Gannett Agrees to DOJ-Ordered Divestiture to Get Approval for Belo Deal

Though many public interest complaints about the deal aren’t addressed in the DOJ consent decree, institute Director Angela Campbell said the DOJ decision could represent progress in the public interest fight against companies using sharing arrangements to get around local ownership rules. The DOJ’s deal with the broadcasters recognizes “the underlying premise that Gannett would have significant control” of stations that are ostensibly owned by a different company, said Campbell. Without divesting KMOV-TV (CBS) St. Louis, Gannett “would have gained a dominant position in broadcast television spot advertising in the St. Louis area” which would have led to higher prices for advertisers, said a Justice news release Monday.

The Gannett/Belo deal called for KMOV and six other Belo stations, in markets where Gannett has market overlaps, to be transferred to Sander Media, where they would all be involved in shared service agreements with Gannett stations. DOJ filed a civil suit Monday in U.S. District Court, D.C., blocking the Gannett/Belo deal while simultaneously submitting the settlement agreement for approval. If the court approves the consent decree, the DOJ block will be removed, said a Justice spokesman. The deal still needs the FCC’s okay. Gannett said the removal of KMOV from the transaction will only have a “nominal” effect on the deal, with “very minimal impact” on the $175 million in “synergies” involved in the transaction. “Gannett’s strong broadcast presence in the St. Louis market with KSDK-TV, which it currently owns, will not be impacted by the divestiture of KMOV-TV,” said a news release from Gannett.

DOJ’s flagging of a sharing arrangement in the deal might heighten scrutiny of the transaction on the FCC side, said Campbell and Free Press Policy Director Matt Wood. Free Press was part of the petition asking the FCC to deny the transaction. “It’s a positive sign,” said Wood. “Recognizing the many problems with these deals can only help.” The DOJ may have focused on the St. Louis portion of the proposed transaction because it would be the most consolidated market after the transaction, said Wood. If the St. Louis portion of the Gannett/Belo deal had gone through and the pending Tribune/Local TV deal were both approved unchanged, the ABC, CBS, NBC, Fox and CW affiliates in St. Louis would all be owned or operated through sharing arrangements by either Gannett or Tribune, said Free Press. “This means five stations (including all stations in the top-four) would represent two independent voices,” said the public interest groups’ petition to deny the transaction.

Those consolidation concerns should be amplified in the FCC’s review of the deal, said Wood and Campbell. Since the FCC looks at transactions from a broader public interest standard than DOJ’s more narrow focus on competition, the commission will consider the proposed consolidation’s effect on the amount of local news sources and local broadcasting along with advertising rates, said Wood. “It’s a very different standard,” Campbell said.

"This is a great step, but there is far more for the DoJ and the FCC to do,” said Free Press by email. “The rest of the station acquisitions in the Gannett-Belo deal, and in several other transactions proposed by Tribune, Sinclair and others, deserve the same careful scrutiny and the same fate.” Gannett, Belo and Sander have to divest their interest in KMOV by April 15, 2014, or 5 days after the U.S. District Court in Washington enters a final judgment -- whichever is later, DOJ said.