[Federal Register Volume 84, Number 106 (Monday, June 3, 2019)]
[Notices]
[Pages 25573-25577]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2019-11489]
[[Page 25573]]
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DEPARTMENT OF JUSTICE
Antitrust Division
United States v. Gray Television, Inc., et al.; Response to
Public Comment
Notice is hereby given pursuant to the Antitrust Procedures and
Penalties Act, 15 U.S.C. 16(b)-(h), that one comment was received
concerning the proposed Final Judgment in this case, and that comment
together with the Response of Plaintiff United States to Public Comment
on the Proposed Final Judgment have been filed with the United States
District Court for the District of Columbia in United States of America
v. Gray Television, Inc., et al., Civil Action No. 1:18-cv-02951-CRC.
Copies of the comment and the United States' response are available for
inspection on the Antitrust Division's website at https://www.justice.gov/atr and at the Office of the Clerk of the United States
District Court for the District of Columbia. Copies of these materials
may be obtained from the Antitrust Division upon request and payment of
the copying fee set by Department of Justice regulations.
Patricia A. Brink,
Director of Civil Enforcement.
UNITED STATES DISTRICT COURT FOR THE DISTRICT OF COLUMBIA
United States of America, Plaintiff, v. Gray Television, Inc.,
and Raycom Media, Inc., Defendants.
Case No. 1:18-cv-02951-CRC
RESPONSE OF PLAINTIFF UNITED STATES TO PUBLIC COMMENT ON THE PROPOSED
FINAL JUDGMENT
As required by the Antitrust Procedures and Penalties Act (the
``APPA'' or ``Tunney Act''), 15 U.S.C. Sec. 16(b)-(h), the United
States hereby responds to the one public comment received by the United
States about the proposed Final Judgment in this case. After careful
consideration of the submitted comment, the United States continues to
believe that the proposed remedy, as described in the proposed Final
Judgment, will address the harm alleged in the Complaint and is
therefore in the public interest. The United States will move the Court
for entry of the proposed Final Judgment after the public comment and
this response have been published in the Federal Register pursuant to
15 U.S.C. Sec. 16(d).
I. PROCEDURAL HISTORY
On June 23, 2018, Gray Television, Inc. (``Gray'') and Raycom
Media, Inc. (``Raycom'') entered into an Agreement and Plan of Merger
pursuant to which Gray would acquire Raycom for approximately $3.6
billion. On December 14, 2018, the United States filed a civil
antitrust Complaint seeking to enjoin Gray and Raycom (collectively,
``Defendants'') from carrying out the merger. The Complaint alleges
that the merger would substantially lessen competition in the markets
for the licensing of ``Big 4'' television retransmission consent and
the sale of broadcast television spot advertising in each of nine
Designated Market Areas (``DMAs'') in which Gray and Raycom each owned
an affiliate of a ``Big 4'' television network (i.e., an NBC, CBS, ABC,
or FOX affiliate). These nine DMAs (the ``Overlap DMAs'') are: (i)
Waco-Temple-Bryan, Texas; (ii) Tallahassee, Florida-Thomasville,
Georgia; (iii) Toledo, Ohio; (iv) Odessa-Midland, Texas; (v) Knoxville,
Tennessee; (vi) Augusta, Georgia; (vii) Panama City, Florida; (viii)
Dothan, Alabama; and (ix) Albany, Georgia.
Simultaneously with the filing of the Complaint, the United States
filed a proposed Final Judgment and a Hold Separate Stipulation and
Order (``Hold Separate'') signed by Plaintiff and Defendants consenting
to entry of the proposed Final Judgment after compliance with the
requirements of the Tunney Act, 15 U.S.C. Sec. 16(b)-(h). Pursuant to
those requirements, the United States filed a Competitive Impact
Statement (``CIS'') on December 14, 2018, describing the transaction
and the proposed Final Judgment. 15 U.S.C. Sec. 16(b). The United
States published the Complaint, proposed Final Judgment, and CIS in the
Federal Register on February 1, 2019, see 84 Fed. Reg. 1,216 (2019),
and caused summaries of the proposed Final Judgment and CIS, together
with directions for the submission of written comments related to the
proposed Final Judgment, to be published in The Washington Post for
seven days, from February 4, 2019, through February 10, 2019,\1\ see 15
U.S.C. Sec. 16(c). The 60-day public comment period required by the
Tunney Act, 15 U.S.C. Sec. 16(b)-(d), ended on April 5, 2019. The
United States received one comment, which is described below in Section
IV, concerning the allegations in the Complaint (Exhibit 1).
