The Department of Justice has said Gray Television and Raycom Media’s proposed $3.6 billion deal can move ahead, as long as the companies divest TV stations in nine local markets where the two currently compete against each other head-to-head.
“Without the required divestitures, Gray’s merger with Raycom threatens serious competitive harm to cable subscribers and small businesses,” said Assistant Attorney General Makan Delrahim of the Justice Department’s Antitrust Division, in a statement. “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.”
Gray had already indicated when the acquisition was first announced in June that it planned to divest its ownership in stations in the nine overlapping markets.
Without divestitures, the merger would leave Gray with two or more Big Four affiliate (NBC, CBS, ABC, or Fox) stations in each area, likely resulting in higher retransmission fees, which in turn could lead to higher cable and satellite bills for millions of consumers, the DOJ said.
Divestitures of Big Four affiliate stations are required in the following overlapping markets: Knoxville, Tenn.; Toledo, Ohio; Waco–Temple–Bryan, Texas; Tallahassee, Fla.,–Thomasville, Ga., Augusta, Ga.,; Odessa-Midland, Texas; Panama City, Fla.; Albany, Ga.; and Dothan, Ala.
The sales also alleviate the DOJ’s antitrust concerns that the merger would harm local business by eliminating competition and enabling the combined company to hike up prices for spot advertising.
The U.S. District Court for the District of Columbia must still approve the proposed settlement filed by the Justice Department. Stakeholders have 60 days to comment before a decision is made. Once the DOJ signs off on its competition review, the FCC is likely to greenlight the transaction as well.
Industry group American Cable Association applauded the DOJ’s action.
“ACA is pleased that DOJ will not tolerate a merger that would eliminate a major competitor in a local TV market and would give Gray enormous pricing leverage over multichannel video programming distributors (MVPDs), especially smaller ones,” ACA President and CEO Matthew Polka said in a statement. “The divestiture mandate also reduces the disruptive impact of signal blackouts involving two Big Four (i.e., affiliates of NBC, CBS, ABC, or FOX) stations in the same local market.”
Gray Television owns 92 television stations, while Raycom owns 51. Together the combined company would be the nation’s No. 3 television group, covering 92 markets and 24 percent of U.S. TV households.
Raycom, along with six other broadcasters, including Nexstar Media, recently settled with the DOJ over claims that the companies were engaging in anticompetitive practices by sharing sensitive sales information.