Agency Has Addressed Concerns About After-Acquired Station Clauses
For Immediate Release
Contact: Ted Hearn
PITTSBURGH, December 20, 2018 – The American Cable Association applauds the Federal Communications Commission for requiring Gray and Raycom to divest nine television stations in “duopoly markets” as a condition of their merger. ACA is also pleased that, in approving the transaction, the FCC helped avoid the triggering of Gray’s “after-acquired station” clauses with respect to Raycom stations to be divested.
“ACA appreciates that the FCC addressed ACA’s concerns about price increases in duopoly markets and through after-acquired station clauses,” ACA President and CEO Matthew M. Polka said. “It’s the outcome we hoped for.”
Since Gray and Raycom first announced their proposed merger, ACA had expressed concern about so-called “duopoly markets,” in which the combination would result in Gray controlling more than one of the local ABC, CBS, NBC, and FOX affiliates. Last week, the Department of Justice required the merging parties to divest stations in each of the nine duopoly markets that would otherwise have been created by the merger. Today, the FCC did the same.
Just as importantly, the FCC addressed ACA’s concerns about retransmission consent price increases that could have occurred depending on how Gray structured the divestiture of Raycom stations it was not permitted to own. Many Raycom stations charge lower prices to cable operators than Gray stations. Many Gray stations, in turn, have negotiated after-acquired station clauses with cable operators. Under such clauses, if Gray purchases a station (such as a Raycom station) that charges the cable operator a lower price, that price automatically increases to the level Gray itself charges.
Had the FCC allowed Gray to temporarily control the Raycom stations prior to divestiture, Gray might have argued that its after-acquired station clauses applied. This, in turn, would have led to unwarranted and unfair price increases.
After ACA first raised the issue, the merger parties filed divestiture applications that did not contemplate Gray having temporary control of Raycom stations. Gray then promised the FCC that it would not seek such control and that the after-acquired station clauses would not apply here.
The FCC explicitly relied on Gray’s representation in approving the transaction. It also “conditioned” approval of the merger on “consummation” of Raycom’s proposed divestitures directly to third parties—divestitures that do not contemplate Gray’s involvement. The FCC, in other words, has heeded ACA’s concerns and eliminated any ambiguity that otherwise might have existed. Should Gray change its mind, it could be subject to enforcement action for misleading the FCC.
“No single entity should be allowed to control more than one Big Four station in a single market. And slick lawyering should not be allowed to turn divestitures into unlooked-for price increases. We’re glad Gray and the FCC ultimately recognized this, and hope this will be a model for future mergers,” Polka said.
About the American Cable Association: Based in Pittsburgh, the American Cable Association is a trade organization representing more than 700 smaller and medium-sized, independent companies that provide broadband, phone and video services to nearly 8 million customers primarily located in rural and smaller suburban markets across America. Through active participation in the regulatory and legislative process in Washington, D.C., ACA’s members work together to advance the interests of their customers and ensure the future competitiveness and viability of their business. For more information, visit: https://www.americancable.org/