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\1\ Though not expressly required to do so by the Tunney Act,
the United States also caused these summaries of the proposed Final
Judgment and CIS, and directions for submission of written comments,
to be published for seven days over a period of two weeks in 11
other newspapers that are widely read in the Overlap DMAs: The
Albany Herald, The Augusta Chronicle, the Dothan Eagle, the Waco
Tribune-Herald, The Knoxville News-Sentinel, the Midland Reporter-
Telegram, The Odessa American, The News Herald (published in Panama
City, Florida), the Tallahassee Democrat, The Blade (published in
Toledo, Ohio), and The Valdosta Daily Times. The last date of
publication of the materials in any of these newspapers was February
19, 2019.
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II. THE COMPLAINT, THE HOLD SEPARATE, AND THE PROPOSED FINAL JUDGMENT
The Complaint alleged that Gray's acquisition of Raycom would
substantially lessen competition in the licensing of Big 4 television
retransmission consent and in the sale of broadcast television spot
advertising in the Overlap DMAs. The proposed Final Judgment remedies
this concern by requiring the Defendants to divest the Big 4 stations
owned by either Gray or Raycom in each Overlap DMA. Without the
proposed remedy, Gray's acquisition of Raycom would have resulted in
the combined company owning an additional Big 4 station in each Overlap
DMA.
Big 4 stations usually are the stations in each DMA ranked highest
in terms of audience share and ratings, largely because of unique
offerings such as local news, sports, and highly ranked primetime
programs. Due to these features, multichannel video programming
distributors (``MVPDs''), such as cable and satellite television
providers, regard Big 4 broadcast stations as highly desirable for
inclusion in the packages they offer subscribers. Viewers typically
consider Big 4 stations to be close substitutes for one another. If an
MVPD suffers a blackout of a Big 4 station in a given DMA, many of the
MVPD's subscribers are likely to turn to other Big 4 stations in the
DMA to watch similar content. The combination of Gray's and Raycom's
Big 4 stations would have increased the combined company's bargaining
leverage against MVPDs in the Overlap DMAs, likely leading to increased
``retransmission consent'' fees, which generally are passed on to MVPD
subscribers.
In addition to licensing retransmission consent, broadcast
television stations sell advertising ``spots'' during breaks in their
programming. An advertiser purchases spots from a broadcast station in
order to reach viewers within the DMA in which the broadcast station is
located. From an advertiser's perspective, broadcast television spot
advertising possesses a unique combination of attributes that sets it
apart from other kinds of advertising. Gray and Raycom compete to sell
broadcast television advertising in each of the Overlap DMAs. Without
the divestiture of a Big 4 station in each Overlap DMA,
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advertisers would have fewer broadcast television alternatives, likely
resulting in increased prices for broadcast television spot
advertising.
On August 22, 2018, the Defendants provided the United States with
executed asset purchase agreements under which the Defendants proposed
to divest the following Big 4 stations:
(a) Raycom-owned KXXV and KRHD-CD, the ABC affiliates in the Waco-
Temple-Bryan, Texas, DMA, and WTXL-TV, the ABC affiliate in the
Tallahassee, Florida-Thomasville, Georgia, DMA to the E.W. Scripps
Company or its subsidiaries (collectively ``Scripps'');
(b) Raycom-owned WTOL, the CBS affiliate in the Toledo, Ohio, DMA,
and KWES-TV, the NBC affiliate in the Odessa-Midland, Texas, DMA to
TEGNA Inc. or its subsidiaries (collectively ``TEGNA'');
(c) Raycom-owned WTNZ, the FOX affiliate in the Knoxville,
Tennessee, DMA, WFXG, the FOX affiliate in the Augusta, Georgia, DMA,
WPGX, the FOX affiliate in the Panama City, Florida, DMA, and WDFX-TV,
the FOX affiliate in the Dothan, Alabama, DMA to Greensboro TV, LLC, a
company controlled by Jim Lockwood (``Lockwood''); and
(d) Gray-owned WSWG, the CBS affiliate in the Albany, Georgia, DMA
to Marquee Broadcasting Georgia, Inc. (``Marquee'').
