Justice Department Requires Divestiture from Gannett Co. Inc. in Order to Proceed with Its Acquisition of Belo Corp.
Divestiture Will Preserve Broadcast Television Competition in St. Louis
The Department of Justice announced today that it will require Gannett Co. Inc., Belo Corp. and Sander Media LLC to divest their interests in KMOV‑TV, a CBS affiliate in St. Louis, in order to proceed with Gannett’s acquisition of Belo, and Sander’s related acquisition of six Belo television stations that Gannett cannot hold under Federal Communications Commission (FCC) rules. The department said that, without the required divestiture, Gannett would have gained a dominant position in broadcast television spot advertising in the St. Louis area, resulting in higher prices advertisers.
In addition to acquiring the six stations from Belo, Sander will enter into several agreements with Gannett in order to both finance purchasing the stations and facilitate operating the stations. KMOV-TV is one of the six stations Sander would acquire from Belo and would be subject to agreements between Sander and Gannett. These agreements, however, do not include any joint negotiation of retransmission rights in St. Louis. The Gannett-Belo acquisition is valued at approximately $2.2 billion.
The department’s Antitrust Division filed a civil antitrust lawsuit today in the U.S. District Court for the District of Columbia to block the proposed acquisition and related agreements between Gannett and Sander, including an option for Gannett to assign or acquire the Belo stations sold to Sander, a financing guarantee and a long-term shared services agreement. At the same time, the department filed a proposed settlement that, if approved by the court, would resolve the competitive concerns alleged in the lawsuit.
“Gannett’s KSDK‑TV and Belo’s KMOV‑TV compete head-to-head in the sale of broadcast television spot advertising in the St. Louis area, and this rivalry constrains advertising rates,” said Bill Baer, Assistant Attorney General in charge of the Department of Justice’s Antitrust Division. “The full divestiture required by the department will ensure that KMOV-TV will remain a vigorous competitor in St. Louis.”
The department’s complaint alleges that the proposed acquisition would lessen competition in broadcast television spot advertising in the St. Louis Designated Market Area (DMA). Even though the two stations would maintain separate sales forces, the various agreements between Gannett and Sander, KMOV‑TV’s new owner, would align the incentives of the two stations. To remedy this harm, the proposed settlement requires Gannett, Belo and Sander to divest all assets primarily used in the operation of KMOV‑TV to an independent purchaser to be approved by the United States. That purchaser will not be permitted to have any agreements with Gannett concerning KMOV-TV that could limit competition with KSDK-TV, including options to acquire or assign, financing agreements and shared services or joint sales agreements.
Gannett, a Delaware corporation with headquarters in McLean, Va., owns and operates 23 broadcast television stations nationwide, 12 of which are in the top 25 markets, as well as numerous newspapers. Gannett’s KSDK‑TV is the NBC affiliate in St. Louis.
Belo, a Delaware corporation with headquarters in Dallas, owns and operates 20 broadcast television stations nationwide, nine of which are in the top 25 markets. Belo’s KMOV‑TV is the CBS affiliate in St. Louis.
Sander, a Delaware limited liability company with headquarters in Scottsdale, Ariz., has no current business activity other than preparing to acquire six Belo stations, including KMOV‑TV in St. Louis, as part of the transactions between Gannett, Belo and Sander.
As required by the Tunney Act, the proposed settlement, along with a competitive impact statement, will be published in the Federal Register. Any person may submit written comments concerning the proposed settlement during a 60‑day comment period to Scott A. Scheele, Chief, Telecommunications and Media Enforcement Section, Antitrust Division, U.S. Department of Justice, 450 Fifth Street, N.W., Suite 7000, Washington, D.C. 20530. At the conclusion of the 60‑day comment period, the U.S. District Court for the District of Columbia may approve the proposed settlement upon finding that it is in the public interest.