A federal judge has blocked local TV giant Nexstar's takeover of a leading rival, Tegna, until an antitrust trial plays out.
If Nexstar loses, it could be compelled to unwind the $6.2 billion deal, in which it absorbed 65 additional stations. In a statement Friday evening, Nexstar said it would appeal the ruling to the Ninth Circuit Court of Appeals.
Until the legal battle ends, Nexstar must separately operate the Tegna stations it just acquired, based on the ruling Friday by Chief Judge Troy Nunley of the Eastern District Court of California in Sacramento.
President Trump had endorsed the deal publicly in February — a highly unusual step — and so did Federal Communications Commission Chairperson Brendan Carr a few hours later. Trump administration officials, including those at Carr's FCC, approved Nexstar's acquisition of Tegna weeks later.
Nexstar consummated the transaction hours after getting the green light.
Eight Democratic attorneys general and satellite TV company DirecTV quickly filed lawsuits.
Nunley had earlier issued a temporary restraining order blocking Nexstar from operating the Tegna stations, finding the plaintiffs stand a strong chance of ultimately prevailing.
In the Friday evening ruling, called a preliminary injunction, Nunley reiterated that the plaintiffs had "demonstrated a prima facie case that the merger creates a 'reasonable probability of anticompetitive effect.'"
Nexstar is what's known in television as a "station group." These groups own many local TV stations in various markets across the country. The majority of those stations are affiliated with the national broadcasting networks like ABC, CBS, Fox and NBC. Nexstar is the country's largest station group by revenue. Tegna was the fourth largest.
While Nunley initially combined the cases, the plaintiffs have somewhat distinct imperatives, and he is allowing them to pursue separate complaints at trial. The attorneys general argue the takeover consolidates too much control of the local TV market in one corporation — especially when it comes to news.
Several Tegna journalists have told NPR that their colleagues expect mass layoffs at the former company's stations in markets where Nexstar now 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 television-station owners for the right to carry their feeds in local markets. In court filings, the company argues Nexstar will be able to use the additional stations to gain more leverage in its negotiations.
Nexstar disputes this. Its legal team notes that, with the Tegna purchase, it owns just 15% of all local television stations in the U.S.
Even so, that translates to 265 local stations in 44 states and the District of Columbia, reaching 80% of the nation's households. Those are all unprecedented figures. Federal competition law limits companies to less than half that level.
And as the attorneys general point out, Nexstar has promised investors it will achieve $300 million annually in what it calls "synergies," by integrating its operations with those formerly owned by Tegna. In the past, such savings often amounted to layoffs and merged operations. After buying Tribune Media, for example, Nexstar merged the Indianapolis stations' newsrooms.
In giving their approval to the deal, the FCC and the Justice Department required minimal concessions, such as the sale of six stations over the next two years. To bypass the limits set by law, they gave waivers to Nexstar that allowed it to acquire stations in more than 30 markets in which the company already operates. Those include such markets as Columbus, Ohio; Denver and Des Moines, Iowa.
"This transaction closed more than four weeks ago following receipt of all required regulatory approvals from the Federal Communications Commission and the U.S. Department of Justice," Nexstar said in a statement released Friday evening after the ruling.
"Nexstar Media Group now owns TEGNA and has taken steps consistent with the Court order that has been in effect," the Nexstar statement continued. "For nearly thirty years, Nexstar has provided free over-the-air access to all its broadcast stations — local news, weather, and community-focused programming alongside major network programming. This pro-competitive transaction will make local stations stronger and support continued investment in local journalism and fact-based news."
Nunley, an Obama appointee to the bench, grounded much of his reasoning on the relative power Nexstar would have in withholding NFL games from DirecTV in key markets. But he also appeared skeptical of Nexstar's arguments that mergers would enhance the quality of its stations' local news coverage — even if the volume of newscasts increased, as Nexstar has suggested.
"The FCC was 'not given the power to decide antitrust issues' and FCC action 'was not intended to prevent enforcement of the antitrust laws in federal courts'," he wrote, quoting legal precedent.
"[T]he Court agrees with Plaintiffs that Defendants' integration efforts are exactly those that would make it more difficult to divest TEGNA stations, as they will eliminate competition and result in newsroom layoffs and shutdowns," Nunley ruled.
And Nunley rejected Nexstar's argument that the FCC's clearance should be considered sufficient review of any antitrust or anti-competitive concerns.
California Attorney General Rob Bonta, one of the state officials suing Nexstar, hailed the judge's ruling as a clear victory.
"This merger is illegal, plain and simple," Bonta said in a statement. "The federal government may have thrown in the towel, but we'll keep fighting for consumers, for workers, for affordability, and for our local news."
FCC Commissioner Anna Gomez, the lone Democrat on the panel, said "The FCC and other government agencies have used what is now recognized as the Billionaire Buddy Bypass to grant expedited, closed-door approval to powerful friends of this administration."
The outcome of the case will largely hinge on whether DirecTV and the state attorneys general can convincingly show the deal lets Nexstar increase prices for consumers, says Beau Buffier, an antitrust lawyer at the law firm Wilson Sonsini who used to work for New York Attorney General Letitia James — one of the plaintiffs in the case. Based on Nunley's actions, he believes the states and DirecTV have a good chance of prevailing on the merits at trial.
Buffier notes that if Nexstar resolved DirecTV's complaint — through a settlement or otherwise — that would not resolve parallel concerns of other providers who have to pay to carry local TV stations, including cable companies and some streamers. And the attorneys general present a different problem for Nexstar in considering a settlement to short-circuit a trial, he said.
"One would expect that in order to satisfy the states, Nexstar would have to divest a substantial number of stations, which would impact the overall economics, and the synergies, and the benefits that they expected to realize from the transaction," Buffier said.
"So they have an incentive, potentially, to continue to fight this for a lengthy period of time rather than try to settle it with a divestiture of, for example, all the duopoly stations."
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