United States District Court, District of Columbia
For UNITED STATES OF AMERICA, Plaintiff: Anupama Sawkar, U.S. DEPARTMENT OF JUSTICE, Antitrust Division, Washington, DC.
For GANNETT CO., INC., Defendant: Gordon Laurence Lang, LEAD ATTORNEY, NIXON PEABODY LLP, Washington, DC; Michael P.A. Cohen, LEAD ATTORNEY, PAUL HASTINGS, LLP, Washington, DC; Elizabeth A. Allen, GANNETT COMPANY, INC., McLean, VA.
For SANDER MEDIA LLC, Defendant: John Parker Erkmann, LEAD ATTORNEY, COOLEY, LLP, Washington, DC.
REGGIE B. WALTON, United States District Judge.
The United States, the plaintiff in this civil case, filed its complaint on December 16, 2013, contesting as anticompetitive the proposed acquisition by defendant Gannett Co, Inc. (" Gannett") of defendant Belo Corp. (" Belo"), as well as " the simultaneous implementation of related agreements between Gannett and defendant Sander Holdings Col, a wholly owned subsidiary of Sander Media LLC ('Sander')." Complaint (" Compl.") ¶ 1. Currently before the Court is Plaintiff United States of America's Renewed Motion and Memorandum for Entry of the Proposed Final Judgment (" Renewed Mot."), pursuant to the Antitrust Procedures and Penalties Act (the " Tunney Act"), 15 U.S.C. § 16 (2012).
The United States asserted in its complaint that the consummation of the proposed acquisition and implementation of the related agreements (collectively, the " Transaction") would constitute a violation of Section Seven of the Clayton Act, 15 U.S.C. § 18 (2012), because " the Transaction's likely effect would be to increase broadcast television spot advertising prices in the St. Louis[, Missouri] Designated Market Area."  Renewed Mot. at 2. The United States now requests that the Court enter the proposed Final Judgment, " which is designed to eliminate the anticompetitive effects of the Transaction." Id. Specifically, the proposed Final Judgment requires the defendants to divest certain Divesture Assets, as defined in the Final Judgment. Proposed Final Judgment (" Final J.") at 3, 5-10. The defendants have agreed to entry of the proposed Final Judgment without further notice to any party or other proceedings. Renewed Mot., Certificate of Compliance (" Compliance I") ¶ 14. After carefully considering all of the relevant submissions by the parties,  the Court concludes for the following reasons that the plaintiff's motion should be granted and that Final Judgment should be entered.
In civil antitrust cases, the Tunney Act permits the United States to propose and courts to enter a final judgment resolving and preventing anticompetitive behavior. 15 U.S.C. § 16. Before a proposed final judgment may be entered, the United States must first satisfy the Act's threshold notice requirements: the proposed final judgment must be published in the Federal Register; a Competitive Impact Statement detailing the alleged anticompetitive behavior and the government's proposed remedy must also be published in the Federal Register; summaries of both of these documents must be published for seven days within a two week period in a newspaper in the jurisdiction in which the case is filed;  and the United States must accept and respond to public comments during a sixty day window following publication. Id. § 16(b)-(d). After the Act's threshold notice requirements are satisfied, the Court must then determine whether entering the final judgment would be in the public interest. Id. § 16(e). A court must consider two factors when making this determination:
(A) the competitive impact of such judgment, including termination of alleged violations, provisions for enforcement and modification, duration of relief sought, anticipated effects of alternative remedies actually considered, whether its terms are ambiguous, and any other competitive considerations bearing upon the adequacy of such judgment that the court deems necessary to a determination of whether the consent judgment is in the public interest; and
(B) the impact of entry of such judgment upon competition in the relevant market or markets, upon the public generally and individuals alleging specific injury from the violations set forth in the complaint including consideration of the public benefit, if any, to be derived from a determination of the issues at trial.
