The Justice Department says Gray Television and Raycom have to divest TV stations in nine markets if they want to get approval of their $3.6 billion merger—they do—citing the potential price hike to cable operators for retransmission rights, which would in turn be passed on as cable bill hikes for millions of consumers.
Gray had already said it would need to spin off the stations in those markets to comply with FCC local ownership rules, so unsurprisingly the broadcasters have agreed to that condition, according to Justice, which filed a settlement with the U.S. Court of Appeals for the D.C. circuit at the same time it filed suit against the deal.
That is the way the settlement process works.
DOJ said the spin-offs were necessary because without them head-to head competition between Gray and Raycom would be eliminated.
The FCC usually coordinates its public interest review with DOJ's competition review, so the commission is likely to OK the deal as well.
Assistant Attorney General Makan Delrahim, head of the antitrust division, signaled the companies had worked with the department to resolve the competitive issues. “I am pleased, however, that we have been able to reach a speedy and complete resolution of the Division’s concerns, thanks in part to the parties’ commitment to engage in good faith settlement talks from the outset of our investigation,” said Delrahim.
That is in stark contrast to Sinclair's failed attempt to buy Tribune, when that company butted heads with DOJ in an effort to retain stations Justice wanted it to divest.
The Raycom-Gray divestiture markets are "Knoxville, Tennessee; Toledo, Ohio; Waco–Temple–Bryan, Texas; Tallahassee, Fla.–Thomasville, Ga.; Augusta, Ga.; Odessa-Midland, Texas; Panama City, Fla.; Albany, Ga.; and Dothan, Ala.," said DOJ. The companies had said they would be divesting WTNZ Knoxville (Fox), WTOL Toledo (CBS), KXXV Waco (ABC), WTXL Tallahassee (ABC), WFXG (Fox) Augusta, KWES Odessa (NBC), WGPX Panama City (Fox), WDFX Dothan (Fox), and Gray's WSWG Albany (CBS).
DOJ signaled it was concerned about retrans fees in those markets. "As a result of the merger, the combined company would likely charge cable and satellite companies higher retransmission fees to carry the combined company’s broadcast stations, resulting in higher monthly cable and satellite bills for millions of Americans," said DOJ.
"The merger would also enable the company to charge local businesses and other advertisers higher prices for spot advertising in the divestiture markets," it said.
Raycom recently settled with DOJ over allegations for anticompetitive info exchanges related to local ad sales.
"Businesses rely on competition among broadcast station owners to obtain reasonable advertising prices. Gray and Raycom compete with one another for the business of local advertisers, and the proposed merger would eliminate that competition, harming local businesses," said DOJ.
Stakeholders will have 60 days to weigh in on the settlement before the court decides whether to accept it.