[Federal Register Volume 86, Number 148 (Thursday, August 5, 2021)]
[Notices]
[Pages 42883-42902]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2021-16682]
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DEPARTMENT OF JUSTICE
Antitrust Division
United States v. Gray Television, Inc., et al.; Proposed Final
Judgment and Competitive Impact Statement
Notice is hereby given pursuant to the Antitrust Procedures and
Penalties Act, 15 U.S.C. 16(b)-(h), that a proposed Final Judgment,
Stipulation, and Competitive Impact Statement 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.
1:21-cv-02041. On July, 28, 2021, the United States filed a Complaint
alleging that Gray Television, Inc.'s (``Gray'') proposed acquisition
of Quincy Media, Inc.'s (``Quincy'') commercial television broadcast
stations would violate Section 7 of the Clayton Act, 15 U.S.C. 18. The
proposed Final Judgment, filed at the same time as the Complaint,
requires Gray and Quincy to divest commercial television broadcast
stations in seven local television markets: (i) Tucson, Arizona; (ii)
Madison, Wisconsin; (iii) Rockford, Illinois; (iv) Paducah, Kentucky-
Cape Girardeau, Missouri-Harrisburg-Mt. Vernon, Illinois; (v) Cedar
Rapids-Waterloo-Iowa City-Dubuque, Iowa; (vi) La Crosse-Eau Claire,
Wisconsin; and (vii) Wausau-Rhinelander, Wisconsin.
Copies of the Complaint, proposed Final Judgment, and Competitive
Impact Statement are available for inspection on the Antitrust
Division's website at http://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
[[Page 42884]]
copying fee set by Department of Justice regulations.
Public comment is invited within 60 days of the date of this
notice. Such comments, including the name of the submitter, and
responses thereto, will be posted on the Antitrust Division's website,
filed with the Court, and, under certain circumstances, published in
the Federal Register. Comments should be submitted in English and
directed to Scott Scheele, Chief, Media, Entertainment, and
Communications Section, Antitrust Division, Department of Justice, 450
Fifth Street NW, Suite 7000, Washington, DC 20530 (email address:
[email protected]).
Suzanne Morris,
Chief, Premerger and Division Statistics, Antitrust Division.
United States District Court for the District of Columbia
United States of America, 450 Fifth Street NW, Washington, DC
20530, Plaintiff v. Gray Television, Inc., 4370 Peachtree Road NE,
Atlanta, Georgia 30319; and Quincy Media, Inc., 130 South 5th
Street, Quincy, Illinois 62301, Defendants.
Case No.: 1:21-cv-02041-CJN
Judge: Carl J. Nichols
Complaint
The United States of America, acting under the direction of the
Attorney General of the United States, brings this civil action against
Gray Television, Inc. (``Gray'') and Quincy Media, Inc. (``Quincy'') to
enjoin Gray's proposed acquisition of Quincy. The United States
complains and alleges as follows:
I. Nature of the Action
1. Pursuant to a Stock Purchase Agreement dated January 31, 2021,
Gray plans to acquire Quincy for approximately $925 million in cash.
2. The proposed acquisition would combine popular local television
stations that compete against each other in several markets, likely
resulting in significant harm to competition.
3. In seven Designated Market Areas (``DMAs''), Gray and Quincy
each own at least one broadcast television station that is affiliated
with one of the ``Big Four'' television networks: NBC, CBS, ABC, or
FOX. These seven DMAs, collectively referred to in this Complaint as
the ``Overlap DMAs'' are: (i) Tucson, Arizona; (ii) Madison, Wisconsin;
(iii) Rockford, Illinois; (iv) Paducah, Kentucky-Cape Girardeau,
Missouri-Harrisburg-Mt. Vernon, Illinois; (v) Cedar Rapids-Waterloo-
Iowa City-Dubuque, Iowa; (vi) La Crosse-Eau Claire, Wisconsin; and
(vii) Wausau-Rhinelander, Wisconsin.
4. In each Overlap DMA, the proposed acquisition would eliminate
competition between Gray and Quincy in the licensing of Big Four
network content (``retransmission consent'') to cable, satellite, fiber
optic television, and over-the-top providers (referred to collectively
as multichannel video programming distributors or ``MVPDs''), for
distribution to their subscribers. Additionally, in each Overlap DMA,
the proposed acquisition would eliminate competition between Gray and
Quincy in the sale of broadcast television spot advertising to
advertisers interested in reaching viewers in the DMA.
5. By eliminating a competitor, the acquisition would likely give
Gray the power to charge MVPDs higher fees for its programming--fees
that those companies would likely pass on, in large measure, to their
subscribers. Additionally, the acquisition would likely allow Gray to
charge local businesses and other advertisers higher prices to reach
audiences in the Overlap DMAs.
6. As a result, the proposed acquisition of Quincy by Gray likely
would substantially lessen competition in the markets for
retransmission consent in each of the Overlap DMAs, and in the markets
for selling broadcast television spot advertising in each of the
Overlap DMAs, in violation of Section 7 of the Clayton Act, 15 U.S.C.
18.
II. The Defendants
7. Gray is a Georgia corporation with its headquarters in Atlanta,
Georgia. Gray owns 165 television stations in 94 DMAs, of which 139 are
Big Four affiliates. In 2020, Gray reported revenues of $2.4 billion.
8. Quincy is an Illinois corporation with its headquarters in
Quincy, Illinois. Quincy owns 20 television stations in 16 DMAs, of
which 19 are Big Four affiliates. In 2020, Quincy had revenues of
approximately $338 million.
III. Jurisdiction and Venue
9. The United States brings this action under Section 15 of the
Clayton Act, 15 U.S.C. 25, as amended, to prevent and restrain
Defendants from violating Section 7 of the Clayton Act, 15 U.S.C. 18.
10. The Court has subject matter jurisdiction over this action
pursuant to Section 15 of the Clayton Act, 15 U.S.C. 25, and 28 U.S.C.
1331, 1337(a), and 1345.
11. Defendants sell broadcast television spot advertising to
businesses (either directly or through advertising agencies) in the
flow of interstate commerce, and such activities substantially affect
interstate commerce.
12. Gray and Quincy have each consented to venue and personal
jurisdiction in this judicial district for purposes of this action.
Both companies transact business in this district. Venue is proper in
this district under Section 12 of the Clayton Act, 15 U.S.C. 22, and
under 28 U.S.C. 1391(b) and (c).
IV. Big Four Television Retransmission Consent Markets
A. Background
13. MVPDs, such as Comcast, DirecTV, and Mediacom, typically pay
the owner of each local Big Four broadcast station in a given DMA a
per-subscriber fee for the right to retransmit the station's content to
the MVPDs' subscribers. The per-subscriber fee and other terms under
which an MVPD is permitted to distribute a station's content to its
subscribers are set forth in a retransmission agreement. A
retransmission agreement is negotiated directly between a broadcast
station group, such as Gray or Quincy, and a given MVPD, and this
agreement typically covers all of the station group's stations located
in the MVPD's service area, or ``footprint.''
14. Each broadcast station group typically renegotiates
retransmission agreements with the MVPDs every few years. If an MVPD
and a broadcast station group cannot agree on a retransmission consent
fee at the expiration of a retransmission agreement, the result may be
a ``blackout'' of the broadcast group's stations from the particular
MVPD--i.e., an open-ended period during which the MVPD may not
distribute those stations to its subscribers until a new contract is
successfully negotiated.
B. Relevant Markets
1. Product Market
15. Big Four broadcast content has special appeal to television
viewers in comparison to the content that is available through other
broadcast stations and cable networks. Big Four stations usually are
the highest ranked in terms of audience share and ratings in each DMA,
largely because of unique offerings such as local news, sports, and
highly ranked primetime programs.
16. Because of Big Four stations' popular national content and
valued local coverage, MVPDs regard Big Four programming as highly
desirable for inclusion in the packages they offer subscribers.
17. Non-Big Four broadcast stations are typically not close
substitutes for viewers of Big Four stations. Stations that are
affiliates of networks other than the Big Four, such as the CW Network,
[[Page 42885]]
MyNetworkTV, or Telemundo, typically feature niche programming without
local news, weather or sports--or, in the case of Telemundo, only offer
local news, weather, and sports aimed at a Spanish-speaking audience.
Stations that are unaffiliated with any network are similarly unlikely
to carry programming with broad popular appeal.
18. If an MVPD suffers a blackout of a Big Four station in a given
DMA, many of the MVPD's subscribers in that DMA are likely to turn to
other Big Four stations in the DMA to watch similar content, such as
sports, primetime shows, and local news and weather. This willingness
of viewers to switch between competing Big Four broadcast stations
limits an MVPD's expected losses in the case of a blackout, and thus
limits a broadcaster's ability to extract higher fees from that MVPD--
since an MVPD's willingness to pay higher retransmission consent fees
for content rises or falls with the harm it would suffer if that
content were lost.
19. Due to the limited programming typically offered by non-Big
Four stations, viewers are much less likely to switch to a non-Big Four
station than to switch to other Big Four stations in the event of a
blackout of a Big Four station. Accordingly, competition from non-Big
Four stations does not typically impose a significant competitive
constraint on the retransmission consent fees charged by the owners of
Big Four stations.
20. For the same reasons, subscribers--and therefore MVPDs--
generally do not view cable network programming as a close substitute
for Big Four network content. This is primarily because cable networks
offer different content. For example, cable networks generally do not
offer local news, which provides a valuable connection to the local
community that is important to viewers of Big Four stations.
21. Because viewers do not regard non-Big Four broadcast stations
or cable networks as close substitutes for the programming they receive
from Big Four stations, these other sources of programming are not
sufficient to discipline an increase in the fees charged for Big Four
television retransmission consent.
22. For all of these reasons, a hypothetical monopolist of Big Four
television stations likely could impose a small but significant and
non-transitory increase in the price (``SSNIP'') it charges MVPDs for
retransmission consent without losing sufficient sales to render the
price increase unprofitable.
23. The licensing of Big Four television retransmission consent
therefore constitutes a relevant product market and line of commerce
under Section 7 of the Clayton Act, 15 U.S.C. 18.
2. Geographic Markets
24. A DMA is a geographic unit for which The Nielsen Company (US),
LLC --a firm that surveys television viewers--furnishes broadcast
television stations, MVPDs, cable networks, advertisers, and
advertising agencies in a particular area with data to aid in
evaluating audience size and composition. DMAs are widely accepted by
industry participants as the standard geographic areas to use in
evaluating television audience size and demographic composition. The
Federal Communications Commission (``FCC'') also uses DMAs as
geographic units with respect to its MVPD regulations.
25. In the event of a blackout of a Big Four network station, FCC
rules generally prohibit an MVPD from importing the same network's
content from another DMA. Thus, MVPD subscribers in one DMA cannot
switch to Big Four programming in another DMA in the face of a
blackout. Therefore, substitution to stations outside the DMA cannot
discipline an increase in the fees charged for retransmission consent
for broadcast stations in the DMA. Each DMA thus constitutes a relevant
geographic market for the licensing of Big Four television
retransmission consent within the meaning of Section 7 of the Clayton
Act, 15 U.S.C. 18.
C. Likely Anticompetitive Effects
26. The more concentrated a market would be as a result of a
proposed merger, the more likely it is that the proposed merger would
substantially lessen competition. Concentration can be measured by the
widely used Herfindahl-Hirschman Index (``HHI'').\1\ Under the
Horizontal Merger Guidelines issued by the Department of Justice and
the Federal Trade Commission, mergers that result in highly
concentrated markets (i.e., with an HHI over 2,500) and that increase
the HHI by more than 200 points are presumed likely to enhance market
power and substantially lessen competition. See, e.g., United States v.
Anthem, Inc., 855 F.3d 345, 349 (D.C. Cir. 2017).
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\1\ The HHI is calculated by squaring the market share of each
firm competing in the market and then summing the resulting numbers.
For example, for a market consisting of four firms with shares of
30, 30, 20, and 20 percent, the HHI is 2,600 (30\2\ + 30\2\ + 20\2\
+20\2\ = 2,600). The HHI takes into account the relative size
distribution of the firms in a market. It approaches zero when a
market is occupied by a large number of firms of relatively equal
size, and reaches its maximum of 10,000 points when a market is
controlled by a single firm. The HHI increases both as the number of
firms in the market decreases and as the disparity in size between
those firms increases.
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27. The chart below summarizes Defendants' approximate Big Four
television retransmission consent market shares, based on revenue
figures in BIA Advisory Services' Investing in Television Market Report
2020 (1st edition), and the effect of the transaction on the HHI in
each Overlap DMA.\2\
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\2\ In this chart, sums that do not agree precisely reflect
rounding.
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Pre- Post-
Overlap DMA Gray Quincy Merged merger merger HHI
share (%) share (%) share (%) HHI HHI increase
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Tucson, AZ.................................... 30 24 54 2,564 4,010 1,446
Madison, WI................................... 30 23 53 2,556 3,956 1,400
Paducah-Harrisburg, KY-IL..................... 30 23 53 2,622 4,022 1,400
Cedar Rapids, IA.............................. 26 20 46 2,533 3,600 1,067
La Crosse-Eau Claire, WI...................... 33 20 53 2,622 3,956 1,333
Rockford, IL.................................. 27 20 47 2,533 3,600 1,066
Wausau-Rhinelander, WI........................ 44 33 77 3,580 6,543 2,963
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28. As indicated by the preceding chart, the post-merger HHI in
each Overlap DMA is well above 2,500, and the HHI increase in each
Overlap DMA far exceeds the 200-point threshold. Thus, the proposed
acquisition presumptively violates Section 7 of the Clayton Act in each
Overlap DMA.