Id. § 16(e)(1). A court's review of a proposed final judgment is highly deferential; thus, approval should be withheld " 'only if any of the terms appear ambiguous, if the enforcement mechanism is inadequate, if third parties will be positively injured, or if the decree otherwise makes a mockery of judicial power.'" Massachusetts v. Microsoft Corp., 373 F.3d 1199, 1236, 362 U.S.App.D.C. 152 (D.C. Cir. 2004) (quoting Mass. Sch. of Law at Andover, Inc. v. United States, 118 F.3d 776, 783, 326 U.S.App.D.C. 175 (D.C. Cir. 1997)) (internal quotations omitted). Moreover, the Tunney Act does not require a hearing as to whether a final judgment is in the public interest. 15 U.S.C. § 16(e)(2). However, the proposed final judgment must remedy only the anticompetitive behavior alleged in the complaint and it must not go beyond that. United States v. Microsoft Corp., 56 F.3d 1448, 1459, 312 U.S.App.D.C. 378 (D.C. Cir. 1995). Finally, " the court's function is not to determine whether the resulting array of rights and liabilities 'is the one that will best serve society, ' but only to confirm that the resulting 'settlement is within the reaches of the public interest.'" United States v. W. Elec. Co., 900 F.2d 283, 309, 283 U.S.App.D.C. 299 (D.C. Cir. 1990) (quoting United States v. Bechtel Corp., 648 F.2d 660, 666 (9th Cir. 1981) (emphasis in original) (internal quotations omitted)).
Upon its review of the record in this case, the Court finds that the United States has satisfied each of the Tunney Act's threshold requirements. Specifically, on December 16, 2013, the United States filed both the proposed Final Judgment and the Competitive Impact Statement with the Court. Mot., Compliance I ¶ 1. On December 30, 2013, the United States published both documents in the Federal Register, United States v. Gannett Co., Inc., Belo Corp., and Sander Media LLC, 78 Fed. Reg. 79, 485, and, beginning on December 23, 2013, the United States published the proposed Final Judgment in The Washington Post for seven consecutive days. Mot., Compliance ¶ 3. Sixty days were then allowed for public comment on the proposed Final Judgment, and no comments were received by the United States during that time. Id. ¶ ¶ 4-5. Likewise, during the period of May 3-14, 2014, these documents were published in the St. Louis Post-Dispatch for seven consecutive days. Renewed Mot., Certificate of Compliance (" Compliance II") ¶ ¶ 7-8. And sixty days thereafter were allowed for public comment on the proposed Final Judgment, but no comments were received by the United States. Id. ¶ ¶ 9-10.
Additionally, the Court concludes that the proposed Final Judgment is in the public interest. The terms of the proposed Final Judgment unambiguously terminates the anticompetitive behavior that gave rise to the complaint filed in this case by the United States. The procedures governing the divestment of the Divesture Assets are clearly delineated in the Final Judgment. Final J. at 5-7. The Court finds that the appointment of a Divesture Trustee, if needed, id. at 8-10, and the periodic compliance inspections that will be conducted by the United States Department of Justice or its agents, id. at 13-14, are effective enforcement mechanisms. Moreover, the proposed Final Judgment provides that the Court will retain jurisdiction to modify, enforce, or punish violations of the Final Judgment, to ensure compliance. Id. at 15. The Court perceives no positive third-party injuries that are likely to result from entering the proposed Final Judgment. Finally, the proposed Final Judgment is a reasonable response to the anticompetitive effects of the Transaction and is appropriate in scope, and thus approval of the Judgment would in no way make a mockery of judicial authority. The Court, therefore, finds that entry of the proposed Final Judgment is appropriate.
Accordingly, it is hereby
ORDERED that the plaintiff's motion to enter final judgment is GRANTED. It is further
ORDERED that the proposed Final Judgment is ENTERED. It is further
ORDERED that this case be CLOSED, subject to the United States moving to reopen the case in the event of the defendants' noncompliance with the terms of what is now a Final Judgment.
