Arthur and Mr. Jacques Grenier, to Financière Micadco Inc. (25%), Groupe Commercial AMT Inc. (25%), 2861-3545 Québec Inc. (25%) and Télémédia Communications Inc. (25%);

B. Subsequently, the transfer of the shares of ERC held by Financière Micadco Inc., Groupe Commercial AMT Inc. and 2861-3545 Québec Inc. (75%) to the remaining sole shareholder, Télémédia Communications Inc.; and

C. The transfer of the assets of CHRC to Radiomédia Inc.

The Commission will issue a licence to Radiomédia Inc. (Radiomédia), expiring 31 August 1999, upon surrender of the current licence for CHRC. This period will enable the Commission to review, within a reasonable period, the implementation of the programming proposals put forward by the applicant. It will also enable the Commission to consider the renewal of this licence together with that of CKAC Montréal and the new Radiomédia network, the licences for which have been issued to the partners of Radiomédia S.E.N.C., including Télémédia Communications Inc. and Radiomutuel Inc. (see Decision CRTC 95-118 of today's date). The licence will be subject to the same conditions in effect under the current licence, as well as to the conditions specified in this decision and in the licence to be issued.

Restructuring of AM radio in Quebec

The current applications were filed with the Commission in the context of a major restructuring of the AM broadcasting undertakings of Télémédia Communications Inc. (Télémédia) and Radiomutuel Inc. (Radiomutuel) in the province of Quebec, announced on 30 September 1994. Under this restructuring, six AM radio stations have been closed: CJMS Montréal, CJRP Quebec City, CJTR Trois-Rivières, CJRS Sherbrooke, CJMT Chicoutimi and CKCH Hull. At the request of the licensees involved, the Commission revoked the licences of these stations, as well as the licence for Radiomutuel's AM radio network, on 2 November 1994 (Decisions CRTC 94-845 and 94-846).

Radiomédia argued that this restructuring had become necessary, due in part to the difficult economic situation AM radio has been facing for a number of years and the significant losses it had incurred. It noted in particular that, between 1989 and 1993, AM radio in Quebec as a whole posted cumulative losses of more than $60 million, close to 50% of which was borne by Télémédia and Radiomutuel. It added that, during this period, advertising revenues declined by 33%, and that the situation was apparently not about to improve, notwithstanding certain measures that had been taken to rationalize operations.

The applicant stated that, in the circumstances, it had come to the conclusion that it would have to regroup and retrench its AM radio holdings in Quebec if it were to maintain an adequate level of service. It decided to implement this plan by retaining a single AM station in each region, the one with the best frequency and capable of reaching the widest audience; and by creating a new AM network, the Radiomédia network, anchored by two stations owned equally by Télémédia and Radiomutuel, namely CKAC Montréal and CHRC Quebec City. The applicant has also decided to establish a news agency, Radiomédia Information, with CKAC as the flagship station, to provide the Radiomédia network stations with a news service operating 24 hours per day, 7 days per week.

Transfer of control without prior approval; and the issue of multiple ownership

ERC currently holds the broadcasting licences for two radio stations in Quebec City: CHRC and CHOI-FM. The current applications concerning the transfer of control of ERC to Télémédia followed a series of transactions between 1992 and 1994, when ERC was experiencing an extremely difficult financial situation and the class A capital stock changed hands, passing in turn from one group of shareholders to another. Télémédia ultimately became the sole shareholder of the ERC.

At the hearing the Commission questioned Télémédia about the manner in which ownership of ERC had been taken over and the possibility that the transaction had been completed without the prior approval of the Commission, and that the Commission had, thereby, been confronted with a fait accompli. While Télémédia emphazised the exceptional circumstances and the urgency imposed byERC's crippling economic situation, it confirmed that for all intents and purposes, the transaction was completed on the basis that the former ERC shareholders had been paid, that Télémédia had taken possession of the shares, and that the former directors had resigned.

While approving the applications pertaining to the transfer of control of ERC, the Commission is nonetheless greatly concerned by the fact that this transfer was completed without prior authorization. Accordingly, the Commission reminds ERC and Télémédia that paragraph 11(4)(a) of the Radio Regulations, 1986 (the Regulations) stipulates that "a licensee shall obtain the prior approval of the Commission in respect of any act, agreement or transaction that directly or indirectly would result in...a change by whatever means of the effective control of its undertaking". In the Commission's view, this provision of the Regulations is of the utmost importance in ensuring that broadcasting undertakings are regulated in the public interest, and it expects this provision to be complied with in full.

The Commission notes further that Télémédia is also the owner of CITF-FM in Quebec City. The Commission's longstanding policy relating to common ownership is that two radio broadcasting undertakings of the same class serving the same market in the same language should not fall under common ownership. The Commission notes that Télémédia undertook to divest itself of CHOI-FM, if the above-mentioned transfer of control application was approved. Consistent with Télémédia's commitment and the Commission's policy, the Commission directs Télémédia to file, within six months of the date of this decision, an application for authority to transfer effective ownership or control of CHOI-FM to a third party. Should Télémédia be unable to file the required application within the specified period, it will be required to place CHOI-FM in trust until a decision is released by the Commission.