[[Page 42886]]
29. The proposed transaction would give Gray the ability to black
out more Big Four stations simultaneously in each of the Overlap DMAs
than either Gray or Quincy could black out independently today. This
would increase Gray's bargaining leverage with MVPDs, likely leading to
increased retransmission consent fees charged to such MVPDs.
V. Broadcast Television Spot Advertising Markets
A. Background
31. Broadcast television stations, including both Big Four and non-
Big Four stations in the Overlap DMAs, sell advertising ``spots''
during breaks in their programming. Advertisers purchase spots from a
broadcast station to communicate with viewers within the DMA in which
the broadcast television station is located. Broadcast television spot
advertising is distinguished from ``network'' advertising, which
consists of advertising time slots sold on nationwide broadcast
networks by those networks, and not by local broadcast television
stations or their representatives.
32. Gray and Quincy each own at least one Big Four affiliated
television station in each of the Overlap DMAs and compete with one
another to sell broadcast television spot advertising in each of the
Overlap DMAs.
B. Relevant Markets
1. Product Market
33. Broadcast television spot advertising constitutes a relevant
product market and line of commerce under Section 7 of the Clayton Act,
15 U.S.C. 18. Advertisers' inability or unwillingness to substitute to
other types of advertising in response to a price increase in broadcast
television spot advertising supports this relevant market definition.
i. Overview of Broadcast Television Spot Advertising
34. Typically, an advertiser purchases broadcast television
advertising spots as one component of an advertising strategy that may
also include cable television advertising spots, newspaper
advertisements, billboards, radio spots, digital advertisements, email
advertisements, and direct mail.
35. Different components of an advertising strategy generally
target different audiences and serve distinct purposes. Advertisers
that advertise on broadcast television stations do so because the
stations offer popular programming such as local news, sports, and
primetime and syndicated shows that are especially attractive to a
broad demographic base and a large audience of viewers. Other
categories of advertising may offer different characteristics, but are
not close substitutes for broadcast television spot advertising. For
example, ads associated with online search results target individual
consumers or respond to specific keyword searches, whereas broadcast
television spot advertising reaches a broad audience throughout a DMA.
36. Technological developments may bring various advertising
categories into closer competition with each other. For example,
broadcasters and cable networks are developing technology to make their
spot advertising addressable, meaning that broadcasters could deliver
targeted advertising in live broadcast and on-demand formats to smart
televisions or streaming devices. For certain advertisers, these
technological changes may make other categories of advertising closer
substitutes for advertising on broadcast television in the future.
However, at this time, for many broadcast television spot advertising
advertisers, these projected developments are insufficient to mitigate
the anticompetitive effects of the proposed acquisition in the Overlap
DMAs.
ii. Cable Television Spot Advertising Is Not a Reasonable Substitute
37. MVPDs sell spot advertising to be shown during breaks in cable
network programming. For viewers, these advertisements are similar to
broadcast television spot ads. However, cable television spot
advertising is not at this time a reasonable substitute for broadcast
television spot advertising for most advertisers.
38. First, broadcast television spot advertising is a more
efficient option than cable television spot advertising for many
advertisers. Because broadcast television offers highly rated
programming with broad appeal, each broadcast television advertising
spot typically offers the opportunity to reach more viewers (more
``ratings points'') than a single spot on a cable network. By contrast,
MVPDs offer dozens of cable networks with specialized programs that
appeal to niche audiences. This fragmentation allows advertisers to
target narrower demographic subsets by buying cable spots on particular
channels, but it does not meet the needs of advertisers who want to
reach a large percentage of a DMA's population.
39. Second, households that have access to cable networks are
divided among multiple MVPDs within a DMA. In contrast, broadcast
television spot advertising reaches all households that subscribe to an
MVPD and, through an over-the-air signal, most households with a
television that do not.
40. Finally, MVPDs' inventory of cable television spot advertising
is limited--typically to two minutes per hour--contrasting sharply with
broadcast stations' much larger number of advertising minutes per hour.
The inventory of DMA-wide cable television spot advertising is
substantially further reduced by the large portion of those spots
allocated to local zone advertising, in which an MVPD sells spots by
geographic zones within a DMA, allowing advertisers to target smaller
geographic areas. Due to the limited inventories and lower ratings
associated with cable television spot programming, cable television
spot advertising does not offer a sufficient volume of ratings points,
or broad enough household penetration, to provide a viable alternative
to broadcast television spot advertising.
iii. Digital Advertising Is Not a Reasonable Substitute
41. Digital advertising is also not a sufficiently close substitute
for broadcast television spot advertising. Some digital advertising,
such as static and floating banner advertisements, static images, text
advertisements, wallpaper advertisements, pop-up advertisements, flash
advertisements, and paid search results, lacks the combination of
sight, sound, and motion that makes television spot advertising
particularly impactful and memorable and therefore effective for
advertisers. Digital video advertisements, on the other hand, do allow
for a combination of sight, sound, and motion, and on this basis are
more comparable to broadcast television spot advertising than other
types of digital advertising. However, they are still not close
substitutes for broadcast television spot advertising because digital
advertisements typically have a different scope of reach compared to
broadcast television spot advertising. For example, while advertisers
use broadcast television spots to reach a large percentage of
households within a given DMA, advertisers use digital advertising to
reach a variety of different audiences. While a small portion of
advertisers purchase DMA-wide advertisements on digital platforms,
digital advertisements usually are targeted either very broadly, such
as nationwide or regional, or to a geographic target smaller than a
DMA, such as a city or a zip code, or to narrow demographic subsets of
a population.
[[Page 42887]]
iv. Other Forms of Advertising Are Not Reasonable Substitutes
42. Other forms of advertising, such as radio, newspaper,
billboard, and direct-mail advertising, also do not constitute
effective substitutes for broadcast television spot advertising. These
forms of media do not reach as many local viewers or drive brand
awareness to the same extent as broadcast television spot advertising
does. Broadcast television spot advertising possesses a unique
combination of attributes that advertisers value in a way that sets it
apart from advertising on other media. Broadcast television spot
advertising combines sight, sound, and motion in a way that makes
television advertisements particularly memorable and impactful.
43. For all of these reasons, a hypothetical monopolist of
broadcast television spot advertising likely could impose a SSNIP
without losing sufficient sales to render the price increase
unprofitable.
44. The sale of broadcast television spot advertising therefore
constitutes a relevant product market and line of commerce under
Section 7 of the Clayton Act, 15 U.S.C. 18.
2. Geographic Markets
45. For an advertiser seeking to reach potential customers in a
given DMA, broadcast television stations located outside of the DMA do
not provide effective access to the advertiser's target audience. The
signals of broadcast television stations located outside of the DMA
generally do not reach any significant portion of the target DMA
through either over-the-air signal or MVPD distribution. Because
advertisers cannot reach viewers inside a DMA by advertising on
stations outside the DMA, a hypothetical monopolist of broadcast
television spot advertising on stations in a given DMA could likely
profitably impose at least a SSNIP.
46. Each of the Overlap DMAs accordingly constitutes a relevant
geographic market for the sale of broadcast television spot advertising
within the meaning of Section 7 of the Clayton Act, 15 U.S.C. 18.
C. Likely Anticompetitive Effects
47. The chart below summarizes Defendants' approximate market
shares, based on figures in BIA Advisory Services' Investing in
Television Market Report 2020 (1st edition), and the result of the
transaction on the HHIs in the sale of broadcast television spot
advertising in each of the Overlap DMAs.
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Pre- Post-
Overlap DMA Gray Quincy Merged merger merger HHI
share (%) share (%) share (%) HHI HHI increase
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Tucson, AZ.................................... 27 25 52 2,059 3,389 1,330
Madison, WI................................... 31 20 51 2,540 3,745 1,205
Paducah-Harrisburg, KY-IL..................... 26 22 48 2,886 4,022 1,136
Cedar Rapids, IA.............................. 41 34 75 3,108 5,852 2,744
La Crosse-Eau Claire, WI...................... 33 23 56 2,587 4,084 1,497
Rockford, IL.................................. 28 35 63 3,348 5,319 1,971
Wausau-Rhinelander, WI........................ 40 38 78 3,479 6,489 3,010
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48. Defendants' large market shares reflect the fact that, in each
Overlap DMA, Gray and Quincy each own one or more significant broadcast
television stations. As indicated by the preceding chart, the post-
merger HHI in each Overlap DMA is well above 2,500 and the HHI increase
in each Overlap DMA far exceeds the 200-point threshold above which a
transaction is presumed to enhance market power and harm competition.
Defendants' proposed transaction is thus presumptively unlawful in each
Overlap DMA.
49. In addition to substantially increasing the concentration
levels in each Overlap DMA, the proposed acquisition would combine
Gray's and Quincy's broadcast television stations, which are generally
close competitors in the sale of broadcast television spot advertising.
In each Overlap DMA, Defendants' broadcast stations compete head-to-
head in the sale of broadcast television spot advertising. Advertisers
obtain lower prices as a result of this competition. In particular,
advertisers in the Overlap DMAs can respond to an increase in one
station's spot advertising prices by purchasing, or threatening to
purchase, advertising spots on one or more stations owned by different
broadcast station groups, thereby ``buying around'' the station that
raises its prices. This practice allows the advertisers either to avoid
the first station's price increase, or to pressure the first station to
lower its prices.
50. If Gray acquires Quincy's stations, advertisers seeking to
reach audiences in the Overlap DMAs would have fewer competing
broadcast television alternatives available to meet their advertising
needs, and would find it more difficult and costly to buy around higher
prices imposed by the combined stations. This would likely result in
increased advertising prices, lower quality local programming to which
the spot advertising is attached (for example, less investment in local
news), and less innovation in providing advertising solutions to
advertisers.
51. For these reasons, the proposed acquisition likely would
substantially lessen competition in the sale of broadcast television
spot advertising in each of the Overlap DMAs, in violation of Section 7
of the Clayton Act, 15 U.S.C. 18.
VI. Absence of Countervailing Factors
52. De novo entry into each Overlap DMA is unlikely. The FCC
regulates entry through the issuance of broadcast television licenses,
which are difficult to obtain because the availability of spectrum is
limited and the regulatory process associated with obtaining a license
is lengthy. Even if a new signal were to become available, commercial
success would come over a period of many years, if at all. Because Big
Four affiliated stations generally have the highest ratings in each
DMA, they are more successful at selling broadcast television spot ads
compared to non-Big Four affiliated broadcast stations. Thus, entry of
a new broadcast station into an Overlap DMA would not be timely,
likely, or sufficient to prevent or remedy the proposed acquisition's
likely anticompetitive effects in the relevant markets.
53. Defendants cannot demonstrate transaction-specific, verifiable
efficiencies sufficient to offset the proposed acquisition's likely
anticompetitive effects.
VII. Violations Alleged
54. The United States hereby incorporates the allegations of
paragraphs 1 through 53 above as if set forth fully herein.
55. Gray's proposed acquisition of Quincy likely would
substantially lessen competition in the relevant markets, in violation
of Section 7 of the
[[Page 42888]]
Clayton Act, 15 U.S.C. 18. The acquisition would likely have the
following anticompetitive effects, among others:
a. Competition in the licensing of Big Four television
retransmission consent in each of the Overlap DMAs likely would be
substantially lessened;
b. competition between Gray and Quincy in the licensing of Big Four
television retransmission consent in each of the Overlap DMAs would be
eliminated;
c. the fees charged to MVPDs for the licensing of retransmission
consent in each of the Overlap DMAs likely would increase;
d. competition in the sale of broadcast television spot advertising
in each of the Overlap DMAs likely would be substantially lessened;
e. competition between Gray and Quincy in the sale of broadcast
television spot advertising in each of the Overlap DMAs would be
eliminated; and
f. prices for spot advertising on broadcast television stations in
each of the Overlap DMAs likely would increase, the quality of local
programming likely would decrease, and Defendants likely would be less
innovative in providing advertising solutions to advertisers.
VIII. Relief Requested
56. The United States requests that:
a. The Court adjudge the proposed acquisition to violate Section 7
of the Clayton Act, 15 U.S.C. 18;
b. the Court enjoin and restrain Defendants from carrying out the
acquisition, or entering into any other agreement, understanding, or
plan by which Gray would merge with, acquire, or be acquired by Quincy,
or Gray and Quincy would combine any of their respective Big Four
stations in the Overlap DMAs;
c. the Court award the United States its costs of this action; and
d. the Court award such other relief to the United States as the
Court may deem just and proper.
Dated: July 28, 2021.
Respectfully submitted,
Counsel for Plaintiff United States of America
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Richard A. Powers,
Acting Assistant Attorney General, Antitrust Division.
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Kathleen S. O'Neill,
Senior Director of Investigation and Litigation, Antitrust Division.
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Scott Scheele (D.C. Bar #429061),
Chief, Media, Entertainment, & Communications Section, Antitrust
Division.
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Jared A. Hughes,
Assistant Chief, Media, Entertainment, & Communications Section,
Antitrust Division.
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Brendan Sepulveda *
(D.C. Bar #1025074),
Trial Attorney, United States Department of Justice, Antitrust
Division, Media, Entertainment, & Communications Section, 450 Fifth
Street NW, Suite 7000, Washington, DC 20530, Telephone: (202) 316-
7258, Facsimile: (202) 514-6381, Email: [email protected].
* Lead Attorney To Be Noticed.
