ACA Joyous With Divestment Need For Gray-Raycom Marriage

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The Department of Justice late Friday gave its formal approval of Gray Television‘s merger with Raycom Media.


And, as expected, divestment of broadcast television stations in nine markets is needed as a condition of resolving “a challenge” to the proposed $3.6 billion merger between Gray and Raycom.

This makes the American Cable Association super-pleased.

The Justice Department’s Antitrust Division filed a civil antitrust lawsuit in the U.S. District Court for the District of Columbia to block the proposed merger. At the same time, the Division filed a proposed settlement that, if approved by the court, would resolve the suit by remedying the competitive harms alleged in the complaint, through the divestitures and related conditions.

This is standard procedure for getting a merger acquisition cleared by DOJ.

“Without the required divestitures, Gray’s merger with Raycom threatens serious competitive harm to cable subscribers and small businesses,” Assistant Attorney General Makan Delrahim, of the Justice Department’s Antitrust Division, said. “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.”

According to the complaint, without the divestitures the merger would eliminate head-to-head competition between Gray and Raycom in the nine local markets in which the divestitures are being required.

In each of those markets, the transaction would increase the number of “Big Four” affiliate stations owned by Gray (i.e., affiliates of NBC, CBS, ABC, or FOX), leaving Gray with two or more Big Four stations in each area.

The divestiture markets are Knoxville, Tennessee; Toledo, Ohio; Waco–Temple–Bryan, Texas; Tallahassee, Florida–Thomasville, Georgia; Augusta, Georgia; Odessa-Midland, Texas; Panama City, Florida; Albany, Georgia; and Dothan, Alabama.

American Cable Association President/CEO Matthew M. Polka applauded the condition of resolving a court challenge to the proposed $3.6 billion merger.

“As DOJ found, permitting the merger without these divestitures would have substantially lessened competition in violation of applicable anti-trust law,” Polka said. “ACA agrees with DOJ’s assessment that absent the divestitures in the nine markets, the Gray-Raycom merger would cause serious harm to pay-TV subscribers and small businesses. DOJ correctly concluded that 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.’”

Polka added that his organization 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. 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.”

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.

The merger would also enable the company to charge local businesses and other advertisers higher prices for spot advertising in the divestiture markets. 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.

The Antitrust Division has determined that the divestitures would resolve antitrust concerns related to the licensing of Big Four television retransmission consent and the sale of broadcast television spot advertising that would otherwise result from the merger. The divestitures required under the settlement announced today would, if approved by the court, require Gray to sell the Big Four affiliate stations currently owned by either Raycom or Gray in each of the nine markets where the companies have Big Four overlaps. The settlement requires that the divestitures be accomplished in such a way as to satisfy the United States that the divested stations and associated assets will be used by the buyers as part of a viable, ongoing commercial television broadcasting business.