Allowing the $6.2 billion tie up of Nexstar Media Group and Tegna Inc. to proceed is bad for competition and bad for local journalism, lawyers for eight states and DirecTV argued in court Tuesday, as they asked for an antitrust case to proceed that would stop the megamerger.
But putting the toothpaste back in the tube nearly three weeks after closing on the deal would be costly for the TV giant, costs Nexstar wants passed along to those fighting the deal.
Lawyers for Nexstar asked a federal court judge in California to force DirecTV and the attorneys general of eight states, including Colorado, to fund a $150 million bond to cover the losses it claims it will incur if the merger is further delayed. Nexstar took on a reported $5.1 billion in debt at closing.
The states and DirecTV filed lawsuits on March 18, the day before the Department of Justice approved the deal that hands Tegna, the parent of 9News in Denver, over to Nexstar, the owner of Fox31, claiming the merger violates antitrust law by giving Nexstar too much control of the television market. Nationally, the deal gives Nexstar 260 stations in 44 states that will reach 80% of U.S. television households.
U.S. District Court Judge Troy A. Nunley granted a temporary restraining order in the DirecTV suit on March 27, ordering the companies to be “held separate” until the transaction can be reviewed. On Tuesday, he heard arguments in the now-combined lawsuit and must decide whether to extend the order and halt all activities in the merger as the case moves through the courts.
In the late afternoon hearing in Sacramento, lawyers arguing to keep the order in place said the merger would irreparably harm the public through higher prices and decreased competition leading to lower quality and quantity of news in multiple markets like Denver.
The merger could reshape local TV news across the country, particularly in Colorado where two of the top stations in Denver’s designated viewing area, KUSA 9News and KDVR Fox31 will combine into one station.
DirecTV attorney Glenn D. Pomerantz argued the merger would allow Nexstar to raise the prices it charges content distributors, known as multichannel video programming distributors, to distribute local programming. It claims Nexstar will use its size to leverage them to charge more to rebroadcast local stations, costs they say will be passed on to the consumer.
Nexstar’s representative Alexander Okuliar disputed those claims saying they are currently locked into contracts with distributors that guarantee prices through the end of the year, and that distributors, like DirecTV can provide that programming through other sources.
But Pomerantz countered for DirecTV that the merger would give Nexstar more leverage to use a practice known as “black outs” during price negotiations, during which time customers can’t watch the local programming until a new deal is struck, typically with higher prices. DirecTV argued Nexstar’s size increase as a result of the merger amplifies its power to “go dark.” And, it said, that the networks like ABC, CBS, NBC and Fox do not provide direct programming to satellite providers, they must obtain that from local station groups.
Nexstar says it has increased local programming in consolidated markets
The states’ argument centers around impact on local news. They claim consolidated newsrooms, like a planned 9News and Fox 31 combination, will lead to journalists being fired, one company deciding what news to cover, and fewer voices making decisions about coverage. Pomerantz, the DirecTV lawyer, agreed, saying the only way to stop Nexstar from firing employees is to issue an injunction.
Nexstar countered stations they have consolidated in the past continue to win awards for exemplary journalism and they have actually increased the number of hours of news broadcast in those markets.
Brynn Anderson Williams from California Attorney General’s office countered that more hours doesn’t automatically translate into more variety in news products. She cited a University of Delaware study that found consolidation leads to duplication of the news with stations often repeating the same news over and over again sometimes on multiple stations. “Nexstar is a news duplicator, meaning they repeat the news over and over again, so to say they are going to increase the number of hours of news is wrong because they will just repeat what they run,” Williams said.
Nexstar is asking the judge to require DirecTV and the states to fund a $150 million bond for the losses it claims it will incur if the merger is delayed. Nexstar argued that the number was not meant to be made public. Judge Nunley closed the court to the public to discuss why the bond was necessary, information Nexstar lawyers described as confidential trade secrets. They also discussed how Nexstar and Tegna would continue to operate if he granted the order.
In a filing with the Securities and Exchange commission in August, Tegna said it had agreed to pay Nexstar $120 million if it ended the deal and Nexstar agreed to a termination fee of $125 million if the deal did not pass regulatory scrutiny.
Nunley said he will issue a written decision on the request for injunction in the next few days.
Nexstar founder and CEO Perry Sook was in court for Tuesday’s hearing. His attorney described the broadcaster as a former journalist who has always supported local news.
A reporter approached Sook as he left court and posted video of him leaving the courthouse with his team. The reporter, who posted the exchange on X, asked Sook if he is worried about shareholder losses if the injunction were to be approved. Sook did not respond.
I tried to ask Nexstar CEO Perry Sook for his thoughts about today's court hearing and whether he had anything to say to journalists who were laid off at KTLA, WPIX and WGN-TV before his company closed on its merger with TEGNA. He didn't have much to say.$NXST pic.twitter.com/ekwE6gD6K8
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