United States District Court For The District of Columbia
United States of America, Plaintiff, v. Gray Television, Inc.,
and Quincy Media, Inc., Defendants.
Case No.: 1:21-cv-02041-CJN
Judge: Carl J. Nichols
Proposed Final Judgment
Whereas, Plaintiff, United States of America, filed its Complaint
on July 28, 2021;
And Whereas, the United States and Defendants, Gray Television,
Inc., and Quincy Media, Inc., have consented to entry of this Final
Judgment without the taking of testimony, without trial or adjudication
of any issue of fact or law, and without this Final Judgment
constituting any evidence against or admission by any party regarding
any issue of fact or law;
And Whereas, Defendants agree to make certain divestitures to
remedy the loss of competition alleged in the Complaint;
And Whereas, Defendants represent that the divestitures and other
relief required by this Final Judgment can and will be made and that
Defendants will not later raise a claim of hardship or difficulty as
grounds for asking the Court to modify any provision of this Final
Judgment;
Now therefore, it is ordered, adjudged, and decreed:
I. Jurisdiction
The Court has jurisdiction over the subject matter of and each of
the parties to this action. The Complaint states a claim upon which
relief may be granted against Defendants under Section 7 of the Clayton
Act, as amended (15 U.S.C. 18).
II. Definitions
As used in this Final Judgment:
A. ``Acquirer'' means Allen or another entity or entities to whom
Defendants divest the Divestiture Assets.
B. ``Gray'' means Defendant Gray Television, Inc., a Georgia
corporation with its headquarters in Atlanta, Georgia, its successors
and assigns, and its subsidiaries, divisions, groups, affiliates,
partnerships, and joint ventures, and their directors, officers,
managers, agents, and employees.
C. ``Quincy'' means Defendant Quincy Media, Inc., an Illinois
corporation with its headquarters in Quincy, Illinois, its successors
and assigns, and its subsidiaries, divisions, groups, affiliates,
partnerships, and joint ventures, and their directors, officers,
managers, agents, and employees.
D. ``Allen'' means Allen Media Holdings, LLC, a Delaware limited
liability company with its headquarters in Los Angeles, California, its
successors and assigns, and its subsidiaries, divisions, groups,
affiliates, partnerships, and joint ventures, and their directors,
officers, managers, agents, and employees.
E. ``Big Four Affiliation Agreement'' means an affiliation
agreement with NBC, CBS, ABC, or FOX.
F. ``Cooperative Agreement'' means (1) carriage agreements, joint
sales agreements, joint operating agreements, local marketing
agreements, news share agreements, shared services agreements, joint
ventures, partnerships, or collaborations or (2) any agreement through
which a person exercises control over any broadcast television station
not owned by the person.
G. ``Divestiture Assets'' means all of Defendants' rights, titles,
and interests in and to all property and assets, tangible and
intangible, wherever located, relating to or used in connection with
the Divestiture Stations, including:
1. The KWWL main transmitter site located at 2698 Lucas Avenue,
Rowley, IA 52329 and the KWWL main studio located at 511 East 5th
Street, Waterloo, IA 50703;
2. the WAOW studio facility located at 1900-1908 Grand Avenue,
Wausau, WI 55403 and the WAOW satellite location at 605 Kent Street
East, Wausau, WI 55504;
3. the WKOW studio facility located at 5725 Tokay Boulevard,
Madison, WI 53719;
4. the WQOW transmitter site located at 780th Avenue Rural Route 3,
Colfax, WI 54730; the WQOW microwave repeater located at S17, T20N,
R8W, Arcadia, WI; the WQOW studio facility located at 5545 Highway 93,
Eau Claire, WI 54701; and the WQOW microwave tower located at S34,
T24N, R9W, Albion Township, WI;
[[Page 42889]]
5. the WREX studio and transmitter facility located at 10322 Auburn
Road, Rockford, IL 61101;
6. the WSIL studio and office located at 1416 Country Aire Drive,
Carterville, IL 62918; the WSIL tower and transmitter building located
at 1154 N Wagon Creek Road, Creal Springs, IL 62922; the WSIL tower
located at 21 W Poplar Street, Harrisburg, IL 62946; and the WSIL tower
and transmitter building located at 3690 Highway 67, Poplar Bluff, MO
63901;
7. the WXOW studio and transmitter facility located at 3705 County
Road 25, La Crescent, MN 55947;
8. the KVOA studio facility located at 209 W Elm Street, Tucson, AZ
85705;
9. all other real property, including fee simple interests and real
property leasehold interests and renewal rights thereto, improvements
to real property, and options to purchase any adjoining or other
property, together with all buildings, facilities, and other
structures;
10. all tangible personal property, including fixed assets,
machinery and manufacturing equipment, tools, vehicles, inventory,
materials, office equipment and furniture, computer hardware, and
supplies;
11. all contracts, contractual rights, and customer relationships,
and all other agreements, commitments, and understandings, including
network affiliation agreements, supply agreements, teaming agreements,
and leases, and all outstanding offers or solicitations to enter into a
similar arrangement;
12. all licenses, permits, certifications, approvals, consents,
registrations, waivers, and authorizations issued or granted by the FCC
or any other governmental organization, and all pending applications or
renewals;
13. all records and data, including (a) customer lists, accounts,
sales, and credit records, (b) production, repair, maintenance, and
performance records, (c) manuals and technical information Defendants
provide to their own employees, customers, suppliers, agents, or
licensees, (d) records and research data concerning historic and
current research and development activities, including designs of
experiments and the results of successful and unsuccessful designs and
experiments, and (e) drawings, blueprints, and designs;
14. all intellectual property owned, licensed, or sublicensed,
either as licensor or licensee, including (a) patents, patent
applications, and inventions and discoveries that may be patentable,
(b) registered and unregistered copyrights and copyright applications,
and (c) registered and unregistered trademarks, trade dress, service
marks, trade names, and trademark applications; and
15. all other intangible property, including (a) commercial names
and d/b/a names, (b) technical information, (c) computer software and
related documentation, know-how, trade secrets, design protocols,
specifications for materials, specifications for parts, specifications
for devices, safety procedures (e.g., for the handling of materials and
substances), quality assurance and control procedures, (d) design tools
and simulation capabilities, and (e) rights in internet websites and
internet domain names; provided, however, that the assets specified in
Paragraphs II(G)(1)-(15) above do not include the Excluded Assets.
H. ``Divestiture Date'' means the date the Divestiture Assets are
divested to Acquirer.
I. ``Divestiture Stations'' means KPOB-TV, KVOA, KWWL, WAOW, WKOW,
WMOW, WQOW, WREX, WSIL-TV, and WXOW.
J. ``DMA'' means Designated Market Area as defined by The Nielsen
Company (US), LLC, based upon viewing patterns and used by BIA Advisory
Services' Investing in Television Market Report 2020 (1st edition).
K. ``Excluded Assets'' means
1. the CW affiliation agreement and programming stream (including
any syndicated programming), receiver, program logs and related
materials, related intellectual property and domain names, relating to
KWWL and/or the Cedar Rapids-Waterloo-Iowa City-Dubuque, Iowa, DMA;
2. the CW affiliation agreement and programming stream (including
any syndicated programming), receiver, program logs and related
materials, related intellectual property and domain names, relating to
WMOW, WAOW and/or the Wausau-Rhinelander, Wisconsin, DMA;
3. the CW affiliation agreement and programming stream (including
any syndicated programming), receiver, program logs and related
materials, related intellectual property and domain names, relating to
WREX and/or the Rockford, Illinois, DMA;
4. the CW affiliation agreement and programming stream (including
any syndicated programming), receiver, program logs and related
materials, related intellectual property and domain names, relating to
WXOW, WQOW, and/or the La Crosse-Eau Claire, Wisconsin, DMA;
5. the MeTV affiliation agreement and programming stream (including
any syndicated programming), receiver, program logs and related
materials, related intellectual property and domain names, relating to
WKOW and/or the Madison, Wisconsin, DMA;
6. the MeTV affiliation agreement and programming stream (including
any syndicated programming), receiver, program logs and related
materials, related intellectual property and domain names, relating to
WXOW, WQOW, and/or the La Crosse-Eau Claire, Wisconsin, DMA;
7. satellite station WYOW, Eagle River, Wisconsin and transmitter
facilities located at 6425 Thunderlake Road in Rhinelander, Wisconsin
54501;
8. all real and tangible personal property owned by Quincy located
at 501 and 513 Hampshire Street in Quincy, Illinois 62301;
9. all tangible personal property owned by Quincy located at 130
South 5th Street, Quincy, Illinois 62301; and
10. all real and tangible personal property owned by Quincy at the
Digital Realty Data Center located at 350 East Cermak, Chicago,
Illinois 60616.
L. ``FCC'' means the Federal Communications Commission.
M. ``Overlap DMAs'' means the following seven DMAs: Tucson,
Arizona; Madison, Wisconsin; Rockford, Illinois; Paducah,
Kentucky[dash]Cape Girardeau, Missouri[dash]Harrisburg-Mt. Vernon,
Illinois; Cedar Rapids-Waterloo-Iowa City-Dubuque, Iowa; La Crosse-Eau
Claire, Wisconsin; and Wausau-Rhinelander, Wisconsin.
N. ``Relevant Personnel'' means all full-time, part-time, or
contract employees of Defendants, wherever located, whose job
responsibilities primarily relate to the operation or management of the
Divestiture Stations, at any time between February 1, 2021, and the
Divestiture Date. The United States, in its sole discretion, will
resolve any disagreement regarding which employees are Relevant
Personnel.
O. ``KPOB-TV'' means the ABC-affiliated broadcast station bearing
that call sign located in the Paducah, Kentucky[dash]Cape Girardeau,
Missouri[dash]Harrisburg-Mt. Vernon, Illinois, DMA and owned by Quincy.
P. ``KVOA'' means the NBC-affiliated broadcast station bearing that
call sign located in the Tucson, Arizona, DMA and owned by Quincy.
Q. ``KWWL'' means the NBC-affiliated broadcast station bearing that
call sign located in the Cedar Rapids-Waterloo-Iowa City-Dubuque, Iowa,
DMA and owned by Quincy.
R. ``WAOW'' means the ABC-affiliated broadcast station bearing that
call sign located in the Wausau-Rhinelander, Wisconsin, DMA and owned
by Quincy.
[[Page 42890]]
S. ``WIFR-LD'' means the CBS-affiliated broadcast station bearing
that call sign located in the Rockford, Illinois, DMA and owned by
Gray.
T. ``WKOW'' means the ABC-affiliated broadcast station bearing that
call sign located in the Madison, Wisconsin DMA and owned by Quincy.
U. ``WMOW'' means the ABC-affiliated broadcast station bearing that
call sign located in the Wausau-Rhinelander, Wisconsin, DMA and owned
by Quincy.
V. ``WREX'' means the NBC-affiliated broadcast station bearing that
call sign located in the Rockford, Illinois, DMA and owned by Quincy.
W. ``WSIL-TV'' means the ABC-affiliated broadcast station bearing
that call sign located in the Paducah, Kentucky[dash]Cape Girardeau,
Missouri[dash]Harrisburg-Mt. Vernon, Illinois, DMA and owned by Quincy.
X. ``WQOW'' means the ABC-affiliated broadcast station bearing that
call sign located in the La Crosse-Eau Claire, Wisconsin, DMA and owned
by Quincy.
Y. ``WXOW'' means the ABC-affiliated broadcast station bearing that
call sign located in the La Crosse-Eau Claire, Wisconsin, DMA and owned
by Quincy.
Z. ``WYOW'' means the satellite broadcast station bearing that call
sign located in the Wausau-Rhinelander, Wisconsin, DMA and owned by
Quincy.
III. Applicability
A. This Final Judgment applies to Gray and Quincy, as defined
above, and all other persons, in active concert or participation with
any Defendant, who receive actual notice of this Final Judgment.
B. If, prior to complying with Section IV and Section V of this
Final Judgment, Defendants sell or otherwise dispose of all or
substantially all of their assets or of business units that include the
Divestiture Assets, Defendants must require any purchaser to be bound
by the provisions of this Final Judgment. Defendants need not obtain
such an agreement from Acquirer.
IV. Divestiture
A. Defendants are ordered and directed, within thirty (30) calendar
days after the Court's entry of the Hold Separate Stipulation and Order
in this matter to divest the Divestiture Assets in a manner consistent
with this Final Judgment to Allen or another Acquirer acceptable to the
United States, in its sole discretion. The United States, in its sole
discretion, may agree to one or more extensions of this time period not
to exceed sixty (60) calendar days in total and will notify the Court
of any extensions.
B. If within the period required for divestiture in Paragraph
IV(A), applications have been filed with the FCC seeking approval to
assign or transfer licenses to Acquirer, but an order or other
dispositive action by the FCC on such applications has not been issued
before the end of the period required for divestiture, the required
divestiture period shall be extended for any Divestiture Assets for
which an FCC order has not been issued until five (5) business days
after an FCC order is issued. Defendants must use best efforts to
obtain all required FCC approvals as expeditiously as possible.
C. Defendants must use best efforts to divest the Divestiture
Assets as expeditiously as possible and may not take any action to
impede the permitting, operation, or divestiture of the Divestiture
Assets. Defendants must take no action that would jeopardize the
divestiture ordered by the Court.
D. Unless the United States otherwise consents in writing,
divestiture pursuant to this Final Judgment must include the entire
Divestiture Assets and must be accomplished in such a way as to satisfy
the United States, in its sole discretion, that the Divestiture Assets
can and will be used by Acquirer as part of a viable, ongoing
commercial television broadcasting business and that the divestiture to
Acquirer will remedy the competitive harm alleged in the Complaint.