Transfer of CHRC assets

Radiomédia is an incorporated company equally owned by Télémédia and Radiomutuel. In this regard, the applicant noted at the hearing that Télémédia and Radiomutuel have not merged their respective undertakings; it added that, with the exception of CHRC and CKAC, the AM stations maintained in operation following the restructuring will be affiliated to the Radiomédia network and will continue to be owned by Télémédia or Radiomutuel as the case may be. It also noted that the FM stations owned by Télémédia and Radiomutuel are likewise unaffected by the restructuring, and will continue to compete in their respective markets.

With regard to the terms of the transaction in relation to the transfer of the CHRC assets, and more particularly the condition attached to all licences stipulating that a broadcasting undertaking "shall be operated in fact by the licensee itself", the Commission has noted the explanations given by the applicant at the hearing concerning compliance with this condition of licence.

Proposed benefits

With the exception of an annual contribution of $25,000 to Musicaction over a seven-year period, which was proposed as support for Canadian talent in the case of CHRC, and the maintenance of a direct annual contribution of $50,000 for the same purpose by CHOI-FM, the applicant did not propose any tangible benefits in the context of these transactions. The Commission notes, however, that CHRC and CHOI-FM have been unprofitable over at least the three years preceding the filing of these applications. Accordingly, the Commission is satisfied that the applications meet the criteria set out in Public Notice CRTC 1993-68 entitled "Application of the Benefits Test at the Time of Transfers of Ownership or Control of Broadcasting Undertakings".

Radiomédia further argued that, notwithstanding the unfortunate consequences of the restructuring, including the station closures and job losses that were the subject of a number of interventions, both the industry and the general public will derive some definite benefits. In particular, the applicant argued that the restructuring will improve the economic health of Quebec radio and create favourable conditions for ensuring the survival of news and public affairs radio with a predominantly spoken word content.

Programming

The Commission has noted Radiomédia's undertaking to broadcast at least 60 hours per week of local programs on CHRC, including a minimum of six hours of local and regional news. The applicant also indicated that CHRC will contribute to the Radiomédia network by providing news reports and broadcasts on current affairs, sports and other events occurring in Quebec City.

Since, as a result of the aforementioned restructuring, CHRC will remain the only AM station in Quebec City, and will also lose its status as an independent station, some interveners raised concerns about the loss of local identity that might occur in CHRC's programming. In this regard, the Commission has noted the applicant's statement at the hearing concerning its intention to give priority to the production of local programs at peak listening periods, between 6:00 a.m. and 7:00 p.m. Monday to Friday.

Furthermore, as a result of discussions at the hearing, Radiomédia has submitted to the Commission its own guidelines on spoken word content, which apply to both CHRC and CKAC. The Commission had asked the applicant about the possibility of imposing adherence to such guidelines as a condition of licence, at least in the case of CHRC, given the past history of this station.

The Commission notes in this regard that CHRC has been the subject of numerous complaints and lawsuits in recent years concerning the abusive language used on the air by certain open-line program hosts. The Commission imposed strict conditions of licence in this regard in 1990 and 1991 (Decisions CRTC 90-772 and 91-434), which were deleted at the time of the last renewal of licence (Decision CRTC 92-588).

The Commission notes that, since 1 September 1992 it has received seven complaints concerning CHRC similar to the previous complaints. Two of these have been settled to the satisfaction of the Commission. The other five complaints were the subject of an exchange of correspondence that was placed in the station's public file, and the Commission informed the complainants that additional discussions would be held concerning all of them at the time of licence renewal.

CHRC's current licence was scheduled to expire on 31 August 1996; as a result of this decision, the term of the licence is extended to 1999. The Commission is of the view that a condition of licence is warranted in view of the station's past history and the new complaints that have been filed since the last renewal of licence. Accordingly, it is a condition of licence that the licensee fully adhere to the guidelines on spoken word content that Radiomédia submitted to the Commission on 21 December 1994.

It is a condition of licence that the licensee adhere to the guidelines on gender portrayal set out in the Canadian Association of Broadcasters' (CAB) "Sex-Role Portrayal Code for Television and Radio Programming", as amended from time to time and accepted by the Commission. The aforementioned condition of licence shall not apply as long as the licensee is a member in good standing of the Canadian Broadcast Standards Council.

It is also a condition of licence that the licensee adhere to the provisions of the CAB's "Broadcast Code for Advertising to Children", as amended from time to time and accepted by the Commission.

In Public Notice CRTC 1992-59 dated 1 September 1992 and entitled "Implementation of an Employment Equity Policy", the Commission announced that the employment equity practices of broadcasters would be subject to examination by the Commission. Following discussion on this matter at the hearing, the Commission expects Radiomédia to develop and implement a plan to ensure that adequate measures are established in regard to employment equity. The Commission expects the licensee to submit a report within six months of the date of this decision stating what steps have been taken to this effect. It also intends to review this issue at the time of the next licence renewal of CHRC.

Allan J. Darling
Secretary General