Antitrust Law Daily Wrap Up, TOP STORY: Gannett agrees to sell St. Louis TV station to gain Justice Department approval of Belo acquisition, (Dec 16, 2013)

By Jeffrey May, J.D.

In order to resolve Department of Justice antitrust concerns that Gannett Co., Inc.’s proposed acquisition of Belo Corporation and related sale of assets to Sander Media LLC will reduce competition for broadcast television spot advertising in the St. Louis area, the parties have agreed to divest their interests in a CBS affiliate in that market (U.S. v. Gannett Co., Inc., Case 1:13-cv-01984, filed December 16, 2013).

The Department of Justice announced today that it filed a complaint in the federal district court in Washington, D.C. to block Gannett’s proposed acquisition of Belo, valued at approximately $2.2 billion, and related agreements concerning Sander’s acquisition of six Belo television stations that Gannett cannot hold under Federal Communications Commission (FCC) rules. At the same time, the Justice Department filed a proposed settlement that, if approved by the court, would resolve the competition concerns alleged in the lawsuit.

In June, Gannett announced the proposed acquisition of Belo, creating “a broadcast ‘Super Group,’ catapulting Gannett into the nation’s fourth-largest owner of major network affiliates reaching nearly a third of all U.S. households.” To comply with FCC ownership rules, Gannett agreed to sell six Belo stations in five designated market areas (DMAs), including KMOV-TV, the CBS affiliate in the St. Louis currently owned by Belo, to Sander. Gannett owns and operates KSDK-TV, the NBC affiliate in the St. Louis DMA.

Although Gannett would transfer ownership of six stations to Sander, the agreements between Gannett and Sander include terms that give Gannett significant influence over Sander’s conduct in operating the stations, including KMOV-TV, and also diminish Gannett’s and Sander’s incentives to compete vigorously with each other in sales of broadcast television advertising in St. Louis, the complaint alleges. The transaction allegedly would have resulted in Gannett owning one of the top three commercial broadcast television stations in St. Louis and having significant influence over a second top three station serving the same area.

According to the government’s competitive impact statement, the proposed consent decree will resolve competition concerns by requiring Gannett to divest its option on KMOV-TV to an acquirer selected by the defendants and approved by the United States, and requiring Sander to divest its interests in the station and the assets used to operate KMOV-TV. The divestiture of KMOV-TV must occur by mid-April 2014 or within five days after the court’s entry of the final judgment.

The transaction remains subject to FCC approval.

Companies: Gannett Co., Inc.; Belo Corp.; Sander Media LLC

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