Nexstar asks appeals court to ease burden of legal injunction over TEGNA deal

Nexstar CEO Perry Sook attends a hearing in an antitrust lawsuit challenging his company's acquisition of TEGNA. (Photo by Matthew Keys for The Desk) — Nexstar CEO Perry Sook attends a hearing in an antitrust lawsuit challenging his company’s acquisition of TEGNA. (Photo by Matthew Keys for The Desk)

Key Points

Nexstar Media Group is asking an appeals court to scale back a lower court injunction tied to its acquisition of TEGNA — but stopped short of asking the court to invalidate the injunction entirely.
Nexstar argues the order is overly broad and should apply only to markets with overlapping Big Four network stations; the broadcaster says the restrictions have already caused significant financial losses and limited business operations.
State attorneys general and DIRECTV continue to challenge the deal, citing concerns over market power and local news impacts.
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Nexstar Media Group has asked a federal appeals court in California to reduce the requirements of a lower court’s preliminary injunction that largely requires the company to maintain separate operations from TEGNA while an antitrust challenge to its $6.2 billion acquisition of its peer broadcaster plays out.

In an opening brief filed with the Ninth Circuit Court of Appeals this week, attorneys for Nexstar said a judge in Sacramento erred by issuing a preliminary injunction that covered all TEGNA stations Nexstar seeks to acquire, rather than limiting the order to stations in nearly three dozen markets where TEGNA and Nexstar own one or more stations affiliated with a “Big Four” network — ABC, CBS, Fox or NBC.

The injunction prevents Nexstar from co-mingling its business with that of TEGNA while antitrust lawsuits filed by more than a dozen states attorney general and DIRECTV play out at the federal courthouse in Sacramento. That city was selected to serve as the center of the lawsuit because Nexstar and TEGNA each own one Big Four-affiliated station that is impacted by the transaction.

Nexstar received approval from regulators at the U.S. Department of Justice (DOJ) and the Federal Communications Commission (FCC) to move forward with its acquisition of more than five dozen TEGNA-owned TV stations, a deal that ordinarily would violate federal ownership rules and which closed just one day after the states and DIRECTV announced their federal lawsuit challenging the transaction.

DIRECTV says the deal concentrates too much power with a single broadcaster — Nexstar already owns or operates more than 200 local TV stations across the country — and allows the company to demand higher carriage fees for exclusive network programming in the cities where it operates. Like other pay TV providers, DIRECTV is required by law to pay Nexstar for the privilege of reselling access to its network-affiliated and independent local tations to satellite and streaming TV subscribers.

The state attorneys general argue much of the same, but go a step further in their complaint, alleging Nexstar’s acquisition of TEGNA will harm local residents because the company will consolidate newsrooms and lay off journalists, which will lead to less diversity in news and community-oriented programming on local TV in the affected areas.

The lawsuit brought by the states was initially spearheaded by Democratic-appointed attorneys general, but the case became a bipartisan effort last month when five additional states — including two with Republican-appointed attorneys general — agreed to participate in the case.

Nexstar says the case should center squarely on the allegations made by DIRECTV concerning its Big Four networks, and that it shouldn’t be prohibited by a lower court from consolidating its operations in markets where only one of the companies owns a Big Four network-affiliated station. The lower court order also prevents Nexstar from running an advertising business called Premion and others assets owned by TEGNA that aren’t connected to local broadcast TV licenses.

“The district court relied on locality-specific antitrust allegations but imposed a nationwide remedy,” attorneys for Nexstar wrote in the brief.

Nexstar said the lower court’s order has already cost it millions of dollars in lost business, though it did not cite a specific figure. During a hearing in April, an attorney with the California Department of Justice noted that Nexstar quantified its potential loss at $150 million if the district court judge issued an injunction; the figure was accidentally left unredacted in a filing made by Nexstar’s legal team. It wasn’t clear if Nexstar’s alleged ongoing losses reached or exceeded that amount.

As for the states, Nexstar believes they shouldn’t be allowed to participate in the antitrust case at all: In their filing, attorneys for the broadcaster asked the appellate court to find that the state attorneys general lack standing under federal antitrust laws because the complaints they raised were better reserved for private parties like DIRECTV.