The United States investigated the sufficiency of the proposed
divestitures for addressing competitive concerns with the proposed
merger by reviewing documents and information from the proposed
divestiture buyers and interviewing their executives. After this
review, the United States concluded that the divestiture of the assets
to each proposed purchaser would not cause competitive harm; each
purchaser has an incentive to use the divestiture assets to compete in
the relevant markets; and each purchaser has sufficient acumen,
experience, and financial capability to compete effectively in the
market over the long term. Each of the approved buyers has financial
capability and experience running multiple broadcast television
stations, including Big 4 affiliates. Moreover, each buyer has the
experience and sophistication necessary to manage the assets its
purchasing, plans to use the assets to compete in the markets in which
they are located, and has no other entanglements suggesting the
divestitures would result in any competitive harm. Accordingly, the
Division concluded that the divestiture of broadcast stations and
related assets to Scripps, TEGNA, Lockwood, and Marquee, resolved the
competitive concerns set forth in the Complaint. On January 2, 2019
Gray consummated its acquisition of Raycom.
The Hold Separate and the proposed Final Judgment were filed with
the court on December 14, 2018. Under the proposed Final Judgment, the
Defendants are required to divest the television stations set forth in
the proposed asset purchase agreements and all assets necessary for
their operation as viable, ongoing commercial broadcast television
stations.\2\ The proposed Final Judgment requires that these assets be
divested to one or more acquirers acceptable to the United States, in
its sole discretion. On December 31, 2018, and January 2, 2019, Gray
sold the divestiture assets set forth in the proposed Final Judgment to
Scripps, TEGNA, Lockwood, and Marquee, as approved by the United
States. On January 2, 2019, Gray consummated its acquisition of Raycom.
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\2\ The proposed Final Judgment contemplates that Gray would not
be required to divest certain excluded assets, namely, the Telemundo
and CW affiliations and programming streams in the Odessa-Midland,
Texas, DMA; the Telemundo affiliation and programming stream in the
Waco-Temple-Bryan, Texas, DMA; and the CW affiliation and
programming stream in the Albany, Georgia, DMA. The United States
has concluded that Gray's retention of these programming streams
would not have a material effect on the adequacy of the proposed
remedy.
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Under the Hold Separate, the United States and the Defendants have
stipulated that the proposed Final Judgment may be entered after
compliance with the APPA. Entry of the proposed Final Judgment would
terminate this action, except that the court would retain jurisdiction
to construe, modify, or enforce the provisions of the proposed Final
Judgment and to punish violations thereof.
III. STANDARD OF JUDICIAL REVIEW
The Clayton Act, as amended by the APPA, requires that proposed
consent judgments in antitrust cases brought by the United States be
subject to a public comment period of at least 60 days, after which the
court shall determine whether entry of the proposed Final Judgment ``is
in the public interest.'' 15 U.S.C. Sec. 16(e)(1). In making that
determination, the court, in accordance with the statute as amended in
2004, is required to consider:
(A) the competitive impact of such judgment, including termination
of alleged violations, provisions for enforcement and modification,
duration of relief sought, anticipated effects of alternative remedies
actually considered, whether its terms are ambiguous, and any other
competitive considerations bearing upon the adequacy of such judgment
that the court deems necessary to a determination of whether the
consent judgment is in the public interest; and
(B) the impact of entry of such judgment upon competition in the
relevant market or markets, upon the public generally and individuals
alleging specific injury from the violations set forth in the complaint
including consideration of the public benefit, if any, to be derived
from a determination of the issues at trial.
15 U.S.C. Sec. 16(e)(1)(A) & (B). In considering these statutory
factors, the court's inquiry is necessarily a limited one as the
government is entitled to ``broad discretion to settle with the
defendant within the reaches of the public interest.'' United States v.
Microsoft Corp., 56 F.3d 1448, 1461 (D.C. Cir. 1995); see generally
United States v. SBC Commc'ns, Inc., 489 F. Supp. 2d 1 (D.D.C. 2007)
(assessing public-interest standard under the Tunney Act); United
States v. U.S. Airways Group, Inc., 38 F. Supp. 3d 69, 75 (D.D.C. 2014)
(explaining that the ``court's inquiry is limited'' in Tunney Act
settlements); United States v. InBev N.V./S.A., No. 08-1965 (JR), 2009
U.S. Dist. LEXIS 84787, at *3 (D.D.C. Aug. 11, 2009) (noting that the
court's review of a consent judgment is limited and only inquires
``into whether the government's determination that the proposed
remedies will cure the antitrust violations alleged in the complaint
was reasonable, and whether the mechanisms to enforce the final
judgment are clear and manageable'').