E. The divestiture must be made to an Acquirer that, in the United
States' sole judgment, has the intent and capability, including the
necessary managerial, operational, technical, and financial capability,
to compete effectively in the business of commercial television
broadcasting.
F. The divestiture must be accomplished in a manner that satisfies
the United States, in its sole discretion, that none of the terms of
any agreement between Acquirer and Defendants gives Defendants the
ability unreasonably to raise Acquirer's costs, to lower Acquirer's
efficiency, or otherwise interfere in the ability of Acquirer to
compete effectively in the business of commercial television
broadcasting in the Overlap DMAs.
G. Divestiture of the Divestiture Assets may be made to one or more
Acquirers, provided that it is demonstrated to the sole satisfaction of
the United States that the criteria required by Paragraphs IV(D),
IV(E), and IV(F) will still be met.
H. In the event Defendants are attempting to divest the Divestiture
Assets to an Acquirer other than Allen, Defendants promptly must make
known, by usual and customary means, the availability of the
Divestiture Assets. Defendants must inform any person making an inquiry
relating to a possible purchase of the Divestiture Assets that the
Divestiture Assets are being divested in accordance with this Final
Judgment and must provide that person with a copy of this Final
Judgment. Defendants must offer to furnish to all prospective
Acquirers, subject to customary confidentiality assurances, all
information and documents relating to the Divestiture Assets that are
customarily provided in a due-diligence process; provided, however,
that Defendants need not provide information or documents subject to
the attorney-client privilege or work-product doctrine. Defendants must
make all information and documents available to the United States at
the same time that the information and documents are made available to
any other person.
I. Defendants must provide prospective Acquirers with (1) access to
personnel and to make inspections of the Divestiture Assets; (2) access
to all environmental, zoning, and other permitting documents and
information relating to the Divestiture Assets; and (3) access to all
financial, operational, or other documents and information relating to
the Divestiture Assets that would customarily be provided as part of a
due diligence process. Defendants also must disclose all encumbrances
on any part of the Divestiture Assets, including on intangible
property.
J. Defendants must cooperate with and assist Acquirer in
identifying and, at the option of Acquirer, in hiring all Relevant
Personnel, including:
1. Within ten (10) business days following the filing of the
Complaint in this matter, Defendants must identify all Relevant
Personnel to Acquirer and the United States, including by providing
organization charts covering all Relevant Personnel.
2. Within ten (10) business days following receipt of a request by
Acquirer or the United States, Defendants must provide to Acquirer and
the United States additional information relating to Relevant
Personnel, including name, job title, reporting relationships, past
experience, responsibilities, training and educational histories,
relevant certifications, and job performance evaluations. Defendants
must also provide to Acquirer and the United States current, and
accrued compensation and benefits, including most recent bonuses paid,
aggregate annual compensation current target or
[[Page 42891]]
guaranteed bonus, if any, any retention agreement or incentives, and
any other payments due, compensation or benefits accrued, or promises
made to the Relevant Personnel. If Defendants are barred by any
applicable law from providing any of this information, Defendants must
provide, within ten (10) business days following receipt of the
request, the requested information to the full extent permitted by law
and also must provide a written explanation of Defendants' inability to
provide the remaining information, including specifically identifying
the provisions of the applicable laws.
3. At the request of Acquirer, Defendants must promptly make
Relevant Personnel available for private interviews with Acquirer
during normal business hours at a mutually agreeable location.
4. Defendants must not interfere with any effort by Acquirer to
employ any Relevant Personnel. Interference includes offering to
increase the compensation or improve the benefits of Relevant Personnel
unless (a) the offer is part of a company-wide increase in compensation
or improvement in benefits that was announced prior to February 1, 2021
or (b) the offer is approved by the United States in its sole
discretion. Defendants' obligations under this Paragraph will expire
sixty (60) calendar days after the Divestiture Date.
5. For Relevant Personnel who elect employment with Acquirer within
sixty (60) calendar days of the Divestiture Date, Defendants must waive
all non-compete and non-disclosure agreements; vest and pay to the
Relevant Personnel (or to Acquirer for payment to the employee) on a
prorated basis any bonuses, incentives, other salary, benefits or other
compensation fully or partially accrued at the time of the transfer of
the employee to Acquirer; vest any unvested pension and other equity
rights; and provide all other benefits that those Relevant Personnel
otherwise would have been provided had the Relevant Personnel continued
employment with Defendants, including any retention bonuses or
payments. Defendants may maintain reasonable restrictions on disclosure
by Relevant Personnel of Defendants' proprietary non-public information
that is unrelated to the operation of a commercial broadcast television
station and not otherwise required to be disclosed by this Final
Judgment.
K. Defendants must warrant to Acquirer that (1) the Divestiture
Assets will be operational and without material defect on the date of
their transfer to Acquirer; and (2) there are no material defects in
the environmental, zoning, or other permits relating to the operation
of the Divestiture Assets. Following the sale of the Divestiture
Assets, Defendants must not undertake, directly or indirectly,
challenges to the environmental, zoning, or other permits relating to
the operation of the Divestiture Assets.
L. Defendants must assign, subcontract, or otherwise transfer all
contracts, agreements, and relationships (or portions of such
contracts, agreements, and relationships) included in the Divestiture
Assets, including all supply and sales contracts and swap agreements,
to Acquirer; provided, however, that for any contract or agreement that
requires the consent of another party to assign, subcontract, or
otherwise transfer, Defendants must use best efforts to accomplish the
assignment, subcontracting, or transfer. Defendants must not interfere
with any negotiations between Acquirer and a contracting party.
M. Defendants must use best efforts to assist Acquirer to obtain
all necessary licenses, registrations, and permits to operate the
Divestiture Assets. Until Acquirer obtains the necessary licenses,
registrations, and permits, Defendants must provide Acquirer with the
benefit of Defendants' licenses, registrations, and permits to the full
extent permissible by law.
N. At the option of Acquirer, and subject to approval by the United
States in its sole discretion, on or before the Divestiture Date,
Defendants must enter into a contract to provide transition services
for back office, human resources, accounting, and information
technology services and support for a period of up to six (6) months on
terms and conditions reasonably related to market conditions for the
provision of the transition services. Any amendment to or modification
of any provision of a contract to provide transition services is
subject to approval by the United States, in its sole discretion. The
United States, in its sole discretion, may approve one or more
extensions of any contract for transition services, for a total of up
to an additional six (6) months. If Acquirer seeks an extension of the
term of any transition services contract, Defendants must notify the
United States in writing at least one (1) month prior to the date the
contract expires or, if Acquirer requests an extension less than one
month prior to the date the contract expires, within two (2) days of
the Acquirer's extension request. Acquirer may terminate a contract for
transition services, or any portion of a contract for transition
services, without cost or penalty at any time upon at least five (5)
calendar days' written notice. The employee(s) of Defendants tasked
with providing transition services must not share any competitively
sensitive information of Acquirer with any other employee of
Defendants.
O. If any term of an agreement between Defendants and Acquirer to
effectuate the divestiture required by this Final Judgment varies from
a term of this Final Judgment, to the extent that Defendants cannot
fully comply with both, this Final Judgment determines Defendants'
obligations. Authorization by the FCC to conduct the divestiture of a
Divestiture Asset in a particular manner will not change or modify any
of the requirements of this Final Judgment.
V. Appointment of Divestiture Trustee
A. If Defendants have not divested the Divestiture Assets within
the time period specified in Paragraphs IV(A) and IV(B), Defendants
must immediately notify the United States of that fact in writing. Upon
application of the United States, which Defendants may not oppose, the
Court will appoint a divestiture trustee selected by the United States
and approved by the Court to effect the divestiture of the Divestiture
Assets.
B. After the appointment of a divestiture trustee by the Court,
only the divestiture trustee will have the right to sell the
Divestiture Assets. The divestiture trustee will have the power and
authority to accomplish the divestiture to an Acquirer or Acquirers
acceptable to the United States, in its sole discretion, at a price and
on terms obtainable through reasonable effort by the divestiture
trustee, subject to the provisions of Sections IV, V, and VI of this
Final Judgment, and will have other powers as the Court deems
appropriate. The divestiture trustee must sell the Divestiture Assets
as quickly as possible.
C. Defendants may not object to a sale by the divestiture trustee
on any ground other than malfeasance by the divestiture trustee.
Objections by Defendants must be conveyed in writing to the United
States and the divestiture trustee within ten (10) calendar days after
the divestiture trustee has provided the notice of proposed divestiture
required by Section VI.
D. The divestiture trustee will serve at the cost and expense of
Defendants pursuant to a written agreement, on terms and conditions,
including confidentiality requirements and conflict-of-interest
certifications, approved by the United States in its sole discretion.
[[Page 42892]]
E. The divestiture trustee may hire at the cost and expense of
Defendants any agents or consultants, including investment bankers,
attorneys, and accountants, that are reasonably necessary in the
divestiture trustee's judgment to assist with the divestiture trustee's
duties. These agents or consultants will be accountable solely to the
divestiture trustee and will serve on terms and conditions, including
confidentiality requirements and conflict-of-interest certifications,
approved by the United States in its sole discretion.
F. The compensation of the divestiture trustee and agents or
consultants hired by the divestiture trustee must be reasonable in
light of the value of the Divestiture Assets and based on a fee
arrangement that provides the divestiture trustee with incentives based
on the price and terms of the divestiture(s) and the speed with which
it is accomplished. If the divestiture trustee and Defendants are
unable to reach agreement on the divestiture trustee's compensation or
other terms and conditions of engagement within fourteen (14) calendar
days of the appointment of the divestiture trustee by the Court, the
United States, in its sole discretion, may take appropriate action,
including by making a recommendation to the Court. Within three (3)
business days of hiring an agent or consultant, the divestiture trustee
must provide written notice of the hiring and rate of compensation to
Defendants and the United States.
G. The divestiture trustee must account for all monies derived from
the sale of the Divestiture Assets sold by the divestiture trustee and
all costs and expenses incurred. Within thirty (30) calendar days of
the Divestiture Date, the divestiture trustee must submit that
accounting to the Court for approval. After approval by the Court of
the divestiture trustee's accounting, including fees for unpaid
services and those of agents or consultants hired by the divestiture
trustee, all remaining money must be paid to Defendants and the trust
will then be terminated.
H. Defendants must use best efforts to assist the divestiture
trustee to accomplish the required divestiture. Subject to reasonable
protection for trade secrets, other confidential research, development,
or commercial information, or any applicable privileges, Defendants
must provide the divestiture trustee and agents or consultants retained
by the divestiture trustee with full and complete access to all
personnel, books, records, and facilities of the Divestiture Assets.
Defendants also must provide or develop financial and other information
relevant to the Divestiture Assets that the divestiture trustee may
reasonably request. Defendants must not take any action to interfere
with or to impede the divestiture trustee's accomplishment of the
divestiture.
I. The divestiture trustee must maintain complete records of all
efforts made to sell the Divestiture Assets, including by filing
monthly reports with the United States setting forth the divestiture
trustee's efforts to accomplish the divestiture ordered by this Final
Judgment. The reports must include the name, address, and telephone
number of each person who, during the preceding month, made an offer to
acquire, expressed an interest in acquiring, entered into negotiations
to acquire, or was contacted or made an inquiry about acquiring any
interest in the Divestiture Assets and must describe in detail each
contact.
J. If the divestiture trustee has not accomplished the divestiture
ordered by this Final Judgment within six months of appointment, the
divestiture trustee must promptly provide the United States with a
report setting forth: (1) The divestiture trustee's efforts to
accomplish the required divestiture; (2) the reasons, in the
divestiture trustee's judgment, why the required divestiture has not
been accomplished; and (3) the divestiture trustee's recommendations
for completing the divestiture. Following receipt of that report, the
United States may make additional recommendations to the Court. The
Court thereafter may enter such orders as it deems appropriate to carry
out the purpose of this Final Judgment, which may include extending the
trust and the term of the divestiture trustee's appointment by a period
requested by the United States.
K. The divestiture trustee will serve until divestiture of all
Divestiture Assets is completed or for a term otherwise ordered by the
Court.
L. If the United States determines that the divestiture trustee is
not acting diligently or in a reasonably cost-effective manner, the
United States may recommend that the Court appoint a substitute
divestiture trustee.
VI. Notice of Proposed Divestiture
A. Within two (2) business days following execution of a definitive
divestiture agreement with an Acquirer other than Allen to divest the
Divestiture Assets, Defendants or the divestiture trustee, whichever is
then responsible for effecting the divestiture, must notify the United
States of the proposed divestiture. If the divestiture trustee is
responsible for completing the divestiture, the divestiture trustee
also must notify Defendants. The notice must set forth the details of
the proposed divestiture and list the name, address, and telephone
number of each person not previously identified who offered or
expressed an interest in or desire to acquire any ownership interest in
the Divestiture Assets.
B. Within fifteen (15) calendar days of receipt by the United
States of this notice, the United States may request from Defendants,
the proposed Acquirer(s), other third parties, or the divestiture
trustee additional information concerning the proposed divestiture, the
proposed Acquirer(s), and other prospective Acquirers. Defendants and
the divestiture trustee must furnish the additional information
requested within fifteen (15) calendar days of the receipt of the
request, unless the United States provides written agreement to a
different period.
