Judge blocks local TV giant Nexstar’s acquisition of rival Tegna pending trial

A federal judge has blocked local TV giant Nexstar’s acquisition of rival Tegna pending an antitrust trial.

If Nexstar loses, it could be forced to cancel a $6.2 billion contract that would absorb an additional 65 stations. Nexstar said in a statement Friday night that it will appeal the ruling to the Ninth Circuit Court of Appeals.

Until the legal battle is over, Nexstar must operate the Tegna station it just acquired separately, under Friday’s ruling by Chief Judge Troy Nunley of the Eastern District of California in Sacramento.

President Trump publicly endorsed the deal in February, a highly unusual move, followed hours later by Federal Communications Commission Chairman Brendan Carr. Trump administration officials, including Mr. Carr’s FCC, approved Nexstar’s acquisition of Tegna a few weeks later.

Nexstar completed the deal hours after it was given the green light.

Eight Democratic attorneys general and the satellite TV company DirecTV quickly filed suit.

Nunley had previously issued a temporary restraining order blocking Nexstar from operating the Tegna stations, finding it likely that the plaintiffs would ultimately prevail.

In Friday night’s ruling, called a preliminary injunction, Nunley reiterated that the plaintiffs “have shown a prima facie case that the merger creates a ‘reasonable probability of anticompetitive effects.'”

Nexstar is what is known in television as a “station group.” These groups own many local television stations in various markets across the country. Most of these stations are affiliated with national broadcast networks such as ABC, CBS, Fox, and NBC. Nexstar is the nation’s largest broadcasting group by revenue. Tegna was the fourth largest.

Nunley originally consolidated the cases, but because the plaintiffs have somewhat different obligations, he has allowed them to pursue separate complaints in court. Attorneys general argue that the deal concentrates too much power in the local television market in one company, especially when it comes to news.

Multiple Tegna journalists told NPR that their colleagues expect mass layoffs to occur at the former company’s stations in markets where Nexstar currently owns at least two “Big Four” stations. The journalists spoke on condition of anonymity due to concerns about job security.

DirecTV is suing because it has to pay station owners for the right to run their feeds in local markets. The company argues in court filings that Nexstar could use the additional stations to gain more leverage in negotiations.

Nexstar disputes this. The company’s legal team points out that the Tegna acquisition leaves the company with just 15% of all local television stations in the United States.

Still, that’s 265 local stations in 44 states and the District of Columbia, reaching 80% of U.S. households. These are all unprecedented numbers. Federal competition law limits companies to less than half that level.

And, as the attorney general notes, Nexstar promised investors that by combining operations with businesses previously owned by Tegna, Nexstar would achieve $300 million a year in what Nexstar called “synergies.” In the past, such savings often led to layoffs or business consolidation. For example, after acquiring Tribune Media, Nexstar consolidated the newsrooms of the Indianapolis stations.

In approving the deal, the Federal Communications Commission and the Department of Justice asked for minimal concessions, including the sale of six stations over the next two years. To circumvent legal restrictions, the company gave Nexstar the right to acquire stations in more than 30 markets where it already operates. These include markets such as Columbus, Ohio, Denver, and Des Moines, Iowa.

“This transaction was completed over four weeks ago after receiving all necessary regulatory approvals from the Federal Communications Commission and the U.S. Department of Justice,” Nexstar said in a statement released Friday night after the ruling.

“Nexstar Media Group currently owns TEGNA and is taking steps consistent with the court order currently in effect,” Nexstar’s statement continued. “For nearly 30 years, Nexstar has provided free over-the-air access to all of its stations – local news, weather and community-focused programming alongside major network programming. This pro-competition deal strengthens our local stations and supports our continued investment in local journalism and fact-based news.”

Nunley, who was appointed to the bench by President Obama, based his reasoning on the relative power Nexstar would have in withholding NFL games from DirecTV in major markets. But he also seemed skeptical about Nexstar’s claims that the merger would improve the quality of each station’s local news coverage, as Nexstar has suggested, even if the amount of news broadcasts increases. Citing case law, he wrote that the FCC was ‘not authorized to decide antitrust issues’ and that its actions were ‘not intended to prevent enforcement of antitrust laws in federal court.’

”[T]”The court agrees with plaintiffs that defendants’ consolidation efforts are precisely what will make the sale of TEGNA stations more difficult, eliminate competition, and lead to newsroom layoffs and closures,” Nunley ruled.

And Nunley rejected Nexstar’s argument that the FCC’s approval should be considered sufficient consideration of antitrust and anticompetitive concerns.

California Attorney General Rob Bonta, one of the state officials who sued Nexstar, hailed the judge’s decision as a clear victory.

“This merger is illegal, plain and simple,” Bonta said in a statement. “The federal government may have given up, but we will continue to fight for consumers, workers, affordability, and local news.”

“The FCC and other government agencies are using what is now known as the Billionaire Buddy Bypass to give quick and private approvals to powerful friends of this administration,” said FCC Chairwoman Anna Gomez, the only Democrat on the committee.

Beau Buffier, one of the plaintiffs in the case and an antitrust attorney at the law firm Wilson Sonsini who worked for former New York State Attorney General Letitia James, said the outcome of the case will largely depend on whether DirecTV and the state attorney general can convincingly demonstrate that Nexstar will raise prices for consumers. Based on Mr. Nunley’s actions, he believes the state and DirecTV have a good chance of prevailing on the merits at trial.

Buffier noted that even if Nexstar resolves the DirecTV complaint through an out-of-court settlement, it likely won’t resolve the parallel concerns of other providers, such as cable companies and some streamers, who have to pay for broadcasting local TV stations. And the attorney general is presenting Nexstar with other issues as it considers a settlement to shorten the trial, he said.

“It would be expected that Nexstar would need to sell a significant number of stations to satisfy the states, which would impact the overall economics, synergies and benefits expected to be realized from the transaction,” Buffer said.

“So they potentially have an incentive to keep fighting this problem for a long time, rather than trying to solve it by selling off all the duopoly stations, for example.”