As the U.S. Court of Appeals for the District of Columbia Circuit
has held, under the APPA a court considers, among other things, the
relationship between the remedy secured and the specific allegations in
the government's complaint, whether the decree is sufficiently clear,
whether its enforcement mechanisms are sufficient, and whether the
decree may positively harm third parties. See Microsoft, 56 F. 3d at
1458-62. With respect to the adequacy of the relief secured by the
decree, a court may not ``engage in an unrestricted evaluation of what
relief would best serve the public.'' United States v. BNS, Inc., 858
F.2d 456, 462 (9th Cir. 1988) (quoting United States v. Bechtel Corp.,
648 F.2d 660, 666 (9th Cir. 1981)); see also Microsoft, 56 F.3d at
1460-62; United States v. Alcoa, Inc., 152 F. Supp. 2d 37, 40 (D.D.C.
2001); InBev, 2009 U.S. Dist. LEXIS 84787, at *3. Instead:
[t]he balancing of competing social and political interests affected by
a proposed antitrust consent decree must be left, in
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the first instance, to the discretion of the Attorney General. The
court's role in protecting the public interest is one of insuring that
the government has not breached its duty to the public in consenting to
the decree. The court is required to determine not whether a particular
decree is the one that will best serve society, but whether the
settlement is ``within the reaches of the public interest.'' More
elaborate requirements might undermine the effectiveness of antitrust
enforcement by consent decree.
Bechtel, 648 F.2d at 666 (emphasis added) (citations omitted).\3\
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\3\ See also BNS, 858 F.2d at 464 (holding that the court's
``ultimate authority under the [APPA] is limited to approving or
disapproving the consent decree''); United States v. Gillette Co.,
406 F. Supp. 713, 716 (D. Mass. 1975) (noting that, in this way, the
court is constrained to ``look at the overall picture not
hypercritically, nor with a microscope, but with an artist's
reducing glass'').
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In determining whether a proposed settlement is in the public
interest, a district court ``must accord deference to the government's
predictions about the efficacy of its remedies, and may not require
that the remedies perfectly match the alleged violations.'' SBC
Commc'ns, 489 F. Supp. 2d at 17; see also U.S. Airways, 38 F. Supp. 3d
at 74-75 (noting that a court should not reject the proposed remedies
because it believes others are preferable and that room must be made
for the government to grant concessions in the negotiation process for
settlements); Microsoft, 56 F.3d at 1461 (noting the need for courts to
be ``deferential to the government's predictions as to the effect of
the proposed remedies''); United States v. Archer- Daniels-Midland Co.,
272 F. Supp. 2d 1, 6 (D.D.C. 2003) (noting that the court should grant
``due respect to the government's prediction as to the effect of
proposed remedies, its perception of the market structure, and its
views of the nature of the case''). The ultimate question is whether
``the remedies [obtained in the decree are] so inconsonant with the
allegations charged as to fall outside of the `reaches of the public
interest.''' Microsoft, 56 F.3d at 1461 (quoting United States v.
Western Elec. Co., 900 F.2d 283, 309 (D.C. Cir. 1990)). To meet this
standard, the United States ``need only provide a factual basis for
concluding that the settlements are reasonably adequate remedies for
the alleged harms.'' SBC Commc'ns, 489 F. Supp. 2d at 17.
Moreover, the court's role under the APPA is limited to reviewing
the remedy in relationship to the violations that the United States has
alleged in its complaint, and does not authorize the court to
``construct [its] own hypothetical case and then evaluate the decree
against that case.'' Microsoft, 56 F.3d at 1459; see also U.S. Airways,
38 F. Supp. 3d at 75 (noting that the court must simply determine
whether there is a factual foundation for the government's decisions
such that its conclusions regarding the proposed settlements are
reasonable); InBev, 2009 U.S. Dist. LEXIS 84787, at *20 (``the `public
interest' is not to be measured by comparing the violations alleged in
the complaint against those the court believes could have, or even
should have, been alleged''). Because the ``court's authority to review
the decree depends entirely on the government's exercising its
prosecutorial discretion by bringing a case in the first place,'' it
follows that ``the court is only authorized to review the decree
itself,'' and not to ``effectively redraft the complaint'' to inquire
into other matters that the United States did not pursue. Microsoft, 56
F.3d at 1459-60. As a court in this district confirmed in SBC
Communications, courts ``cannot look beyond the complaint in making the
public interest determination unless the complaint is drafted so
narrowly as to make a mockery of judicial power.'' SBC Commc'ns, 489 F.
