Gannett Co.'s $2.2-billion acquisition of Belo TV stations can move forward -- but the Department of Justice is demanding the sale of KMOV-TV Channel 4 in St. Louis as a condition for the agency's approval of the deal.
The proposed deal would give the McLean, Va., newspaper and broadcasting company multiple TV stations in several markets, which has become an issue for media watchdogs.
The situation in St. Louis was particularly problematic because Gannett owns KSDK-TV, the NBC affiliate there, and Belo owns the CBS affiliate, KMOV-TV -- the top two stations in that market. If Gannett had control of both stations, it would have gained a dominant position and too much influence in setting advertising rates, the Justice Department said Monday.
Gannett and Belo had planned to sell six Belo television stations, including KMOV-TV, to a Scottsdale, Ariz., investment group, Sander Media, which was then going to assign management operations of KMOV-TV and five other stations to Gannett. That plan raised eyebrows in the government and among some consumer activists.
The arrangement, at least in St. Louis, did not pass DOJ muster. The department found that Sander Media had "no current business activity other than preparing to acquire six Belo stations."
The Justice Department on Monday announced the settlement of an antitrust lawsuit it has filed to block the merger as long as the companies comply with the department's requirements. A federal judge must approve the settlement.
"The full divestiture required by the department will ensure that KMOV-TV will remain a vigorous competitor in St. Louis," Bill Baer, assistant attorney general in charge of the department's Antitrust Division, said in a statement.
The federal action suggests the government intends to scrutinize the wave of consolidation among local TV broadcasters. Consumer activists, who are worried that the mergers will lead to fewer voices in local media, had decried the Gannett arrangement with Sander Media.
“For too long, broadcasters have evaded the FCC’s ownership rules by creating shell companies to hold the licenses. The result is less local journalism, fewer voices and fewer viewpoints on the air. We’re pleased that the Department of Justice recognized some of the harms of Gannett's proposal in St. Louis and took the problem seriously," said Matt Wood, policy director for Free Press, a nonprofit public policy advocacy group.
Gannett, which owns 23 TV stations and publishes USA Today and other newspapers, said the settlement should allow it to finalize its Belo acquisition later this month.
The Federal Communications Commission must still approve the deal.