DOJ Conditions Gray/Raycom on Divestitures; Nexstar Settlement May Help Tribune OK
Gray and Raycom -- in the process of selling TV stations in nine designated market areas as part of their $3.6 billion deal announced in June (see 1808270038) -- now also have DOJ requiring the same as terms for OK. In a complaint filed Friday with U.S. District Court for the District of Columbia, Justice said the deal minus the divestitures would leave New Gray with increased power to charge MVPDs higher fees for its programming and advertisers more to reach audiences in those markets.
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The Gray/Raycom complaint/settlement came a day after another DOJ filing with the court regarding another proposed broadcast deal, worth some $6.4 billion. While Nexstar joining broadcasters that settled DOJ advertising collusion claims (see 1811130039) might help grease the path to getting the OK for the company to buy Tribune, the two situations aren't tightly intertwined, broadcast lawyers told us.
In the Gray/Raycom complaint, DOJ said there are nine DMAs where the two each own at least one affiliate of a Big Four network. Under the docket 18-cv-02951 proposed final judgment, the two would be required to sell WTNZ Knoxville, Tennessee; WTOL Toledo, Ohio; KXXV Waco, Texas; KRHD-CD Bryan, Texas; WTXL-TV, Tallahassee; WFXG, Augusta, Georgia; KWES-TV Odessa, Texas; WPGX Panama City, Florida; WSWG, Valdosta, Georgia; and WDFX-TV Ozark, Alabama, as a fix. It said the two would have 90 days from the filing of the complaint or five days after notice of entry regarding the court's final judgment, whichever comes later, to make the sales.
Gray appreciates the Antitrust Division’s "work on this transaction and look[s] forward to closing the merger and divestitures once we receive the FCC consents," emailed Chief Legal and Development Officer Kevin Latek. Raycom didn't comment immediately.
The FCC is expected to approve Gray/Raycom (see 1808270038), but hadn't made any announcement. It declined to comment.
The Nexstar settlement meantime removes one potential obstacle to its Tribune deal OK, but "only one of several," emailed Peter Tannenwald of Fletcher Heald. Nexstar didn't want the investigation pending while pursuing Tribune, but since other broadcasters settled, Nexstar risked a court battle where it had no allies to share the litigation burden, Tannenwald said. It likely was in settlement negotiations as the others were but either was tougher than they were in those talks or some detail in the settlement differed for Nexstar and took more time to hammer out with Justice, he said. The settlement's only real significance is it shows Nexstar didn’t want to make a federal case or at least didn’t want an unresolved dispute to impede pursuing clearance of the Tribune acquisition, he said.
DOJ always would review a merger the size of Tribune/Nexstar, "and the fewer wrinkles the better," said Charles Naftalin of Holland & Knight. The pact likely was in the works for a while and would have happened regardless of a pending merger, he said. Tribune and Nexstar didn't comment Friday. Under the amended docket 18-cv-02609-TSC complaint filed Thursday in the U.S. District Court for the District of Columbia, Nexstar was added as a defendant, alongside Sinclair, Raycom, Tribune, Meredith, Griffin and Dreamcatcher. It's not evident if there could be future settlements with other broadcasters because the investigation's scope isn't clear, though it's believed to have focused on the largest broadcast operators instead of industrywide, Naftalin said. DOJ didn't comment.
"Robust competition among broadcast stations allows American businesses to obtain competitive advertising rates. The unlawful sharing of information reduced that competition and harmed businesses and the consumers they serve," Antitrust chief Makan Delrahim said. Under a proposed final judgment, Nexstar management and sales staff would be barred from communicating competitively sensitive information to stations it doesn't own in the same designated market area, or knowingly using such information from stations it doesn't own in the same designated market area. Nexstar would be obligated to cooperate with the DOJ in any further ad information collusion probe.