“Unlike the federal government, states have no regulatory authority to enforce the federal antitrust laws — they have the power to sue only as private parties,” attorneys for Nexstar wrote in the brief, adding that the states must make a “clear showing” that they have a specific interest separate from a private party.

“Their showing of injury relies on a chain of contingencies: That the merger would permit Nexstar to increase retransmission fees beyond what it could charge absent the merger, that (pay TV companies) would choose to pass on those increases to subscribers, that the transaction would degrade the local-news product received by subscribers, and that subscribers would suffer injury-in-fact as a result,” attorneys for Nexstar argued. “Each link is speculative; together, they collapse.”

The brief filed by Nexstar stopped short of requesting the appellate court overturn the lower court’s injunction entirely — meaning Nexstar is likely to be prevented from consolidating or otherwise operating TEGNA’s major network-affiliated stations while the lawsuits filed by DIRECTV and the states play out.

The case is likely to take months while the case moves through numerous procedural hurdles, which could invite settlements involving DIRECTV or any of the states at any time. When asked about his state’s motivation in participating in the case, California Attorney General Rob Bonta told The Desk that he wanted Nexstar and TEGNA to remain separate companies for the foreseeable future.

“The federal government ushered this deal through, and it is presumptively unlawful, the merger is,” Bonta said. “What we’re looking for is a block of the merger. That’s what we’ve asked for.”

Bonta said he was not convinced that Nexstar would prevail in seeking relief from the appellate court on the injunction.

“It’s already permissively unlawful, and that’s why it’s been blocked through a preliminary injunction,” Bonta noted. “Nexstar and TEGNA are both appealing the order; I do not think they will prevail based on the facts and the law, but it is their right to try.”

Bonta and other state attorneys general said the speed at which Nexstar closed on its acquisition of TEGNA after receiving approval from federal regulators was as problematic as the regulatory scrutiny itself. Rather than examine Nexstar’s merger with TEGNA with a fine tooth comb, opponents of the merger said Trump-appointed officials at the DOJ and the FCC pushed for the deal to go through, then Nexstar almost immediately announced the acquisition was finished.

Nexstar said its interest in acquiring TEGNA was based on a need to grow its operation so it could compete with streaming services backed by deep-pocketed tech companies, which have siphoned off advertising revenue traditionally earmarked for local and national TV channels by spending big to grab lucrative entertainment and sports rights.

While local TV broadcasters are usually limited to the number of TV stations they can own based on federal ownership rules, no such limitations exist for streaming services, which are allowed to reach audiences across the country. As of last year, all four major broadcast networks own streaming services that provide entertainment and sports programming directly to consumers.

In a statement late Wednesday evening, a Nexstar spokesperson said the company’s appeals brief is intended to reflect both the reality of the challenges facing local broadcasters today and demonstrate how out of touch its legal opponents are in seeking to block the merger. If the legal challenges are successful, it will lead to lower investments in local news and community programming — not more — because Nexstar and other broadcasters will not be able to financially support that content.

“The plaintiffs’ claims reflect a fundamental misunderstanding of the modern media landscape in which companies like Nexstar and TEGNA are dwarfed by Big Tech, which has unlimited reach, bottomless resources and unchecked influence,” Nexstar said in the statement. “We’re looking forward to presenting our case at trial and exposing just how weak, cynical and misguided these claims are.”

The spokesperson continued: “Our appeal is focused on narrowing an overly broad preliminary injunction that goes far beyond the harms plaintiffs are alleging, hindering broadcasters’ ability to compete, and creating further uncertainty for an industry already under significant pressure. At a moment when the future of local journalism is at stake, keeping broadcasters from achieving the scale needed to compete only serves to strengthen the dominance of Big Tech and accelerate the erosion of local news in the communities we serve.”

Nexstar asks appeals court to ease burden of legal injunction over TEGNA deal

The local television broadcaster declined to seek a full revocation of a lower court's injunction, instead asking the appellate court to reduce the burdens of the order.

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