WHEREAS, plaintiff, the United States of America, filed its Complaint on December 16, 2013, and plaintiff and Defendants Gannett Co., Inc. (" Gannett"), Belo Corp. (" Belo"), and Sander Media LLC (" Sander"), by their respective attorneys, have consented to the entry of this Final Judgment without trial or adjudication of any issue of fact or law herein, and without this Final Judgment constituting any evidence against or an admission by any party with respect to any issue of law or fact herein;
AND WHEREAS, Defendants have agreed to be bound by the provisions of this Final Judgment pending its approval by the Court;
AND WHEREAS, the essence of this Final Judgment is the prompt and certain divestiture of certain rights and assets by the Defendants to assure that competition is not substantially lessened;
AND WHEREAS, the United States requires Defendants to make certain divestitures for the purpose of remedying the loss of competition alleged in the Complaint;
AND WHEREAS, Defendants have represented to the United States that the divestitures required below can and will be made, and that Defendants will later raise no claim of hardship or difficulty as grounds for asking the Court to modify any of the divestiture provisions contained below;
NOW THEREFORE, before any testimony is taken, without trial or adjudication of any issue of fact or law, and upon consent of the parties, it is hereby ORDERED, ADJUDGED, AND DECREED:
This Court has jurisdiction over each of the parties hereto and over the subject matter of this action. The Complaint states a claim upon which relief may be granted against Defendants under Section 1 of the Sherman Act, and Section 7 of the Clayton Act, as amended, 15 U.S.C. § § 1 and 18.
As used in this Final Judgment:
A. " Acquirer" means the entity to which the Defendants divest the Divestiture Assets.
B. " Gannett" means defendant Gannett Co., Inc., a Delaware corporation, with its headquarters in McLean, Virginia, and includes its successors and assigns, and its subsidiaries, divisions, groups, affiliates, partnerships, joint ventures, directors, officers, managers, agents., and employees.
C. " Belo" means defendant Belo Corp., a Delaware corporation, with its headquarters in Dallas, Texas, and includes its successors and assigns, and its subsidiaries, divisions, groups, affiliates, partnerships, joint ventures, directors, officers, managers, agents, and employees.
D. " Sander" means defendant Sander Media LLC, a Delaware limited liability company, with its headquarters in Scottsdale, Arizona, and includes its successors and assigns, and its subsidiaries, divisions, groups, affiliates, partnerships, joint ventures, directors, owners, officers, managers, agents, and employees.
E. " DMA" means Designated Market Area as defined by A.C. Nielsen Company based upon viewing patterns and used by the Investing In Television BIA Market Report 2013 (1st edition). DMAs are ranked according to the number of households therein and are used by broadcasters, advertisers, and advertising agencies to aid in evaluating television audience size and composition.
F. " KMOV-TV" means the CBS-affiliated broadcast television station located in the St. Louis DMA owned by Belo and being sold to Sander as part of the Transaction.
G. " Divestiture Assets" means all of the assets, tangible or intangible, used in the operation of KMOV-TV, including, but not limited to, all real property (owned or leased) used in the operation of the station, all broadcast equipment, office equipment, office furniture, fixtures, materials, supplies, and other tangible property used in the operation of the station; all licenses, permits, authorizations, and applications therefore issued by the Federal Communications Commission (" FCC") and other government agencies related to that station; all contracts (including programming contracts and rights), agreements, network affiliation agreements, leases and commitments and understandings of Belo or Sander relating to the operation of KMOV-TV; all trademarks, service marks, trade names, copyrights, patents, slogans, programming materials, and promotional materials relating to KMOV-TV; all customer lists, contracts, accounts, and credit records; and all logs and other records maintained by Belo or Sander in connection with KMOV-TV, provided, however, that Divestiture Assets does not include physical assets located outside of the St. Louis DMA (e.g., corporate infrastructure), group-wide corporate records, employee benefit plans, group-wide insurance policies, group-wide service contracts, group-wide software licenses and digital systems, the trademarks " Belo" or " Sander, " or the Shared Services Agreement or other agreements referenced in the Asset Purchase Agreement dated June 12, 2013, and its subsequent amendments.