C. Within forty-five (45) calendar days after receipt of the notice
required by Paragraph VI(A) or within twenty (20) calendar days after
the United States has been provided the additional information
requested pursuant to Paragraph VI(B), whichever is later, the United
States must provide written notice to Defendants and any divestiture
trustee that states whether the United States, in its sole discretion,
objects to Acquirer(s) or any other aspect of the proposed divestiture.
Without written notice that the United States does not object, a
divestiture may not be consummated. If the United States provides
written notice that it does not object, the divestiture may be
consummated, subject only to Defendants' limited right to object to the
sale under Paragraph V(C) of this Final Judgment. Upon objection by
Defendants pursuant to Paragraph V(C), a divestiture by the divestiture
trustee may not be consummated unless approved by the Court.
D. No information or documents obtained pursuant to this Section VI
may be divulged by the United States to any person other than an
authorized representative of the executive branch of the United States,
except in the course of legal proceedings to which the United States is
a party, including grand-jury proceedings, for the purpose of
evaluating a proposed Acquirer or securing compliance with this Final
Judgment, or as otherwise required by law.
E. In the event of a request by a third party for disclosure of
information under the Freedom of Information Act, 5 U.S.C. 552, the
Antitrust Division will act in accordance with that statute and the
Department of Justice regulations at
[[Page 42893]]
28 CFR part 16, including the provision on confidential commercial
information at 28 CFR 16.7. Persons submitting information to the
Antitrust Division should designate the confidential commercial
information portions of all applicable documents and information under
28 CFR 16.7. Designations of confidentiality expire ten years after
submission, ``unless the submitter requests and provides justification
for a longer designation period.'' See 28 CFR 16.7(b).
F. If at the time that a person furnishes information or documents
to the United States pursuant to this Section VI, that person
represents and identifies in writing information or documents for which
a claim of protection may be asserted under Rule 26(c)(1)(G) of the
Federal Rules of Civil Procedure, and marks each pertinent page of such
material, ``Subject to claim of protection under Rule 26(c)(1)(G) of
the Federal Rules of Civil Procedure,'' the United States must give
that person ten (10) calendar days' notice before divulging the
material in any legal proceeding (other than a grand-jury proceeding).
VII. Financing
Defendants may not finance all or any part of any Acquirer's
purchase of all or part of the Divestiture Assets.
VIII. Hold Separate
Defendants must take all steps necessary to comply with the Hold
Separate Stipulation and Order entered by the Court.
IX. Affidavits
A. Within twenty (20) calendar days of the filing of the Complaint
in this matter, and every thirty (30) calendar days thereafter until
the divestiture required by this Final Judgment has been completed,
each Defendant must deliver to the United States an affidavit, signed
by each Defendant's Chief Financial Officer and General Counsel,
describing in reasonable detail the fact and manner of that Defendant's
compliance with this Final Judgment. The United States, in its sole
discretion, may approve different signatories for the affidavits.
B. Each affidavit required by Paragraph IX(A) must include: (1) The
name, address, and telephone number of each person who, during the
preceding thirty (30) calendar days, made an offer to acquire,
expressed an interest in acquiring, entered into negotiations to
acquire, or was contacted or made an inquiry about acquiring, an
interest in the Divestiture Assets and describe in detail each contact
with such persons during that period; (2) a description of the efforts
Defendants have taken to solicit buyers for and complete the sale of
the Divestiture Assets, including efforts to secure other regulatory
approvals, and to provide required information to prospective
Acquirers; and (3) a description of any limitations placed by
Defendants on information provided to prospective Acquirers. Objection
by the United States to information provided by Defendants to
prospective Acquirers must be made within fourteen (14) calendar days
of receipt of the affidavit, except that the United States may object
at any time if the information set forth in the affidavit is not true
or complete.
C. Defendants must keep all records of any efforts made to divest
the Divestiture Assets until one year after the Divestiture Date.
D. Within twenty (20) calendar days of the filing of the Complaint
in this matter, each Defendant must deliver to the United States an
affidavit signed by each Defendant's Chief Financial Officer and
General Counsel, that describes in reasonable detail all actions that
Defendant has taken and all steps that Defendants has implemented on an
ongoing basis to comply with Section VIII of this Final Judgment. The
United States, in its sole discretion, may approve different
signatories for the affidavits.
E. If a Defendant makes any changes to the efforts and actions
described in affidavits provided pursuant to Paragraph IX(D), Defendant
must, within fifteen (15) calendar days after any change is
implemented, deliver to the United States an affidavit describing those
changes.
F. Defendants must keep all records of any efforts made to comply
with Section VIII until one year after the Divestiture Date.
X. Compliance Inspection
A. For the purposes of determining or securing compliance with this
Final Judgment, or of any related orders such as the Hold Separate
Stipulation and Order or of determining whether this Final Judgment
should be modified or vacated, upon written request of an authorized
representative of the Assistant Attorney General for the Antitrust
Division, and reasonable notice to Defendants, Defendants must permit,
from time to time and subject to legally recognized privileges,
authorized representatives, including agents retained by the United
States:
(1) To have access during Defendants' office hours to inspect and
copy, or at the option of the United States, to require Defendants to
provide electronic copies of all books, ledgers, accounts, records,
data, and documents in the possession, custody, or control of
Defendants relating to any matters contained in this Final Judgment;
and
(2) to interview, either informally or on the record, Defendants'
officers, employees, or agents, who may have their individual counsel
present, relating to any matters contained in this Final Judgment. The
interviews must be subject to the reasonable convenience of the
interviewee and without restraint or interference by Defendants.
B. Upon the written request of an authorized representative of the
Assistant Attorney General for the Antitrust Division, Defendants must
submit written reports or respond to written interrogatories, under
oath if requested, relating to any of the matters contained in this
Final Judgment.
C. No information or documents obtained by the United States
pursuant to this Section X may be divulged by the United States to any
person other than an authorized representative of the executive branch
of the United States, except in the course of legal proceedings to
which the United States is a party, including grand jury proceedings,
for the purpose of securing compliance with this Final Judgment, or as
otherwise required by law.
D. In the event of a request by a third party for disclosure of
information under the Freedom of Information Act, 5 U.S.C. 552, the
Antitrust Division will act in accordance with that statute and the
Department of Justice regulations at 28 CFR part 16, including the
provision on confidential commercial information at 28 CFR 16.7.
Defendants submitting information to the Antitrust Division should
designate the confidential commercial information portions of all
applicable documents and information under 28 CFR 16.7. Designations of
confidentiality expire ten years after submission, ``unless the
submitter requests and provides justification for a longer designation
period.'' See 28 CFR 16.7(b).
E. If at the time that Defendants furnish information or documents
to the United States pursuant to this Section X, Defendants represent
and identify in writing information or documents for which a claim of
protection may be asserted under Rule 26(c)(1)(G) of the Federal Rules
of Civil Procedure, and Defendants mark each pertinent page of such
material, ``Subject to claim of protection under Rule 26(c)(1)(G) of
the Federal Rules of Civil Procedure,'' the United States must give
Defendants ten (10) calendar days' notice before divulging the material
in any legal
[[Page 42894]]
proceeding (other than a grand jury proceeding).
XI. Notification
A. Unless a transaction is otherwise subject to the reporting and
waiting period requirements of the Hart-Scott-Rodino Antitrust
Improvements Act of 1976, as amended, 15 U.S.C. 18a (the ``HSR Act''),
Defendants may not, without first providing notification to the United
States, directly or indirectly acquire (including through an asset swap
agreement) any Big Four Affiliation Agreement in a DMA in which either
Defendant has an existing Big Four Affiliation Agreement in place.
B. Defendants must provide the notification required by this
Section XI in the same format as, and in accordance with the
instructions relating to, the Notification and Report Form set forth in
the Appendix to Part 803 of Title 16 of the Code of Federal Regulations
as amended, except that the information requested in Items 5 through 8
of the instructions must be provided only about the business of
commercial television broadcasting. Notification must be provided at
least thirty (30) calendar days before acquiring any assets or
interest, and must include, beyond the information required by the
instructions, the names of the principal representatives who negotiated
the transaction on behalf of each party and all management or strategic
plans discussing the proposed transaction. If, within the thirty (30)
calendar days following notification, representatives of the United
States make a written request for additional information, Defendants
may not consummate the proposed transaction until thirty (30) calendar
days after submitting all requested information.
C. Early termination of the waiting periods set forth in this
Section XI may be requested and, where appropriate, granted in the same
manner as is applicable under the requirements and provisions of the
HSR Act and rules promulgated thereunder. This Section XI must be
broadly construed and any ambiguity or uncertainty relating to whether
to file a notice under this Section XI must be resolved in favor of
filing notice.
XII. No Reacquisition and Limitations on Collaborations
A. Unless approved by the United States in its sole discretion,
during the term of this Final Judgment, Defendants may not (1)
reacquire any part of or any interest in the Divestiture Assets; (2)
acquire any option to reacquire any part of the Divestiture Assets or
to assign any part of the Divestiture Assets to any other person; (3)
enter into or expand the scope of any Cooperative Agreement relating to
the Divestiture Assets; (4) conduct any business negotiations jointly
with any Acquirer relating to the Divestiture Assets divested to such
Acquirer; or (5) provide financing or guarantees of financing with
respect to the Divestiture Assets.
B. Paragraph XII(A)(3) does not preclude Defendants from:
1. Continuing existing agreements or entering into new agreements
in a form customarily used in the industry to (a) share news
helicopters or (b) pool generic video footage that does not include
recording a reporter or other on-air talent, and does not preclude
Defendants from entering into any non-sales-related shared services
agreement approved by the United States in its sole discretion;
2. entering into agreements to provide news programming to
broadcast television stations included in the Divestiture Assets,
provided that Defendants do not sell, price, market, hold out for sale,
or profit from the sale of advertising associated with the news
programming provided by Defendants under such agreements except by
approval of the United States in its sole discretion; or
3. rebroadcasting WIFR-LD's CBS program stream on a digital
subchannel of WREX, provided that (1) Acquirer rebroadcasts the WIFR-LD
CBS program stream on a pass-through basis and coextensively with its
main WREX signal, and (2) Defendants and Acquirer continue to operate
WIFR-LD and WREX as separate commercial broadcast television stations
with no common ownership or control, revenue sharing, or joint sales.
XIII. Retention of Jurisdiction
The Court retains jurisdiction to enable any party to this Final
Judgment to apply to the Court at any time for further orders and
directions as may be necessary or appropriate to carry out or construe
this Final Judgment, to modify any of its provisions, to enforce
compliance, and to punish violations of its provisions.
XIV. Enforcement of Final Judgment
A. The United States retains and reserves all rights to enforce the
provisions of this Final Judgment, including the right to seek an order
of contempt from the Court. Defendants agree that in any civil contempt
action, any motion to show cause, or any similar action brought by the
United States regarding an alleged violation of this Final Judgment,
the United States may establish a violation of the decree and the
appropriateness of any remedy therefor by a preponderance of the
evidence, and Defendants waive any argument that a different standard
of proof should apply.
B. The Final Judgment should be interpreted to give full effect to
the procompetitive purposes of the antitrust laws and to restore the
competition the United States alleges was harmed by the challenged
conduct. Defendants agree that they may be held in contempt of, and
that the Court may enforce, any provision of this Final Judgment that,
as interpreted by the Court in light of these procompetitive principles
and applying ordinary tools of interpretation, is stated specifically
and in reasonable detail, whether or not it is clear and unambiguous on
its face. In any such interpretation, the terms of this Final Judgment
should not be construed against either party as the drafter.
C. In an enforcement proceeding in which the Court finds that
Defendants have violated this Final Judgment, the United States may
apply to the Court for a one-time extension of this Final Judgment,
together with other relief that may be appropriate. In connection with
a successful effort by the United States to enforce this Final Judgment
against a Defendant, whether litigated or resolved before litigation,
that Defendant agrees to reimburse the United States for the fees and
expenses of its attorneys, as well as all other costs including
experts' fees, incurred in connection with that enforcement effort,
including in the investigation of the potential violation.
XV. Expiration of Final Judgment
Unless the Court grants an extension, this Final Judgment will
expire ten (10) years from the date of its entry, except that after
five (5) years from the date of its entry, this Final Judgment may be
terminated upon notice by the United States, to the Court and
Defendants that the divestiture has been completed and continuation of
this Final Judgment is no longer necessary or in the public interest.
XVI. Public Interest Determination
Entry of this Final Judgment is in the public interest. The parties
have complied with the requirements of the Antitrust Procedures and
Penalties Act, 15 U.S.C. 16, including by making available to the
public copies of this Final Judgment and the Competitive Impact
Statement, public comments thereon, and any response to comments by the
United States. Based upon the record before the Court, which includes
the Competitive Impact Statement and, if applicable, any comments and
response to comments filed with the
[[Page 42895]]
Court, entry of this Final Judgment is in the public interest.
Date: ______
[Court approval subject to procedures of Antitrust Procedures and
Penalties Act, 15 U.S.C. 16]
-----------------------------------------------------------------------
United States District Judge
United States District Court for the District of Columbia
United States of America, Plaintiff, v. Gray Television, Inc.,
and Quincy Media, Inc., Defendants.
Case No.: 1:21-cv-02041-CJN
Judge: Carl J. Nichols
Competitive Impact Statement
In accordance with the Antitrust Procedures and Penalties Act, 15
U.S.C. 16(b)-(h) (the ``APPA'' or ``Tunney Act''), the United States of
America files this Competitive Impact Statement relating to the
proposed Final Judgment filed in this civil antitrust proceeding.
