Washington, D.C. — After court filings revealed that Nexstar Media Group stacked the board of TEGNA Inc. exclusively with its own current and former executives — despite a federal injunction ordering the two broadcast rivals to remain separate while their illegal $6.2 billion merger is challenged — the American Economic Liberties Project called on the court to grant a motion filed by a bipartisan coalition of 13 state attorneys general and DirectTV to address their conduct. Economic Liberties also urged the judge to issue sanctions and contempt orders against the defendants’ executives, and refer defendants’ attorneys to the bar for disciplinary action. 

“For the last year, local broadcasting giants Nexstar and TEGNA have engaged in sordid behavior to accumulate power in local broadcasting,” said Laurel Kilgour, Research Manager at the American Economic Liberties Project. “This behavior continued as Nexstar put its own C-level executives on the board of TEGNA and bragged to its investors that it is already controlling TEGNA like a subsidiary, despite a court order mandating the two firms be held separate. It seems Nexstar and TEGNA feel invincible with the blessing of Trump’s FCC and DOJ henchmen. They’re now apparently breaking a federal court order and the law because they’ve essentially been told they’re above both.” 

“It is time for Judge Nunley to sanction executives and lawyers for contempt of court and impose meaningful sanctions to make clear that merging parties cannot evade the law while their transactions remain under judicial review,” Kilgour continued. “In addition to sanctioning Nexstar CEO Perry A. Sook, Judge Nunley should consider referring Wilkinson Stekloff lawyers Sarah Neuman and Beth Wilkinson, as well as Nexstar’s General Counsel Elizabeth Ryder, to state bars for disciplinary action. These are sophisticated actors who know they are actively flouting a judicial order and showing contempt for the court and the rule of law. Anything less would be an open invitation for corporate lawlessness.”

“Nexstar’s disregard for the court’s order is not an aberration but fits a broader pattern in which this administration and the corporations seeking its favor have treated the rule of law as optional whenever it stands between them and a deal,” said Nidhi Hegde, Executive Director at the American Economic Liberties Project. 

Though an April injunction ordering Nexstar “to not influence the management of the held-separate TEGNA business unit,” the plaintiffs’ motion alleges that the company instead installed a group of Nexstar officials who, for months, guided TEGNA’s business strategy and gained access to sensitive internal data and information.

While Nexstar’s lawyers claim TEGNA is still independent  — and apparently tried to keep the fact that they appointed these executives to the board secret from the plaintiffs — Nexstar’s own CEO Perry Sook divulged to investors that TEGNA “operate[s] as a [Nexstar] subsidiary” and that TEGNA leadership “have conversations” with Nexstar executives who “report to the Board.” Sook also stated that certain TEGNA transactions “would have to be approved by the Board of TEGNA, which is comprised of Nexstar executives, and Nexstar ‘must make’ decisions directing TEGNA-owned stations.”

Nexstar installed the following current and former Nexstar executives on TEGNA’s board:

• Perry Sook – Nexstar’s CEO
• Michael Biard – Nexstar’s President & COO
• Lee Ann Gliha – Nexstar’s Executive Vice President & CFO
• Elizabeth Ryder – Nexstar Executive Vice President & General Counsel & Secretary to Nexstar’s Board of Directors
• Timothy Busch – Former President of Nexstar Broadcasting (who had worked for the company for more than twenty years) and current Nexstar consultant.

Today’s motion for clarification was filed by DirectTV and a coalition of both Republican and Democratic AGs from California, Colorado, Connecticut, Illinois, Indiana, Kansas, Massachusetts, New York, North Carolina, Oregon, Pennsylvania, and Vermont. 

The motion asks the court to confirm that its preliminary injunction order prohibits interlocking director positions between companies that are supposed to be held separate as competitors, require regular ongoing reporting by the defendants to the plaintiffs and the court about communications between the companies and about material changes to budgets or operating plans, and discovery relating to compliance with the preliminary injunction. The latter request could set the stage for a motion for sanctions and/or contempt. 

The motion also notes that “Section 8 of the Clayton Act prohibits the same directors from sitting on the board of competitors.” The purpose of that prohibition is to prevent opportunities for coordination of business decisions by competitors, including the exchange of commercially sensitive information among competitors. 

Nexstar has apparently taken the position that Board members could recuse themselves from competitively sensitive Board matters on a case by case basis. As the motion points out, this proposal is “little more than asking the fox to guard the henhouse” and “[a] board that must recuse whenever the company’s competitively sensitive information is discussed or an important strategic decision is made is no board at all.”

BACKGROUND

The backstory of this merger is using political influence and a contempt for legal process to harm consumers. Both Nexstar and TEGNA own local broadcasting stations, and have what are called retransmission rights for must-have content — like NFL football games. Pay-TV operators, including streamers, must buy those rights from local broadcasters. Nexstar and TEGNA have bought hundreds of these channels and raised prices — controlling 50 to 70% of broadcast revenue in some areas — which ultimately get passed on to consumers.

Over the past year, both companies worked with the Trump administration to have Jimmy Kimmel Live! removed from the air, in the hopes that the Trump’s regulators would approve their illegal merger. It worked on both counts: Trump endorsed the merger, saying it “will help knock out the Fake News,” while DOJ’s Antitrust Division and FCC cleared the way for it. On the same day, the DOJ ended its merger investigation into the deal, while the FCC approved the merger in secret, without a commission vote, a highly unusual move. Within minutes of the approval, Nexstar and TEGNA closed the deal, paid off executives, and began integrating the two firms.

In March, California and the seven other states filed a lawsuit to block the merger and in April secured a preliminary injunction blocking the merger from proceeding. DirecTV, which distributes local television stations like those owned by Nexstar and TEGNA, also sued to block the merger, alleging that the “massive concentration of market power” would hike their retransmission fees. 

The combined broadcaster would create the largest operator of local television stations in the country, with ownership of roughly 265 stations reaching as much as 80% of US households — far exceeding the 39% national audience viewership cap set by Congress. With this size, it will have the leverage to raise the retransmission consent fees that cable, satellite, and streaming providers pay to local broadcasters to carry their channels: Nexstar executives plan to extract at least $135 million by raising these fees. For this reason, even conservative stations like Newsmax and One America News Network oppose the merger. Most of these fees, though, are passed on to consumers through higher pay-TV bills. The deal’s hit to local competition will also likely increase TV advertising rates, making it harder for small businesses to compete on cable. 

Last week, the FCC announced an August vote that would eliminate the 39% national broadcast ownership cap, further clearing the way for Nexstar’s acquisition of TEGNA.

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