H. " Transaction" means the merger and acquisition contemplated by the Agreement and Plan of Merger, dated June 12, 2013, by and among Belo, Gannett, and Delta Acquisition Corp. and all related agreements, including Sander's acquisition of certain Belo stations and all agreements entered into between Gannett and Sander contemplated by the Asset Purchase Agreement, dated June 12, 2013, and its subsequent amendments.
I. " Shared Services Agreement" means the Shared Services Agreement between Gannett and Sander contemplated by the Transaction in substantially the same form as Exhibit C(2) to the Agreement and Plan of Merger dated June 12, 2013, by and among Belo, Gannett, and Delta Acquisition Corp.
A. This Final Judgment applies to Gannett, Belo, and Sander as defined above, and all other persons in active concert or participation with any of them who receive actual notice of this Final Judgment by personal service or otherwise.
B. If, prior to complying with Sections IV and V of this Final Judgment, Defendants sell or otherwise dispose of all or substantially all of their assets or of lesser business units that include the Defendants' Divestiture Assets, they shall require the purchaser to be bound by the provisions of this Final Judgment. Defendants need not obtain such an agreement from the Acquirer of the assets divested pursuant to the Final Judgment.
A. Defendants are ordered and directed to divest the Divestiture Assets to an Acquirer acceptable to the United States in its sole discretion, in a manner consistent with this Final Judgment and the Hold Separate Stipulation and Order in this case. Such divestiture shall include all ownership interests and options to acquire or to transfer to others any ownership interests in the Divestiture Assets, and Defendants shall not retain any options to acquire or transfer to others ownership interests in the Divestiture Assets after completing the divestiture required by this Final Judgment. Defendants shall not enter into any agreements to provide financing, guarantees of financing or services to, or to conduct any sales or any business negotiations jointly with, the Acquirer with respect to the Divestiture Assets, and any such agreements that may exist between Gannett and Sander shall be terminated with respect to the Divestiture Assets upon divestiture, except to the extent that the United States in its sole discretion approves in writing any transitional services that may be necessary to facilitate continuous operation of the Divestiture Assets until the Acquirer can provide such capabilities independently. The divestiture pursuant to this section shall take place within one hundred and twenty (120) calendar days after the filing of the Complaint in this matter, or five (5) days after notice of entry of this Final Judgment by the Court, whichever is later. The United States, in its sole discretion, may agree to one or more extensions of this time period, not to exceed ninety (90) calendar days in total, and shall notify the Court in such circumstances. Defendants shall use their best efforts to accomplish the divestiture ordered by this Final Judgment, including using their best efforts to obtain all necessary FCC approvals, as expeditiously as possible.
B. In accomplishing the divestiture ordered by this Final Judgment, Defendants promptly shall make known, by usual and customary means, the availability of the Divestiture Assets. Defendants shall inform any person making inquiry regarding a possible purchase of the Divestiture Assets that they are being divested pursuant to this Final Judgment and provide that person with a copy of this Final Judgment. Defendants shall furnish to all prospective Acquirers, subject to customary confidentiality assurances, all information and documents relating to the Divestiture Assets customarily provided in a due diligence process, except such information or documents subject to the attorney-client privilege or work-product doctrine. Defendants shall make available such information to the United States at the same time that such information is made available to any other person.
C. Defendants shall provide the Acquirer and the United States information relating to the personnel involved in the operation and management of the Divestiture Assets to enable the Acquirer to make offers of employment. Defendants shall not interfere with any negotiations by the Acquirer to employ or contract with any employee of any defendant whose primary responsibility relates to the operation or management of the Divestiture Assets.
