No doubt some in Washington will think the Dept. of Justice let Gannett off easy. In order to close its purchase of Belo, the DOJ Monday required Gannett to divest KMOV-TV, Belo's CBS affiliate, in St. Louis, next year.
KMOV-TV, Belo's CBS affiliate and KSDK, Gannett's NBC affiliate are the top two stations in the market. The combined company planned to spin-off KMOV, along with five other TV stations to Sander Media, run by former Belo CEO Jack Sander, who would then operate the stations as part of a shared service agreement with Gannett.
Even though the arrangement with Sander Media would have called for separate sales forces, the DOJ concluded the arrangement would have lessened competition in the market and result in higher prices to advertisers.
"Gannett's KSDK-TV and Belo's KMOV-TV compete head-to-head in the sale of broadcast television spot advertising in the St. Louis area, and this rivalry constrains advertising rates," said Bill Baer, assistant attorney general in the DOJ's antitrust division. "The full divestiture required by the department will ensure that KMOV-TV will remain a vigorous competitor in St. Louis."
In a press release, Gannett, which will become the fourth largest owner of big four network affiliates after it closes on Belo, said the condition will have a "minimal impact" on the synergies it expects to get out of the $1.5 billion merger.
The transaction still has to win approval from the Federal Communications Commission, which is receiving a lot of comments from consumer groups and cable operators about limiting the kind of business arrangements, known as shared service agreements, Gannett and Belo proposed with Sander Media. Currently the FCC does not limit shared service agreements in counting toward ownership, but the commission is considering changing that as part of its review of media ownership rules.
"This is a great step, but there is far more for the DOJ and the FCC to do," said Matt Wood, policy director for Free Press. "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."