Comcast Under Investigation by U.S. Department of Justice

It's centered around the “spot” cable ad market.

Photo | Jeff Fusco

Photo | Jeff Fusco

You know those local ads that appear on national cable TV shows for a cheesesteak place, car dealership or furniture store? Sometimes panned because of low video and sound quality, they’re actually part of a $5 billion market that allows advertisers to target small segments of the population.

Well those ads are at the heart of a U.S. Dept. of Justice investigation into Comcast that was revealed on Tuesday by the Wall Street Journal. The Justice Department is investigating whether Comcast is violating federal anti-trust law through its ad sales practices regarding the so-called “spot” cable ad market. Approximately two minutes of each hour of television is purchased by local ad buyers.

The investigation is probing whether Comcast has a monopoly or is attempting to monopolize spot ad sales in certain markets, according to the WSJ. It’s also probing Comcast’s deals to represent rival pay-TV providers’ in their ad sales processes, since there are sometimes multiple pay-TV operators in the same market.

“Comcast takes the lead on negotiating with advertisers on behalf of rival pay-TV providers in many markets,” the WSJ says. “Comcast also owns a majority stake in one of the main companies that helps national advertisers buy commercial time from cable providers in local markets.”

A Comcast spokesperson said the company plans to fully cooperate with the investigation. In a statement, Comcast said multi-channel video providers account for about 7 percent of local advertising sales and that the company uses “long-standing industry practices” to sell ads. Ultimately, the company argues that the process is beneficial to advertisers.

“To better compete with local advertising platforms with significant scale, like a broadcaster or web app that can sell an entire geographic market, and to provide more and better choices to advertisers, [multichannel-video providers] have long worked together through local interconnect arrangements to sell local advertising,” the statement says. “These interconnects increase efficiency and help keep costs down for advertisers and are responsive to the needs of major local advertisers.”

The Justice Department declined to comment.