D. Defendants shall permit prospective acquirers of the Divestiture Assets to have reasonable access to personnel and to make inspections of the physical facilities of KMOV-TV; access to any and all environmental, zoning, and other permit documents and information; and access to any and all financial, operational, or other documents and information customarily provided as part of a due diligence process.
E. Defendants shall warrant to the Acquirer that each asset will be operational on the date of sale.
F. Defendants shall not take any action that will impede in any way the permitting, operation, or divestiture of the Divestiture Assets.
G. Defendants shall warrant to the Acquirer that there are no material defects in the environmental, zoning, or other permits pertaining to the operation of each asset, and that following the sale of the Divestiture Assets, Defendants will not undertake, directly or indirectly, any challenges to the environmental, zoning, or other permits relating to the operation of the Divestiture Assets.
H. Unless the United States otherwise consents in writing, the divestiture pursuant to Section IV, or by trustee appointed pursuant to Section V of this Final Judgment, shall include the entire Divestiture Assets, and be accomplished in such a way as to satisfy the United States, in its sole discretion, that the Divestiture Assets can and will be used by the Acquirer as part of a viable, ongoing commercial television broadcasting business, and the divestiture of such assets will achieve the purposes of this Final Judgment and remedy the competitive harm alleged in the Complaint. The divestitures, whether pursuant to Section IV or Section V of this Final Judgment:
(1) shall be made to an Acquirer that, in the United States' sole judgment, has the intent and capability (including the necessary managerial, operational, technical, and financial capability) of competing effectively in the television broadcasting business in the St. Louis DMA; and
(2) shall be accomplished so as to satisfy the United States, in its sole discretion, that none of the terms of any agreement between the Acquirer and Defendants gives Defendants the ability unreasonably to raise the Acquirer's costs, to lower the Acquirer's efficiency, or otherwise to interfere in the ability of the Acquirer to compete effectively.
V. APPOINTMENT OF TRUSTEE
A. If the Defendants have not divested the Divestiture Assets within the time period specified in Paragraph IV(A), Defendants shall notify the United States of that fact in writing.
B. If (a) the Defendants have not divested the Divestiture Assets within the time period specified by Paragraph IV(A), or (b) the United States decides in its sole discretion that the Acquirer is likely to be unable to complete the purchase of the Divestiture Assets, upon application of the United States in its sole discretion, the Court shall appoint a trustee selected by the United States and approved by the Court to effect the divestiture of the Divestiture Assets.
C. After the appointment of a trustee becomes effective, only the trustee shall have the right to sell the Divestiture Assets. The trustee shall have the power and authority to accomplish the divestiture to an Acquirer, and in a manner acceptable to the United States in its sole discretion, at such price and on such terms as are then obtainable upon reasonable effort by the trustee, subject to the provisions of Sections IV, V, and VI of this Final Judgment, and shall have such other powers as this Court deems appropriate. Subject to Paragraph V(D) of this Final Judgment, the trustee may hire at the cost and expense of Gannett any investment bankers, attorneys, or other agents, who shall be solely accountable to the trustee, reasonably necessary in the trustee's judgment to assist in the divestiture. Defendants shall inform any person making an inquiry regarding a possible purchase of the Divestiture Assets that they are being divested pursuant to this Final Judgment and provide that person with a copy of this Final Judgment and contact information for the trustee.
D. Defendants shall not object to a sale by the trustee on any ground other than the trustee's malfeasance. Any such objection by Defendants must be conveyed in writing to the United States and the trustee within ten (10) calendar days after the trustee has provided the notice required under Section VI.
