Five entities that made plays on FM CP opportunities in FM Auction No. 37 back in 2004 withdrew after leading the bidding, and became liable for payment when the eventual winning bid failed to match the bid they abandoned. Petitions for relief were turned down.
Cumulus, Connoisseur, Nassau, College Creek and Barry Lunderville are the members of the aggrieved quintet.
If the CP eventually draws an equal or greater bid than the abandoned bid, there is no harm and no foul. But if it is less, the withdrawing entity must make up the difference.
The FCC said this policy is a key element in the auction process. “By forcing each bidder to consider carefully the costs that may be incurred by withdrawing a bid, the rule deters “insincere bidding” that may interfere with auction dynamics, including by distorting price information. Regardless of bidder motives, insincere bids can reduce the efficiency of the competitive bidding mechanism. This damage to the auction process is particularly great later in the auction, ‘because other bidders have fewer opportunities to adjust their strategies and thus there is less . . . chance the license will be awarded to the bidder who values it most highly.’ Whatever the reason for such bids, the bid withdrawal payment requirement ‘compels bidders who may ultimately withdraw to consider the external consequences of both how much they bid and the timing of their withdrawal.’ Setting bid withdrawal payments at an appropriate level also ‘precisely’ protects the government from the loss of revenue associated with bid withdrawals.”
The appeals hinged on exceptions the FCC has made in the past, but the FCC defended its right to grant waivers and exceptions and turned down all five requests.
Here’s what was on the table:
* Connoisseur Media (as Bigglesworth Broadcasting) bid $893,750 for a CP in Flasher ND that eventually went for $284,000. Liability: $609,750.
* Barry P. Lunderville bid $422,000 for a CP in Groveton NH that eventually went for $178,000. Liability: $244,000.
* College Creek Broadcasting bid $1,339,000 for a CP in Windsor NY that eventually went for $545,000. Liability: $794,000.
* College Creek Broadcasting bid $1,026,000 for a CP in Blue Lake CA that eventually went for $361,000. Liability: $665,000.
* Cumulus Licensing bid $1,461,000 for a CP in Cannon Ball ND that eventually went for $124,000. Liability: $1,337,000.
* Nassau Broadcasting bid $822,000 for a CP in Whitefield NH that eventually went for $196,000. Liability: $626,000.
There were a few interesting items in the FCC document on the matter. Connoisseur had asked for relief due to the sudden and unforeseen drop in radio station valuations, but the FCC said that is a risk bidders assume in all auctions and besides, the winning bid that supplanted the company’s abandoned Flasher ND bid was made by a co-owned entity – in essence, the FCC said Connoisseur was trying to replace its own high bid with a lower one.
Nassau said it was forced to withdraw from one of two bids because it suddenly found out that it would have been unable to construct both due to local multiple ownership caps. The FCC said its engineers should have been well aware of that before the company began bidding.
RBR-TVBR observation: It would seem that knowing your ceiling for a given allotment going into the auction is of paramount importance. And if you change your mind after putting a dollar amount on the table, unless you are absolutely certain that another bidder is going to come forward with a little bit more, you might as well take the stick – better than paying beaucoup bucks for a great big pile of nothing.
