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Conditions with 'Teeth'?

Petitions Against Standard/Tegna Target Retrans

Apollo Global Management’s financing of Standard/Tegna, influence over the new company and the series of station transfers the $8.6 billion deal would create among Standard, Tegna and Apollo subsidiary Cox Media Group were targeted by MVPDs, public interest groups and fellow broadcaster Graham Media in petitions posted Thursday in docket 22-162. “Why would Applicants go through this many hoops?” asked MVPD Altice, saying one possibility “is that they seek to apply Cox retransmission consent rates to New TEGNA stations -- even though Cox isn’t buying TEGNA.” The applicants’ “attempt to exploit ‘after-acquisition’ clauses in retransmission consent contracts will inevitably result in increased MVPD subscription prices” for consumers, said a filing from two sectors of the Communications Workers of America.

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The deal is structured to have Standard sell four stations to Cox, Cox to sell subsidiary Teton to Standard, Tegna to become part of Teton, and then the new company sell four stations to Cox, said Altice. “After a number of intermediate steps, the end result would be that Standard General would buy a Boston TV station from Apollo’s CMG, sell four Texas stations to CMG and buy most of TEGNA’s stations,” said the joint filing from CWA NewsGuild and National Association of Broadcast Employees and Technicians sectors.

The proposed transaction will not result in Apollo or Cox Media Group having any influence or control over TEGNA,” said a Standard spokesperson in a statement. "Apollo is providing a small portion of the financing -- none of the twelve lenders, nor the five preferred providers involved in this deal will have any ability to influence TEGNA’s operations or gain access to any competitively sensitive information.” Standard didn’t comment on whether it's seeking to apply after-acquired clauses based on Cox’s retransmission consent rates to the Tegna Stations. Apollo didn’t respond to a request for comment.

The FCC should impose conditions on the transaction to prevent the activation of after-acquired clauses in retrans deals, block the companies from jointly negotiating retrans contracts, and prevent information sharing on retrans rates between the new Tegna and Apollo’s Cox stations, said NCTA, the American Television Association and Altice in a joint filing. FCC rules already bar broadcasters that aren’t commonly owned from joint retrans negotiation, but that's not enough, said NCTA. “The collection of interlocking relationships creates, in the aggregate, a high risk that the parties, post-transaction, will have the incentive and the ability to share information or otherwise coordinate their retransmission consent negotiations.”

ATVA said the FCC should “put teeth” into the joint negotiation rules by using language from a consent decree reached with Sinclair over past retrans negotiation violations. “This transaction would intertwine the two broadcasters economically, increasing both the incentives for and the ability of the parties to collude,” said ATVA.

Arguments the FCC should get involved in retrans rate negotiations haven’t historically gotten much traction at the FCC, but this case is “entirely different,” said the joint filing from the NewsGuild sector and NABET. “Here, there is direct and unambiguous evidence of harm to consumer welfare,” said the unions. The structure of the transaction will increase prices for consumers, they said.

MVPDs, public interest groups and Graham Media also raised concerns about possible collusion between Cox and the new Tegna outside the realm of retrans deals. The deal would lead to Cox and the new Tegna controlling all four major network affiliates in Jacksonville, said Graham, which owns WJXT Jacksonville. “Graham is concerned that granting the Transaction -- and permitting two massive investment firms to own or control all four Jacksonville major network affiliates” will raise “public interest harms.” Allowing “the combination of the financial interests of all the major network affiliates will consolidate an already highly consolidated Jacksonville market,” Graham said.

The FCC should explore the facts behind the deal through an administrative hearing, said the CWA groups and Common Cause and the United Church of Christ Media Justice Ministry. This deal presents “a special circumstance that absolutely precludes grant of the applications without further exploration in an evidentiary hearing,” said the unions. “The applications should be denied or referred to an administrative law judge for a hearing,” said Common Cause and UCC’s joint filing.

The unions and public interest groups challenged assertions from Standard that the deal would lead to increased local journalism. As investment funds rather than media organizations, Standard and Apollo are incentivized to reduce costs by cutting jobs, said the CWA groups. The FCC should “pay particular attention to the damage that grant of these applications would cause to the labor market in TEGNA cities as well as throughout the country.” said the unions. “The cutting of potentially half the resources available to local stations cannot possibly enhance the Commission’s goals to promote localism,” said Common Cause and the UCC. Standard sent a memo to Tegna employees last week saying the company doesn’t intend to cut newsroom jobs.

The FCC should reexamine the UHF discount and the national ownership cap, and overturn a ruling by the previous FCC on the standing of public interest groups (see 1909160065), said Common Cause, UCC and the unions. The FCC said in a 2017 decision that organizations such as Common Cause have to demonstrate they have members who are viewers in relevant markets in a transaction to have standing. The agency “must correct” the implication “that the failure of an organization party-in-interest that is asserting associational standing to file affidavits in every market impacted by a transaction somehow impairs its rights to file in the markets where it does submit affidavits,” the joint filing said.