IX. Nature and Purpose of the Proceeding
On January 31, 2021, Defendant Gray Television, Inc. (``Gray'')
agreed to acquire Defendant Quincy Media, Inc. (``Quincy'') for
approximately $925 million in cash. The United States filed a civil
antitrust Complaint on July 28, 2021, seeking to enjoin the proposed
acquisition. The Complaint alleges that the likely effect of this
acquisition would be to substantially lessen competition for licensing
the television programming of NBC, CBS, ABC, and FOX (collectively,
``Big Four'') affiliate stations to cable, satellite, fiber optic
television, and over-the-top providers (referred to collectively as
multichannel video programming distributors, or ``MVPDs'') for
retransmission to their subscribers and the sale of broadcast
television spot advertising in seven local geographic markets in
violation of Section 7 of the Clayton Act, 15 U.S.C. 18. The seven
Designated Market Areas (``DMAs'') in which a substantial reduction in
competition is alleged are: (i) Tucson, Arizona; (ii) Madison,
Wisconsin; (iii) Rockford, Illinois; (iv) Paducah, Kentucky/Cape
Girardeau, Missouri/Harrisburg-Mt. Vernon, Illinois; (v) Cedar Rapids-
Waterloo-Iowa City-Dubuque, Iowa; (vi) La Crosse-Eau Claire, Wisconsin;
and (vii) Wausau-Rhinelander, Wisconsin (collectively, ``the Overlap
DMAs'').\3\ In each Overlap DMA, Gray and Quincy each own at least one
broadcast television station that is affiliated with one of the Big
Four television networks. The loss of competition alleged in the
Complaint likely would result in an increase in retransmission consent
fees charged to MVPDs, much of which would be passed through to MVPD
subscribers, and higher prices for broadcast television spot
advertising in each Overlap DMA.
---------------------------------------------------------------------------
\3\ A DMA is a geographic unit for which The Nielsen Company
(US), LLC--a firm that surveys television viewers--furnishes
broadcast television stations, MVPDs, cable networks, advertisers,
and advertising agencies in a particular area with data to aid in
evaluating audience size and composition. DMAs are widely accepted
by industry participants as the standard geographic areas to use in
evaluating television audience size and demographic composition. The
Federal Communications Commission (``FCC'') also uses DMAs as
geographic units with respect to its broadcast television
regulations.
---------------------------------------------------------------------------
At the same time the Complaint was filed, the United States filed a
proposed Final Judgment and Hold Separate Stipulation and Order
(``Stipulation and Order''), which are designed to remedy the loss of
competition alleged in the Complaint. Under the proposed Final
Judgment, which is explained more fully below, Defendants are required
to divest the following broadcast television stations (the
``Divestiture Stations'') and related assets to an acquirer or
acquirers acceptable to the United States in its sole discretion: KPOB-
TV and WSIL-TV in the Paducah, Kentucky/Cape Girardeau, Missouri/
Harrisburg-Mt. Vernon, Illinois, DMA; KVOA in the Tucson, Arizona, DMA;
KWWL in the Cedar Rapids-Waterloo-Iowa City-Dubuque, Iowa, DMA; WAOW
and WMOW in the Wausau-Rhinelander, Wisconsin, DMA; WKOW in the
Madison, Wisconsin, DMA; WQOW and WXOW in the La Crosse-Eau Claire,
Wisconsin, DMA; and WREX in the Rockford, Illinois, DMA.
Under the terms of the Stipulation and Order, Defendants must take
certain steps to ensure that each Divestiture Station is operated as a
competitively independent, economically viable, and ongoing business
concern, which must remain independent and uninfluenced by Defendants,
and that competition is maintained during the pendency of the required
divestiture.
The United States and Defendants have stipulated that the proposed
Final Judgment may be entered after compliance with the APPA. Entry of
the proposed Final Judgment will terminate this action, except that the
Court will retain jurisdiction to construe, modify, or enforce the
provisions of the proposed Final Judgment and to punish violations
thereof.
X. Description of Events Giving Rise to the Alleged Violation
(A) The Defendants and the Proposed Transaction
Gray is a Georgia corporation with its headquarters in Atlanta,
Georgia. Gray owns 165 television stations in 94 DMAs, of which 139 are
Big Four affiliates. In 2020, Gray reported revenues of $2.4 billion.
Quincy is an Illinois corporation with its headquarters in Quincy,
Illinois. Quincy owns 20 television stations in 16 DMAs, of which 19
are Big Four affiliates. In 2020, Quincy had revenues of approximately
$338 million.
(B) The Competitive Effects of the Transaction in the Market for Big
Four Television Retransmission Consent
1. Background
MVPDs, such as Comcast, DirecTV, and Mediacom, typically pay the
owner of each local Big Four broadcast station in a given DMA a per-
subscriber fee for the right to retransmit the station's content to the
MVPDs' subscribers. The per-subscriber fee and other terms under which
an MVPD is permitted to distribute a station's content to its
subscribers are set forth in a retransmission agreement. A
retransmission agreement is negotiated directly between a broadcast
station group, such as Gray or Quincy, and a given MVPD, and this
agreement typically covers all of the station group's stations located
in the MVPD's service area, or ``footprint.''
2. Relevant Markets
Big Four broadcast content has special appeal to television viewers
in comparison to the content that is available through other broadcast
stations and cable networks. Big Four stations usually are the highest
ranked in terms of audience share and ratings in each DMA, largely
because of unique offerings such as local news, sports, and highly-
ranked primetime programs. Viewers typically consider the Big Four
stations to be close substitutes for one another. Because of Big Four
stations' popular national content and valued local coverage, MVPDs
regard Big Four programming as highly desirable for inclusion in the
packages they offer subscribers. Non-Big Four broadcast stations are
typically not close substitutes for viewers of Big Four stations.
Stations that are affiliates of networks other than the Big Four, such
as the CW Network, MyNetworkTV, or Telemundo, typically feature niche
programming without local news, weather or sports--or, in the case of
[[Page 42896]]
Telemundo, only offer local news, weather, and sports aimed at a
Spanish-speaking audience. Stations that are unaffiliated with any
network are similarly unlikely to carry programming with broad popular
appeal.
If an MVPD suffers a blackout of a Big Four station in a given DMA,
many of the MVPD's subscribers in that DMA are likely to turn to other
Big Four stations in the DMA to watch similar content, such as sports,
primetime shows, and local news and weather. This willingness of
viewers to switch between competing Big Four broadcast stations limits
an MVPD's expected losses in the case of a blackout, and thus limits a
broadcaster's ability to extract higher fees from that MVPD--since an
MVPD's willingness to pay higher retransmission consent fees for
content rises or falls with the harm it would suffer if that content
were lost. Due to the limited programming typically offered by non-Big
Four stations, viewers are much less likely to switch to a non-Big Four
station than to switch to other Big Four stations in the event of a
blackout of a Big Four station. Accordingly, competition from non-Big
Four stations does not typically impose a significant competitive
constraint on the retransmission consent fees charged by the owners of
Big Four stations. For the same reasons, subscribers--and therefore
MVPDs--generally do not view cable network programming as a close
substitute for Big Four network content. This is primarily because
cable networks offer different content than Big Four stations. For
example, cable networks generally do not offer local news, which
provides a valuable connection to the local community that is important
to viewers of Big Four stations.
Because viewers do not regard non-Big Four broadcast stations or
cable networks as close substitutes for the programming they receive
from Big Four stations, these other sources of programming are not
sufficient to discipline an increase in the fees charged for Big Four
television retransmission consent. Accordingly, a small but significant
increase in the retransmission consent fees of Big Four affiliates
would not cause enough MVPDs to forego carrying the content of the Big
Four stations to make such an increase unprofitable for the Big Four
stations.
The relevant geographic markets for the licensing of Big Four
television retransmission consent are the individual DMAs in which such
licensing occurs. The Complaint alleges a substantial reduction of
competition in the market for the licensing of Big Four television
retransmission consent in the Overlap DMAs.
In the event of a blackout of a Big Four network station, FCC rules
generally prohibit an MVPD from importing the same network's content
from another DMA. Thus, MVPD subscribers in one DMA cannot switch to
Big Four programming in another DMA in the face of a blackout.
Therefore, substitution to stations outside the DMA cannot discipline
an increase in the fees charged for retransmission consent for
broadcast stations in the DMA.
3. Anticompetitive Effects
In each of the Overlap DMAs, Gray and Quincy each own at least one
Big Four affiliate broadcast television station. By combining the
Defendants' Big Four stations, the proposed merger would increase the
Defendants' market shares in the licensing of Big Four television
retransmission consent in each Overlap DMA, and would increase the
market concentration in that business in each Overlap DMA. The chart
below summarizes Defendants' approximate Big Four retransmission
consent market shares, based on figures in BIA Advisory Services'
Investing in Television Market Report 2020 (1st edition), and market
concentrations measured by the widely used Herfindahl-Hirschman Index
(``HHI''),\4\ in each Overlap DMA, before and after the proposed
merger.
---------------------------------------------------------------------------
\4\ The HHI is calculated by squaring the market share of each
firm competing in the market and then summing the resulting numbers.
For example, for a market consisting of four firms with shares of
30, 30, 20, and 20 percent, the HHI is 2,600 (30\2\ + 30\2\ + 20\2\
+20\2\ = 2,600). The HHI takes into account the relative size
distribution of the firms in a market. It approaches zero when a
market is occupied by a large number of firms of relatively equal
size, and reaches its maximum of 10,000 points when a market is
controlled by a single firm. The HHI increases both as the number of
firms in the market decreases and as the disparity in size between
those firms increases.
----------------------------------------------------------------------------------------------------------------
Pre- Post-
Overlap DMA Gray Quincy Merged merger merger HHI
share (%) share (%) share (%) HHI HHI increase
----------------------------------------------------------------------------------------------------------------
Tucson, AZ.................................... 30 24 54 2,564 4,010 1,446
Madison, WI................................... 30 23 53 2,556 3,956 1,400
Paducah-Harrisburg, KY-IL..................... 30 23 53 2,622 4,022 1,400
Cedar Rapids, IA.............................. 26 20 46 2,533 3,600 1,067
La Crosse-Eau Claire, WI...................... 33 20 53 2,622 3,956 1,333
Rockford, IL.................................. 27 20 47 2,533 3,600 1,066
Wausau-Rhinelander, WI........................ 44 33 77 3,580 6,543 2,963
----------------------------------------------------------------------------------------------------------------
As indicated by the preceding chart, in each Big Four Overlap DMA
the post-merger HHI would exceed 2,500, and the merger would increase
the HHI by more than 200 points. As a result, the proposed merger is
presumed likely to enhance market power under the Horizontal Merger
Guidelines issued by the Department of Justice and the Federal Trade
Commission.
The proposed merger would enable Gray to black out more Big Four
stations simultaneously in each of the Overlap DMAs than either Gray or
Quincy could black out independently today, likely leading to increased
retransmission consent fees to any MVPD whose footprint includes any of
the Overlap DMAs. Retransmission consent fees generally are passed
through to an MVPD's subscribers in the form of higher subscription
fees or as a line item on their bills.
(C) The Competitive Effects of the Transaction in the Market for
Broadcast Television Spot Advertising
1. Background
Broadcast television stations sell advertising ``spots'' during
breaks in their programming. Advertisers purchase spots from a
broadcast station to communicate with viewers within the DMA in which
the broadcast television station is located. Broadcast television spot
advertising is distinguished from ``network'' advertising, which
consists
[[Page 42897]]
of advertising time slots sold on nationwide broadcast networks by
those networks, and not by local broadcast television stations or their
representatives. Gray and Quincy each own at least one Big Four
affiliated television station in each of the Overlap DMAs and compete
with one another to sell broadcast television spot advertising in each
of the Overlap DMAs.
2. Relevant Markets
Broadcast television spot advertising constitutes a relevant
product market and line of commerce under Section 7 of the Clayton Act,
15 U.S.C. 18. Advertisers' inability or unwillingness to substitute to
other types of advertising in response to a price increase in broadcast
television spot advertising supports this relevant market definition.
Typically, an advertiser purchases broadcast television advertising
spots as one component of an advertising strategy that may also include
cable television advertising spots, newspaper advertisements,
billboards, radio spots, digital advertisements, email advertisements,
and direct mail. Different components of an advertising strategy
generally target different audiences and serve distinct purposes.
Advertisers that advertise on broadcast television stations do so
because the stations offer popular programming such as local news,
sports, and primetime and syndicated shows that are especially
attractive to a broad demographic base and a large audience of viewers.
Other categories of advertising may offer different characteristics,
but are not close substitutes for broadcast television spot
advertising. For example, ads associated with online search results
target individual consumers or respond to specific keyword searches,
whereas broadcast television spot advertising reaches a broad audience
throughout a DMA. In the future, technological developments may bring
various advertising categories into closer competition with each other.
For example, broadcasters and cable networks are developing technology
to make their spot advertising addressable, meaning that broadcasters
could deliver targeted advertising in live broadcast and on-demand
formats to smart televisions or streaming devices. For certain
advertisers, these technological changes may make other categories of
advertising closer substitutes for advertising on broadcast television
in the future. However, at this time, for many broadcast television
spot advertising advertisers, these projected developments are
insufficient to mitigate the anticompetitive effects of the merger in
the Overlap DMAs.