Supp. 2d at 15.
In its 2004 amendments to the APPA,\4\ Congress made clear its
intent to preserve the practical benefits of utilizing consent decrees
in antitrust enforcement, adding the unambiguous instruction that
``[n]othing in this section shall be construed to require the court to
conduct an evidentiary hearing or to require the court to permit anyone
to intervene.'' 15 U.S.C. Sec. 16(e)(2); see also U.S. Airways, 38 F.
Supp. 3d at 76 (indicating that a court is not required to hold an
evidentiary hearing or to permit intervenors as part of its review
under the Tunney Act). This language explicitly wrote into the statute
what Congress intended when it first enacted the Tunney Act in 1974. As
Senator Tunney explained: ``[t]he court is nowhere compelled to go to
trial or to engage in extended proceedings which might have the effect
of vitiating the benefits of prompt and less costly settlement through
the consent decree process.'' 119 Cong. Rec. 24,598 (1973) (statement
of Sen. Tunney). Rather, the procedure for the public-interest
determination is left to the discretion of the court, with the
recognition that the court's ``scope of review remains sharply
proscribed by precedent and the nature of Tunney Act proceedings.'' SBC
Commc'ns, 489 F. Supp. 2d at 11. A court can make its public-interest
determination based on the competitive impact statement and response to
public comments alone. U.S. Airways, 38 F. Supp. 3d at 76; see also
United States v. Enova Corp., 107 F. Supp. 2d 10, 17 (D.D.C. 2000)
(noting that the ``Tunney Act expressly allows the court to make its
public interest determination on the basis of the competitive impact
statement and response to comments alone''); S. Rep. No. 93-298 93d
Cong., 1st Sess., at 6 (1973) (``Where the public interest can be
meaningfully evaluated simply on the basis of briefs and oral
arguments, that is the approach that should be utilized.'').
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\4\ The 2004 amendments substituted ``shall'' for ``may'' in
directing relevant factors for a court to consider and amended the
list of factors to focus on competitive considerations and to
address potentially ambiguous judgment terms. Compare 15 U.S.C.
Sec. 16(e) (2004), with 15 U.S.C. Sec. 16(e)(1) (2006); see also
SBC Commc'ns, 489 F. Supp. 2d at 11 (concluding that the 2004
amendments ``effected minimal changes'' to Tunney Act review).
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IV. SUMMARY OF PUBLIC COMMENT AND THE UNITED STATES' RESPONSE
During the public comment period, the United States received only
one comment concerning the proposed Final Judgment in this litigation.
That comment, attached as Exhibit 1, is a letter from a self-described
``television viewer'' in Dothan, Alabama, one of the Overlap DMAs. The
comment takes issue with Gray acquiring additional Big 4 stations in
Dothan. As required by the APPA, the comment, and the United States'
response, will be published in the Federal Register.
The United States believes that nothing in this comment warrants a
change to the proposed Final Judgment or supports an inference that the
proposed Final Judgment is not in the public interest. While the
proposed merger would, absent the remedy, have put more Big 4 affiliate
stations under Gray's control, the proposed Final Judgment avoids this
result. In Dothan, Alabama, where Gray owns the CBS and NBC affiliates,
the merger would have resulted in Gray also owning the FOX affiliate,
WDFX-TV. As noted above, however, WDFX-TV was one of the stations sold
to Lockwood on January 2, 2019. Therefore, consistent with the concerns
expressed by the commenter, the proposed Final Judgment prevents Gray
from increasing its control over television affiliates in Dotham.
CONCLUSION
After reviewing the public comment, the United States continues to
believe that the proposed Final Judgment, as drafted, provides an
effective and appropriate remedy for the antitrust violations alleged
in the Complaint, and is therefore in the public interest. The
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United States will move that this Court enter the proposed Final
Judgment after the comment and this response are published in the
Federal Register.
Dated: May 20, 2019
Respectfully submitted,
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Gregg I. Malawer,
United States Department of Justice, Antitrust Division, 450 Fifth
Street NW, Suite 4000, Washington, DC 20530, Tel: 202-616-5943,
[email protected].
Counsel for the United States.
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