NY State Attorney General advises Arbitron of the intent to commence litigation against the company

STATE OF NEW YORK
OFFICE OF THE ATTORNEY GENERAL
ANDREW M. CUOMO DIVISION OF SOCIAL JUSTICE
ATTORNEY GENERAL CIVIL RIGHTS BUREAU

October 2, 2008

VIA CERTIFIED MAIL & HAND DELIVERY

Stephen B. Morris
Chairman, President and CEO
Arbitron, Inc.
142 West 57th Street
New York, NY 10019-3300

Timothy T. Smith
Executive Vice President &
Chief Legal Officer, Legal & Business Affairs
Arbitron, Inc.
9705 Patuxent Woods Drive
Columbia, MD 21046-1572

Dear Messrs. Morris and Smith:

You are hereby notified that the Attorney General intends to commence litigation against Arbitron, Inc. (“Arbitron”) pursuant to New York Executive Law Section 63(12), Article 22-A of the General Business Law (“GBL”), Sections 349 and 350, Article 23-A of the GBL, Section 352, and Section 40-c of the New York Civil Rights Law, to enjoin unlawful and deceptive acts and practices in which Arbitron plans to engage, has engaged and/or continues to engage, and to obtain additional injunctive relief, penalties, damages and such other relief as the Court may deem just and proper.

The unlawful and deceptive acts and practices complained of consist of engaging in or planning to engage in repeated and persistent fraudulent and illegal business practices in connection with the marketing and planned commercialization in New York of the Portable People Meter (“PPM”) methodology. The PPM service is marketed as a tool for determining ratings for radio stations, which is then used to determine market share. Arbitron announced its plans to commercialize the PPM methodology in New York on October 8, 2008, which is directly tied to performance-based non-equity compensation for executive staff of Arbitron. However, the PPM methodology Arbitron intends to use beginning on October 8, 2008 in New York has not been
accredited by the Media Rating Council, Inc. (“MRC”), the primary accrediting agency for ratings services in the United States, and appears to contain design flaws that will disproportionately impact minority communities, broadcasters, and businesses.

Due to Arbitron’s virtual monopoly over ratings in the radio industry, a significant and improper decline 120 Broadway, New York, NY 10271 • (212) 416-8250 • Fax (212) 416-8074 • http://www.oag.state.ny.us> in ratings under a PPM system would cause minority stations to suffer drastic reductions in advertising revenues. This, in turn, would distort the marketplace and severely harm and possibly destroy minority broadcasting in New York. More specifically, it appears that the methodology, among other things: (1) does not adequately represent young African American and Hispanic listeners; (2) does not appropriately account for cell phone-only households which impacts the representation of young and minority listeners; (3) does not
adequately account for non-English speaking people; (4) does not employ adequate recruitment methods to accurately represent and assess the diversity of minority listenership; and (5) does not provide sufficient geographic granularity, as well as income and country of origin data to permit accurate assessment of minority radio listenership.
Despite the lack of accreditation and the design flaws in the methodology, Arbitron has engaged in the
following conduct:

• Made public representations that create the misleading impression that the PPM methodology for New York is fair, reliable and fully represents the diversity of New York radio markets in
violation of the Executive Law §63(12) and GBL §§349, 350, 352;

• Made public representations that create the misleading impression that the PPM methodology is accredited in New York in violation of the Executive Law Section §63(12) and GBL §§349 and 350, 352;

• Made representations to shareholders about the reliability and scheduled commercialization of the PPM methodology, thereby inflating the price of Arbitron’s common stock, but failed to
disclose to shareholders material adverse information about the PPM methodology in violation of Executive Law Section §63(12) and GBL §352;

• Disseminated false and misleading advertising materials in violation of Executive Law §63(12) and GBL §§349, 350, 352, including but not limited to advertising materials that create the
misleading impression that the PPM methodology is valid, reliable, fair and representative of the demographics in New York, and that in commercializing the PPM methodology Arbitron is
strictly adhering to the MRC Code of Conduct and Minimum Standards; and • Attempted to commercialize the PPM methodology in New York without addressing methodological flaws which disparately impacts racial and ethnic minorities in violation of §40-c of the New York Civil Rights Law.

120 Broadway, New York, NY 10271 • (212) 416-8250 • Fax (212) 416-8074 • http://www.oag.state.ny.us
Please be advised that, pursuant to Section Article 22-A of the GBL, Arbitron is hereby afforded the
opportunity to show, within five business days after receipt of this notice, why such proceeding should not be
instituted. Thank you in advance for your cooperation. If you have any questions, please feel free to call me at
(212) 416-8252.

Sincerely,
Attorney General Andrew Cuomo
By: _____________________________
Alphonso David
Deputy Bureau Chief, Civil Rights Bureau
Office of the New York Attorney General
cc: Daniel J. Horwitz

To read full letter CLICK on link below (Adobe Acrobat Reader required):
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