Key Points
- A federal appeals court rejected Nexstar’s bid to rehear a ruling that revived DIRECTV’s antitrust lawsuit over station “sidecar” arrangements.
- The court let stand its finding that DIRECTV plausibly alleged lost subscribers and profits tied to Nexstar’s fee practices.
- The decision clears the way for the case to proceed in lower court unless Nexstar seeks review by the Supreme Court.
A federal appellate court has rejected a request by Nexstar Media Group for a reconsideration of an earlier order that reinstated a lawsuit filed by DIRECTV over the broadcaster’s so-called “sidecar” arrangements with Mission Broadcasting and White Knight Broadcasting.
In an order released on Wednesday, the Second Circuit Court of Appeals denied Nexstar’s request for a “panel rehearing” or an “en banc rehearing,” which would have effectively given Nexstar a second opportunity to argue against allowing DIRECTV to proceed with its lawsuit, which was originally filed in 2023.
In its complaint, DIRECTV says Nexstar’s practice of entering into shared services agreements or local marketing agreements with Mission and White Knight allowed it to raise distribution fees associated with licensed TV stations that it does not directly own.
Those arrangements are common in the local TV industry: They serve as a loophole within existing federal law that is supposed to prevent a broadcaster from having direct ownership of local TV stations that reach more than 39 percent of Americans.
Shared services agreements and local marketing agreements — commonly referred to as “sidecars” — allow broadcasters to circumvent that restriction by operating local TV stations that are technically licensed to other companies on paper. Nearly all Mission- and White Knight-owned TV stations are operated by Nexstar through those arrangements.
Nexstar-owned TV stations are available to DIRECTV’s satellite and streaming customers, but stations owned by Mission and White Knight have been unavailable to DIRECTV and U-Verse subscribers for several years.
In March 2023, DIRECTV sued Nexstar, arguing the broadcaster’s practice of entering into shared services agreement with White Knight and Mission allowed it to raise distribution fees for stations it doesn’t own.
To that end, DIRECTV accused Nexstar of hiring an independent consultant named Eric Sahl who was tasked with ensuring the company got the most money from DIRECTV for its own stations and those licensed to Mission and White Knight.
Attorneys for DIRECTV said talking points made by Sahl during negotiations over carriage of White Knight and Mission stations were identical to comments made by Nexstar during a similar dispute involving the distribution of its own stations on Verizon Fios one year earlier.
In 2024, a federal judge dismissed DIRECTV’s lawsuit against Nexstar, saying the satellite company did not have standing through antitrust law to bring a claim of damages against Nexstar. The judge said DIRECTV didn’t enter into a new agreement with White Knight or Mission and has not paid for distribution of the channels since 2022, so it couldn’t prove financial harm was caused as a result of anything alleged against Nexstar or the other two companies.
But the Second Circuit reversed the lower court’s decision last month, ruling DIRECTV can point to damages in the form of lost business when subscribers in markets served by White Knight and Mission TV stations churned out of their satellite and streaming services.
“Lost profits resulting from a reduction in output represent a cognizable antitrust injury, and DIRECTV plausibly alleges that its lost profits flowed directly from the output-reducing effects of the alleged price-fixing conspiracy,” the appellate judges said.
Nexstar promptly filed a request for a rehearing, which was rejected on Wednesday. The order was signed by the Clerk of the Second Circuit Court of Appeals, with no reason stated for the refusal.
It wasn’t clear if Nexstar planned to appeal further, which would require a petition to the U.S. Supreme Court, or if it will move forward with arguing its case in the lower district court.
“We respectfully disagree with the appellate court’s decision, and we look forward to the next phase of the legal process,” a Nexstar spokesperson said by e-mail.
DIRECTV has emerged as one of the loudest critics of Nexstar’s proposed acquisition of TEGNA, joining some pay TV groups and public interest organizations in arguing that the deal would lead to higher distribution fees charged to cable and satellite companies, which will spur higher bills for subscribers.
Nexstar and TEGNA contend the deal is necessary to better compete against large tech companies that operate streaming platforms, at a time when advertising dollars are flowing toward digital services. By consolidating, the broadcasters argue they can generate more revenue from their channels and media platforms, which will allow them to make stronger investments in local news and community-oriented programming.