MVPDs sell spot advertising to be shown during breaks in cable
network programming. For viewers, these advertisements are similar to
broadcast television spot ads. However, cable television spot
advertising is not at this time a reasonable substitute for broadcast
television spot advertising for most advertisers. First, broadcast
television spot advertising is a more efficient option than cable
television spot advertising for many advertisers. Because broadcast
television offers highly rated programming with broad appeal, each
broadcast television advertising spot typically offers the opportunity
to reach more viewers (more ``ratings points'') than a single spot on a
cable channel. By contrast, MVPDs offer dozens of cable networks with
specialized programs that appeal to niche audiences. This fragmentation
allows advertisers to target narrower demographic subsets by buying
cable spots on particular channels, but it does not meet the needs of
advertisers who want to reach a large percentage of a DMA's population.
Second, households that have access to cable networks are divided among
multiple MVPDs within a DMA. In contrast, broadcast television spot
advertising has a much broader reach because it reaches all households
that subscribe to an MVPD and, through an over-the-air signal, most
households with a television that do not. Third and finally, MVPDs'
inventory of cable television spot advertising is limited--typically to
two minutes per hour--contrasting sharply with broadcast stations' much
larger number of advertising minutes per hour. The inventory of DMA-
wide cable television spot advertising is substantially further reduced
by the large portion of those spots allocated to local zone
advertising, in which an MVPD sells spots by geographic zones within a
DMA, allowing advertisers to target smaller geographic areas. Due to
the limited inventories and lower ratings associated with cable
television spot programming, cable television spot advertising does not
offer a sufficient volume of ratings points, or broad enough household
penetration, to provide a reasonable alternative to broadcast
television spot advertising.
Digital advertising is also not a sufficiently close substitute for
broadcast television spot advertising. Some digital advertising, such
as static and floating banner advertisements, static images, text
advertisements, wallpaper advertisements, pop-up advertisements, flash
advertisements, and paid search results, lacks the combination of
sight, sound, and motion that makes television spot advertising
particularly impactful and memorable and therefore effective for
advertisers. Digital video advertisements, on the other hand, do allow
for a combination of sight, sound, and motion, and on this basis are
more comparable to broadcast television spot advertising than other
types of digital advertising. However, they are still not close
substitutes for broadcast television spot advertising because digital
advertisements typically have a different scope of reach compared to
broadcast television spot advertising. For example, while advertisers
use broadcast television spots to reach a large percentage of
households within a given DMA, advertisers use digital advertising to
reach a variety of different audiences. While a small portion of
advertisers purchase DMA-wide advertisements on digital platforms,
digital advertisements usually are targeted either very broadly, such
as nationwide or regional, or to a geographic target smaller than a
DMA, such as a city or a zip code, or to narrow demographic subsets of
a population.
Other forms of advertising, such as radio, newspaper, billboard,
and direct-mail advertising, also do not constitute effective
substitutes for broadcast television spot advertising. These forms of
media do not reach as many local viewers or drive brand awareness to
the same extent as broadcast television spot advertising does.
Broadcast television spot advertising possesses a unique combination of
attributes that advertisers value in a way that sets it apart from
advertising on other media. Broadcast television spot advertising
combines sight, sound, and motion in a way that makes television
advertisements particularly memorable and impactful.
The relevant geographic markets for the sale of broadcast
television spot advertising are the individual DMAs in which such
advertising is viewed. The Complaint alleges a substantial reduction of
competition in the market for sale of broadcast television advertising
in the Overlap DMAs. For an advertiser seeking to reach potential
customers in a given DMA, broadcast television stations located outside
of the DMA do not provide effective access to the advertiser's target
audience. The signals of broadcast television stations located outside
of the DMA generally do not reach any significant portion of the target
DMA through either over-the-air signal or MVPD distribution.
Accordingly, a small but significant increase in the spot advertising
prices of stations broadcasting into the DMA would not cause a
sufficient number of
[[Page 42898]]
advertisers to switch to stations outside the DMA to make such an
increase unprofitable for the station.
3. Anticompetitive Effects
In each of the Overlap DMAs, Gray and Quincy each own at least one
Big Four affiliate broadcast television station. By combining the
Defendants' stations, the proposed merger would increase the
Defendants' market shares in the sale of broadcast television spot
advertising in each Overlap DMA, and would increase the market
concentration in that business in each Overlap DMA. The chart below
summarizes Defendants' approximate market shares, based on figures in
BIA Advisory Services' Investing in Television Market Report 2020 (1st
edition), and the result of the transaction on the HHIs in the sale of
broadcast television spot advertising.
----------------------------------------------------------------------------------------------------------------
Pre- Post-
Overlap DMA Gray Quincy Merged merger merger HHI
share (%) share (%) share (%) HHI HHI increase
----------------------------------------------------------------------------------------------------------------
Tucson, AZ.................................... 27 25 52 2,059 3,389 1,330
Madison, WI................................... 31 20 51 2,540 3,745 1,205
Paducah-Harrisburg, KY-IL..................... 26 22 48 2,886 4,022 1,136
Cedar Rapids, IA.............................. 41 34 75 3,108 5,852 2,744
La Crosse-Eau Claire, WI...................... 33 23 56 2,587 4,084 1,497
Rockford, IL.................................. 28 35 63 3,348 5,319 1,971
Wausau-Rhinelander, WI........................ 40 38 78 3,479 6,489 3,010
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Defendants' large market shares reflect the fact that, in each
Overlap DMA, Gray and Quincy each own one or more significant broadcast
television stations. As indicated by the preceding chart, the post-
merger HHI in each Overlap DMA is well above 2,500, and the HHI
increase in each Overlap DMA far exceeds the 200-point threshold above
which a transaction is presumed to enhance market power and harm
competition under the Horizontal Merger Guidelines. Defendants'
proposed transaction is thus presumptively unlawful in each Overlap
DMA.
In addition to substantially increasing the concentration levels in
each Overlap DMA, the proposed acquisition would combine Gray's and
Quincy's broadcast television stations, which are generally close
competitors in the sale of broadcast television spot advertising. In
each Overlap DMA, Defendants' broadcast stations compete head-to-head
in the sale of broadcast television spot advertising. Advertisers
obtain lower prices as a result of this competition. In particular,
advertisers in the Overlap DMAs can respond to an increase in one
station's spot advertising prices by purchasing, or threatening to
purchase, advertising spots on one or more stations owned by different
broadcast station groups, thereby ``buying around'' the station that
raises its prices. This practice allows the advertisers either to avoid
the first station's price increase, or to pressure the first station to
lower its prices. If Gray acquires Quincy's stations, advertisers
seeking to reach audiences in the Overlap DMAs would have fewer
competing broadcast television alternatives available to meet their
advertising needs, and would find it more difficult and costly to buy
around higher prices imposed by the combined stations. This would
likely result in increased advertising prices, lower quality local
programming to which the spot advertising is attached (for example,
less investment in local news), and less innovation in providing
advertising solutions to advertisers.
(D) Entry
De novo entry into each Overlap DMA is unlikely. The FCC regulates
entry through the issuance of broadcast television licenses, which are
difficult to obtain because the availability of spectrum is limited and
the regulatory process associated with obtaining a license is lengthy.
Even if a new signal were to become available, commercial success would
come over a period of many years, if at all. Because Big Four
affiliated stations generally have the highest ratings in each DMA,
they are more successful at selling broadcast television spot ads
compared to non-Big Four affiliated broadcast stations. Thus, entry of
a new broadcast station into an Overlap DMA would not be timely,
likely, or sufficient to prevent or remedy the proposed acquisition's
likely anticompetitive effects in the relevant markets.
XI. Explanation of the Proposed Final Judgment
The relief required by the proposed Final Judgment will remedy the
loss of competition alleged in the Complaint by establishing an
independent and economically viable competitor in the markets for the
licensing of Big Four television retransmission consent and the sale of
broadcast television spot advertising. The proposed Final Judgment
requires Defendants to divest the Divestiture Stations within 30 days
after the entry of the Stipulation and Order to Allen Media Holdings,
LLC (``Allen'') or an alternative acquirer approved by the United
States. Where Defendants have filed applications with the FCC seeking
approval to assign or transfer any licenses to acquirer, the 30-day
time period will be extended until five business days after an FCC
order has been issued. The assets must be divested in such a way as to
satisfy the United States in its sole discretion that the assets can
and will be operated by the acquirer as a viable, ongoing business that
can compete effectively in the licensing of Big Four television
retransmission consent and the sale of broadcast television spot
advertising. Defendants must take all reasonable steps necessary to
accomplish the divestiture quickly, including obtaining any necessary
FCC approvals as expeditiously as possible, and must cooperate with the
acquirer.
(A) The Divestiture Assets
The Divestiture Assets, which are defined in Paragraph II(G) of the
proposed Final Judgment, include all tangible and intangible assets of
the Divestiture Stations. The assets include all tangible property; all
licenses, permits, and authorizations; all contracts (including
programming contracts and rights), agreements, network affiliation
agreements, leases, and commitments and understandings; all trademarks,
service marks, trade names, copyrights, patents, slogans, programming
materials, and promotional materials; all customer lists, contracts,
accounts, and credit records; all logs and other records; and the
content and affiliation of each digital subchannel.
(B) The Excluded Assets
Certain assets are excluded from the Divestiture Assets, as
described in Paragraph II(J) of the proposed Final Judgment. The assets
that are excluded
[[Page 42899]]
relate to: (1) The CW programming stream currently broadcast on KWWL in
the Cedar Rapids-Waterloo-Iowa City-Dubuque, Iowa, DMA; (2) the CW
programming stream currently broadcast on WMOW and WAOW in the Wausau-
Rhinelander, Wisconsin, DMA; (3) the CW programming stream currently
broadcast on WREX in the Rockford, Illinois, DMA; (4) the CW and MeTV
programming streams currently broadcast on WXOW and WQOW in the La
Crosse-Eau Claire, Wisconsin, DMA; (5) the MeTV programming stream
currently broadcast on WKOW in the Madison, Wisconsin, DMA; (6)
satellite station WYOW, Eagle River, Wisconsin; (7) all real and
tangible personal property owned by Quincy located at 501 and 513
Hampshire Street in Quincy, Illinois 62301; (8) all tangible personal
property owned by Quincy located at 130 South 5th Street, Quincy,
Illinois 62301; and (9) all real and tangible personal property owned
by Quincy at the Digital Realty Data Center located at 350 East Cermak,
Chicago, Illinois 60616.
The excluded CW and MeTV programming streams currently are derived
from separate network affiliations and are broadcast from digital
subchannels of the Divestiture Stations. As a result, the Defendants'
retention of those CW and MeTV programming streams will not prevent the
divestiture buyer from operating the Divestiture Stations as viable,
independent competitors. Nor will Defendants' retention of these assets
substantially lessen competition. Divesting one of the Defendants' Big
Four affiliates in each Overlap DMA will ensure that competition in the
licensing of Big Four television retransmission consent is not
diminished. Also, nearly all of the merger-induced increase in
concentration in the sale of broadcast television spot advertising in
each Overlap DMA is avoided by the sale of one of Defendants' Big Four
affiliates in each Overlap DMA, as the broadcast television spot
advertising revenues attributable to non-Big Four affiliates (e.g., CW
and MeTV) is very small, relative to that of the Big Four affiliates.
(C) General Conditions
The proposed Final Judgment contains provisions intended to
facilitate the acquirer's efforts to hire certain employees.
Specifically, Paragraph IV(J) of the proposed Final Judgment requires
Defendants to provide the acquirer and the United States with
organization charts and information relating to these employees and to
make them available for interviews. It also provides that Defendants
must not interfere with any negotiations by the acquirer to hire these
employees. In addition, for employees who elect employment with the
acquirer, Defendants must waive all non-compete and non-disclosure
agreements, vest all unvested pension and other equity rights, provide
any pay pro-rata, provide all compensation and benefits that those
employees have fully or partially accrued, and provide all other
benefits that the employees would generally be provided had those
employees continued employment with Defendants, including but not
limited to any retention bonuses or payments. This paragraph further
provides that Defendants may not solicit to hire any of those employees
who were hired by the acquirer, unless an employee is terminated or
laid off by the acquirer or the acquirer agrees in writing that
Defendants may solicit to hire that individual. The non-solicitation
period runs for sixty (60) days from the date of the divestiture.
Paragraph IV(L) of the proposed Final Judgment will facilitate the
transfer to the acquirer of customers and other contractual
relationships that are included within the Divestiture Assets.
Defendants must transfer all contracts, agreements, and relationships
to the acquirer and must make best efforts to assign, subcontract, or
otherwise transfer contracts or agreements that require the consent of
another party before assignment, subcontracting, or other transfer.
The proposed Final Judgment requires Defendants to provide certain
transition services to maintain the viability and competitiveness of
the Divestiture Stations during the transition to the acquirer.
Paragraph IV(N) of the proposed Final Judgment requires Defendants, at
the acquirer's option, to enter into a transition services agreement
for back office, human resources, accounting, and information
technology services for a period of up to six (6) months. The acquirer
may terminate the transition services agreement, or any portion of it,
without cost or penalty at any time upon commercially reasonable
notice. The paragraph further provides that the United States, in its
sole discretion, may approve one or more extensions of this transition
services agreement for a total of up to an additional six (6) months
and that any amendments to or modifications of any provisions of a
transition services agreement are subject to approval by the United
States in its sole discretion. Paragraph IV(N) also provides that
employees of Defendants tasked with supporting this agreement must not
share any competitively sensitive information of the acquirer with any
other employee of Defendants, unless such sharing is for the sole
purpose of providing transition services to the acquirer.
