DOJ Nexstar/Tribune Complaint Flags Indianapolis Market, Says Broadcast Ads Aren't Substitutable

Though Nexstar originally proposed holding on to top-four network Tribune stations WXIN and WTTV and divesting two other stations in the Indianapolis market, the DOJ complaint highlights the market as a problem. The complaint asks the U.S. District Court for the District of Columbia to “enjoin and restrain” Nexstar from completing the deal if it would “combine any of their respective Big 4 stations in the Big 4 Overlap” designated market areas “or their stations in the Indianapolis DMA.” Indianapolis is the only market where Nexstar’s previously stated divestiture plans (see 1903200058) would still leave the broadcaster with a top-four duopoly. Nexstar is seen likely to sell one of the stations, since the FCC is also hesitant about top-four combinations, said S&P Global analyst Justin Nielson. Nexstar is unlikely to want to hold the deal up, he said.

DOJ's arriving at a consent decree often presages FCC approval of a deal soon after, said several broadcast and communications attorneys. Though the FCC hasn’t approved any new top-four combinations, the agency did approve an existing top-four duopoly similar to Nexstar’s proposed Indianapolis combination in the Gray/Raycom deal. That approval took a long time to arrive and could slow the Nexstar/Tribune deal if Nexstar seeks to pursue it, Nielson said. The FCC didn’t comment, nor did DOJ or Nexstar.

Touted by DOJ as necessary to keep the deal from having anticompetitive effects on advertising and retransmission consent rates, the 13 divestiture markets listed in the complaint were all previously listed by Nexstar in March as places where it would need to unload a station. Nexstar already arranged to sell stations in the affected markets to Tegna, Scripps and Circle City Broadcasting, deals that DOJ said in the complaint are acceptable. Nexstar also announced divestitures in Phoenix, New York City and the Miami area that weren’t called for by DOJ. Those sales are likely intended to keep the combination under the FCC’s 39 percent broadcast population coverage ownership cap, Nielson said.

The deal “would substantially lessen competition” in retransmission consent in the 13 markets without the divestitures, the complaint said. DOJ’s emphasis on retransmission consent and the agency’s filing of a complaint against the transaction are indications it has “significant competitive concerns” about allowing top-four combinations in those markets, said America's Communications Association Senior Vice President-Government Affairs Ross Lieberman.

“These divestitures do very little to amend our concerns about the Nexstar/Tribune deal,” said Free Press Policy Manager Dana Floberg. “The bigger a broadcast chain is, the more leverage they have over the companies they negotiate with -- and the less incentive to actually serve the needs of local communities.”

The complaint explicitly says broadcast advertising isn’t substitutable with MVPD and digital advertising, contrary to the arguments made by broadcast panelists at the DOJ broadcast competition workshop. DOJ Antitrust Division Chief Makan Delrahim said then it was possible markets had changed to put broadcasters in direct competition with MVPDs and digital companies (see 1905020068), but Wednesday’s complaint said that isn't yet the case. “While cable spot or digital advertising may constrain broadcast television spot advertising prices in the future, it does not do so today,” DOJ said. A broadcast attorney said it’s not clear if the complaint is a rejection by DOJ of the arguments raised in the workshop. DOJ didn’t comment. “NAB respectfully disagrees with the Justice Department position," an NAB spokesperson said. "The idea that broadcast TV stations only compete with other crosstown broadcasters for local advertising dollars is simply a fantasy.”