WASHINGTON (CN) — The Justice Department filed a proposed merger settlement with Gray Television on Wednesday over the company’s plans to acquire Quincy Media for $925 million — a move the government said would significantly harm media competition.
“I am pleased that we have been able to reach a complete resolution of the department’s concerns, thanks in part to the parties’ commitment to engage in good faith settlement talks from the outset of our investigation,” acting Assistant Attorney General Richard Powers said in a statement.
The Georgia and Illinois-based broadcast groups overlap in seven local markets around the country, where they each own at least one Big Four – NBC, CBS, ABC and FOX – affiliate station. If the acquisition were to go through as originally planned, the Justice Department argued that competition would be eliminated in the licensing of Big Four network content, passing the cost onto distributors, and eventually, to subscribers.
Typically, distributors like Comcast or DirecTV pay the owner of local Big Four broadcast stations for the right to transmit their content. Broadcast station groups like Gray and Quincy negotiate with distributors — but if they can’t come to an agreement, there’s a blackout of the station. And instead of turning to other smaller stations, subscribers usually turn to other Big Four stations where they can watch news, primetime shows, sports and weather.
If the two broadcast groups merged, the federal government argued in its complaint that Gray would have a greater ability to black out more Big Four stations in each of the seven overlapping markets, increasing the company's leverage with distributors.
The broadcast giant would also be able to charge higher prices to local businesses and advertisers, who often choose to use a Big Four program for advertising over a cable TV spot.
Under the settlement agreement — filed alongside the complaint Wednesday in Washington federal court, but yet to be approved by a judge — Gray and Quincy would need to divest 10 broadcast stations in the seven overlapping markets: Tucson, Arizona; Madison, Wisconsin; Rockford, Illinois; Paducah, Kentucky; Cedar Rapids, Iowa; La Crosse, Wisconsin; and Wausau, Wisconsin.
“Without the required divestitures, Gray’s acquisition of Quincy threatens significant competitive harm to cable and satellite TV subscribers and small businesses that advertise on broadcast television,” Powers said.
The stations will be divested to Allen Media Holdings, which operates 14 broadcast television stations in 12 local markets, or another acquirer that the Justice Department approves.
For comparison, Gray owns 165 television in 94 local markets, and Quincy owns 20 television stations in 16 local markets.
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