(D) Appointment of Divestiture Trustee
If Defendants do not accomplish the divestiture within the period
prescribed in Paragraph IV(A) of the proposed Final Judgment, Section V
of the proposed Final Judgment provides that the Court will appoint a
divestiture trustee selected by the United States to effect the
divestiture. If a divestiture trustee is appointed, the proposed Final
Judgment provides that Defendants must pay all costs and expenses of
the trustee. The divestiture trustee's commission must be structured so
as to provide an incentive for the trustee based on the price obtained
and the speed with which the divestiture is accomplished. After the
divestiture trustee's appointment becomes effective, the trustee must
provide monthly reports to the United States setting forth his or her
efforts to accomplish the divestiture. If the divestiture has not been
accomplished within six months of the divestiture trustee's
appointment, the divestiture trustee and the United States may make
recommendations to the Court, which will enter such orders as
appropriate, in order to carry out the purpose of the proposed Final
Judgment, including by extending the trust or the term of the
divestiture trustee's appointment.
(E) Notification Requirements
Section XI of the proposed Final Judgment requires Defendants to
notify the United States in advance of acquiring, directly or
indirectly, in a transaction that would not otherwise be reportable
under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as
amended, 15 U.S.C. 18a (the ``HSR Act''), any Big Four affiliation
agreement in a DMA in which a Defendant already has a Big Four
affiliation agreement in place. Pursuant to the proposed Final
Judgment, Defendants must notify the United States of such acquisitions
as it would for a required HSR Act filing, as specified in the Appendix
to Part 803 of Title 16 of the Code of Federal Regulations. The
proposed Final Judgment further provides for waiting periods and
opportunities for the United States to obtain additional information
analogous to the provisions of the HSR Act before such acquisitions can
be consummated. Requiring notification before the acquisition of Big
Four affiliation agreement in a DMA in which
[[Page 42900]]
a Defendant already has a Big Four affiliation agreement in place will
permit the United States to assess the competitive effects of that
acquisition before it is consummated and, if necessary, seek to enjoin
the transaction.
(F) Prohibitions on Reacquisition and Limitations on Collaborations
To ensure that the Divestiture Stations are operated independently
from Defendants after the divestitures, Paragraph XII(A) of the
proposed Final Judgment provides that during the term of the Final
Judgment Defendants shall not (1) reacquire any part of the Divestiture
Assets; (2) acquire any option to reacquire any part of the Divestiture
Assets or to assign them to any other person; (3) enter into any
carriage agreement, local marketing agreement, joint sales agreement,
other cooperative selling arrangement, or shared services agreement
(except as provided in in Section XII), or conduct other business
negotiations jointly with any acquirer of any of the Divestiture Assets
with respect to those Divestiture Assets; or (4) provide financing or
guarantees of financing with respect to the Divestiture Assets.
Under Paragraph XII(B)(1) of the proposed Final Judgment, the
shared services prohibition does not preclude Defendants from
continuing or entering into agreements in a form customarily used in
the industry to (a) share news helicopters or (b) pool generic video
footage that does not include recording a reporter or other on-air
talent, and does not preclude Defendants from entering into any non-
sales-related shared services agreement or transition services
agreement that is approved in advance by the United States in its sole
discretion. Additionally, Paragraph XII(B)(2) provides that the
restrictions of Paragraph XII(A) do not prevent Defendants from
entering into agreements to provide news programming to the Divestiture
Stations, provided that Defendants do not sell, price, market, hold out
for sale, or profit from the sale of advertising associated with the
news programming provided by Defendants under such agreements except by
approval of the United States in its sole discretion.
The proposed Final Judgment makes one exception to the general
prohibition against carriage agreements between the Defendants and the
acquirer in the Rockford, Illinois, DMA. Paragraph XII(B)(3) of the
proposed Final Judgment provides that Defendants and acquirer may
rebroadcast WIFR-LD's CBS program stream on a digital subchannel of
WREX, provided that the acquirer rebroadcasts the WIFR-LD program
stream on a pass-through basis and coextensively with its main WREX
signal, and that Defendants and the acquirer continue to operate WIFR-
LD and WREX as separate commercial broadcast television stations.
Currently, WIFR-LD's CBS program stream is broadcast on a low power
signal. Rebroadcasting the program stream on a WREX digital subchannel
would put the program stream on a full power signal, thereby allowing
more viewers in the Rockford, Illinois, DMA to access WIFR-LD's CBS
programming on an over-the-air basis. Rebroadcasting WIFR-LD's CBS
program stream in this way will not prevent the acquirer from operating
WREX as a viable, independent competitor, nor will it substantially
lessen competition in the Rockford, Illinois, DMA.
(G) Enforcement and Expiration of the Final Judgment
The proposed Final Judgment also contains provisions designed to
promote compliance and will make enforcement of the Final Judgment as
effective as possible. Paragraph XIV(A) provides that the United States
retains and reserves all rights to enforce the Final Judgment,
including the right to seek an order of contempt from the Court. Under
the terms of this paragraph, Defendants have agreed that in any civil
contempt action, any motion to show cause, or any similar action
brought by the United States regarding an alleged violation of the
Final Judgment, the United States may establish the violation and the
appropriateness of any remedy by a preponderance of the evidence and
that Defendants have waived any argument that a different standard of
proof should apply. This provision aligns the standard for compliance
with the Final Judgment with the standard of proof that applies to the
underlying offense that the Final Judgment addresses.
Paragraph XIV(B) provides additional clarification regarding the
interpretation of the provisions of the proposed Final Judgment. The
proposed Final Judgment is intended to remedy the loss of competition
the United States alleges would otherwise be harmed by the transaction.
Defendants agree that they will abide by the proposed Final Judgment,
and that they may be held in contempt of the Court for failing to
comply with any provision of the proposed Final Judgment that is stated
specifically and in reasonable detail, as interpreted in light of this
procompetitive purpose.
Paragraph XIV(C) of the proposed Final Judgment provides that if
the Court finds in an enforcement proceeding that a Defendant has
violated the Final Judgment, the United States may apply to the Court
for a one-time extension of the Final Judgment, together with such
other relief as may be appropriate. In addition, to compensate American
taxpayers for any costs associated with investigating and enforcing
violations of the Final Judgment, Paragraph XIV(C) provides that, in
any successful effort by the United States to enforce the Final
Judgment against a Defendant, whether litigated or resolved before
litigation, the Defendant must reimburse the United States for
attorneys' fees, experts' fees, and other costs incurred in connection
with any effort to enforce the Final Judgment, including the
investigation of the potential violation.
Finally, Section XV of the proposed Final Judgment provides that
the Final Judgment will expire ten years from the date of its entry,
except that after five years from the date of its entry, the Final
Judgment may be terminated upon notice by the United States to the
Court and Defendants that the divestiture has been completed and that
continuation of the Final Judgment is no longer necessary or in the
public interest.
XII. Remedies Available to Potential Private Litigants
Section 4 of the Clayton Act, 15 U.S.C. 15, provides that any
person who has been injured as a result of conduct prohibited by the
antitrust laws may bring suit in federal court to recover three times
the damages the person has suffered, as well as costs and reasonable
attorneys' fees. Entry of the proposed Final Judgment neither impairs
nor assists the bringing of any private antitrust damage action. Under
the provisions of Section 5(a) of the Clayton Act, 15 U.S.C. 16(a), the
proposed Final Judgment has no prima facie effect in any subsequent
private lawsuit that may be brought against Defendants.
XIII. Procedures Available for Modification of the Proposed Final
Judgment
The United States and Defendants have stipulated that the proposed
Final Judgment may be entered by the Court after compliance with the
provisions of the APPA, provided that the United States has not
withdrawn its consent. The APPA conditions entry upon the Court's
determination that the proposed Final Judgment is in the public
interest.
The APPA provides a period of at least 60 days preceding the
effective date of the proposed Final Judgment within which any person
may submit to the United States written comments regarding the proposed
Final Judgment.
[[Page 42901]]
Any person who wishes to comment should do so within 60 days of the
date of publication of this Competitive Impact Statement in the Federal
Register, or the last date of publication in a newspaper of the summary
of this Competitive Impact Statement, whichever is later. All comments
received during this period will be considered by the U.S. Department
of Justice, which remains free to withdraw its consent to the proposed
Final Judgment at any time before the Court's entry of the Final
Judgment. The comments and the response of the United States will be
filed with the Court. In addition, the comments and the United States'
responses will be published in the Federal Register unless the Court
agrees that the United States may instead publish them on the U.S.
Department of Justice, Antitrust Division's internet website.
Written comments should be submitted in English to: Scott Scheele,
Chief, Media, Entertainment, and Communications Section, Antitrust
Division, U.S. Department of Justice, 450 Fifth Street NW, Suite 7000,
Washington, DC 20530, [email protected].
The proposed Final Judgment provides that the Court retains
jurisdiction over this action, and the parties may apply to the Court
for any order necessary or appropriate for the modification,
interpretation, or enforcement of the Final Judgment.
XIV. Alternatives to the Proposed Final Judgment
As an alternative to the proposed Final Judgment, the United States
considered a full trial on the merits against Defendants. The United
States could have continued the litigation and sought preliminary and
permanent injunctions against Gray's acquisition of Quincy. The United
States is satisfied, however, that the relief required by the proposed
Final Judgment will remedy the anticompetitive effects alleged in the
Complaint, preserving competition for licensing Big Four television
retransmission consent and the sale of broadcast television spot
advertising in the Overlap DMAs. Thus, the proposed Final Judgment
achieves all or substantially all of the relief the United States would
have obtained through litigation, but avoids the time, expense, and
uncertainty of a full trial on the merits.
XV. Standard of Review Under the APPA for the Proposed Final Judgment
Under the Clayton Act and the APPA, proposed Final Judgments or
``consent decrees'' in antitrust cases brought by the United States are
subject to a 60-day comment period, after which the Court shall
determine whether entry of the proposed Final Judgment ``is in the
public interest.'' 15 U.S.C. 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. 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); United States v.
U.S. Airways Grp., 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 a
court's review of a proposed Final 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 mechanism 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 proposed Final Judgment is
sufficiently clear, whether its enforcement mechanisms are sufficient,
and whether it may positively harm third parties. See Microsoft, 56
F.3d at 1458-62. With respect to the adequacy of the relief secured by
the proposed Final Judgment, a court may not ``make de novo
determination of facts and issues.'' United States v. W. Elec. Co., 993
F.2d 1572, 1577 (D.C. Cir. 1993) (quotation marks omitted); see also
Microsoft, 56 F.3d at 1460-62; United States v. Alcoa, Inc., 152 F.
Supp. 2d 37, 40 (D.D.C. 2001); United States v. Enova Corp., 107 F.
Supp. 2d 10, 16 (D.D.C. 2000); 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 the first instance, to the discretion of the Attorney General.'' W.
Elec. Co., 993 F.2d at 1577 (quotation marks omitted). ``The court
should bear in mind the flexibility of the public interest inquiry: the
court's function is not to determine whether the resulting array of
rights and liabilities is one that will best serve society, but only to
confirm that the resulting settlement is within the reaches of the
public interest.'' Microsoft, 56 F.3d at 1460 (quotation marks
omitted); see also United States v. Deutsche Telekom AG, No. 19 2232
(TJK), 2020 WL 1873555, at *7 (D.D.C. Apr. 14, 2020). More demanding
requirements would ``have enormous practical consequences for the
government's ability to negotiate future settlements,'' contrary to
congressional intent. Microsoft, 56 F.3d at 1456. ``The Tunney Act was
not intended to create a disincentive to the use of the consent
decree.'' Id.
The United States' predictions about the efficacy of the remedy are
to be afforded deference by the Court. See, e.g., Microsoft, 56 F.3d at
1461 (recognizing courts should give ``due respect to the Justice
Department's . . . view of the nature of its case''); United States v.
Iron Mountain, Inc., 217 F. Supp. 3d 146, 152-53 (D.D.C. 2016) (``In
evaluating objections to settlement agreements under the Tunney Act, a
court must be mindful that [t]he government need not prove that the
settlements will perfectly remedy the alleged antitrust harms[;] it
need only provide a factual basis for concluding that the settlements
are reasonably adequate remedies for the alleged harms.'') (internal
citations omitted); United States v. Republic Servs., Inc., 723 F.
Supp. 2d 157, 160 (D.D.C. 2010) (noting ``the deferential review to
which the government's proposed remedy is accorded''); United States v.
Archer-Daniels-Midland Co., 272 F. Supp. 2d 1, 6 (D.D.C. 2003) (``A
district court must accord due respect to the government's prediction
as to the effect of proposed remedies, its perception of the market
structure, and its view of the nature of the case''). The ultimate
question is whether ``the remedies [obtained by the
[[Page 42902]]
Final Judgment 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 W. Elec. Co., 900 F.2d at 309).
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 (``[T]he
`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.
In its 2004 amendments to the APPA, Congress made clear its intent
to preserve the practical benefits of using judgments proposed by the
United States in antitrust enforcement, Public Law 108-237 Sec. 221,
and added 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. 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). ``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 (citing Enova Corp., 107 F.
Supp. 2d at 17).
XVI. Determinative Documents
There are no determinative materials or documents within the
meaning of the APPA that were considered by the United States in
formulating the proposed Final Judgment.
Dated: July 28, 2021.
Respectfully submitted,
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Brendan Sepulveda (D.C. Bar #1025074),
United States Department of Justice, Antitrust Division, 450 Fifth
Street NW, Suite 7000, Washington, DC 20530, Telephone: (202) 316-
7258, Facsimile: (202) 514-6381, Email: [email protected].
[FR Doc. 2021-16682 Filed 8-4-21; 8:45 am]
BILLING CODE 4410-11-P