The U.S. Justice Department asked Raycom Media Inc. and Gray Television Inc. to divest broadcast television stations in nine markets to gain regulatory approval for the companies' proposed $3.6 billion merger. The merger is still pending approval by the Federal Communications Commission.
The required divestitures are key to resolving the antitrust division's lawsuit filed in the U.S. District Court for the District of Columbia to block the deal, the agency said Dec. 14. The division also filed a proposed settlement that could resolve the suit by remedying the competitive harms alleged in the complaint, through the divestitures and related conditions.
The divestiture markets are Knoxville, Tenn.; Toledo, Ohio; Waco–Temple–Bryan, Texas; Tallahassee, Fla.–Thomasville, Ga.; Augusta, Ga.; Odessa-Midland, Texas; Panama City, Fla.; Albany, Ga.; and Dothan, Ala. Gray already identified the overlapping markets it expected to divest stations.
"Without the required divestitures, Gray's merger with Raycom threatens serious competitive harm to cable subscribers and small businesses," said Assistant Attorney General Makan Delrahim of the DOJ's antitrust division.
"I am pleased, however, that we have been able to reach a speedy and complete resolution of the Division's concerns, thanks in part to the parties' commitment to engage in good-faith settlement talks from the outset of our investigation."
The divestitures would address the DOJ's concerns related to the licensing of Big Four (NBC, CBS, ABC, and Fox) television retransmission consent and the sale of broadcast television spot advertising that would otherwise result from the merger, the agency said. Under the requirement, Gray would sell the Big Four affiliate stations currently owned by either Raycom or Gray in each of the nine markets where the companies have Big Four overlaps.
The divestitures must be done so that the stations "will be used by the buyers as part of a viable, ongoing commercial television broadcasting business," the agency said.
The DOJ concerned that without the divestitures the merger would eliminate competition between Gray and Raycom in the nine markets.
The agency alleged that the combined company would likely charge cable and satellite companies higher retransmission fees to carry the merged company's broadcast stations, resulting in higher monthly cable and satellite bills for consumers.
It also worried the combined company would charge advertisers higher prices for spot advertising in the divestiture markets. Gray and Raycom compete with one another for the business of local advertisers, and the proposed merger could eliminate that competition, the agency said.
Georgia-based Gray Television owns 92 television stations in 56 local markets, of which 83 are Big Four affiliate stations. Raycom, a Delaware corporation with headquarters in Alabama, owns 51 television stations in 43 local markets, of which 45 are Big Four affiliate stations.