E. The trustee shall serve at the cost and expense of Gannett, on such terms and conditions as the United States approves, and shall account for all monies derived from the sale of the assets sold by the trustee and all costs and expenses so incurred. After approval by the Court of the trustee's accounting, including fees for its services and those of any professionals and agents retained by the trustee, all remaining money shall be paid to Defendants and the trust shall then be terminated. The compensation of the trustee and any professionals and agents retained by the trustee shall be reasonable in light of the value of the Divestiture Assets and based on a fee arrangement providing the trustee with an incentive based on the price and terms of the divestiture and the speed with which it is accomplished, but timeliness is paramount.
F. Defendants shall use their best efforts to assist the trustee in accomplishing the required divestiture. The trustee and any consultants, accountants, attorneys, and other persons retained by the trustee shall have full and complete access to the personnel, books, records, and facilities of the business to be divested, and Defendants shall develop financial and other information relevant to such business as the trustee may reasonably request, subject to reasonable protection for trade secret or other confidential research, development or commercial information. Defendants shall take no action to interfere with or to impede the trustee's accomplishment of the divestiture.
G. After its appointment, the trustee shall file monthly reports with the United States setting forth the trustee's efforts to accomplish the divestiture ordered under this Final Judgment. Such reports shall include the name, address and telephone number of each person who, during the preceding month, made an offer to acquire, expressed an interest in acquiring, entered into negotiations to acquire, or was contacted or made an inquiry about acquiring, any interest in the Divestiture Assets, and shall describe in detail each contact with any such person. The trustee shall maintain full records of all efforts made to divest the Divestiture Assets.
H. If the trustee has not accomplished the divestiture ordered under this Final Judgment within six (6) months after its appointment, the trustee shall promptly file with the Court a report setting forth: (1) the trustee's efforts to accomplish the required divestiture, (2) the reasons, in the trustee's judgment, why the required divestiture has not been accomplished, and (3) the trustee's recommendations. To the extent that such report contains information that the trustee deems confidential, such report shall not be filed in the public docket of the Court. The trustee shall at the same time furnish such report to the United States, which shall have the right to make additional recommendations consistent with the purpose of the trust. The Court thereafter shall enter such orders as it shall deem appropriate to carry out the purpose of the Final Judgment, which may, if necessary, include extending the trust and the term of the trustee's appointment by a period requested by the United States.
VI. NOTICE OF PROPOSED DIVESTITURE
A. Within two (2) business days following execution of a definitive divestiture agreement, Defendants or the trustee, whichever is then responsible for effecting the divestiture required herein, shall notify the United States of any proposed divestiture required by Section IV or V of this Final Judgment. If the trustee is responsible, it shall similarly notify Defendants. The notice shall set forth the details of the proposed divestiture and list the name, address, and telephone number of each person not previously identified who offered or expressed an interest in or desire to acquire any ownership interest in the Divestiture Assets, together with full details of the same.
B. Within fifteen (15) calendar days of receipt by the United States of such notice, the United States may request from Defendants, the proposed Acquirer, any other third party, or the trustee if applicable, additional information concerning the proposed divestiture, the proposed Acquirer, and any other potential Acquirer. Defendants and the trustee shall furnish any additional information requested within fifteen (15) calendar days of the receipt of the request, unless the parties shall otherwise agree.
C. Within thirty (30) calendar days after receipt of the notice or within twenty (20) calendar days after the United States has been provided the additional information requested from Defendants, the proposed Acquirer, any third party, and the trustee, whichever is later, the United States shall provide written notice to Defendants and the trustee, if there is one, stating whether or not it objects to the proposed divestiture in its sole discretion. If the United States provides written notice that it does not object, the divestiture may be consummated, subject only to Defendants' limited right to object to the sale under Paragraph V(C) of this Final Judgment. Absent written notice that the United States does not object to the proposed Acquirer or upon objection by the United States, a divestiture proposed under Section IV or Section V shall not be consummated. Upon objection by Defendants under Paragraph V(C), a divestiture proposed under Section V shall not be consummated unless approved by the Court.
Defendants shall not finance all or any part of any purchase made pursuant to Section IV or V of this Final Judgment.
VIII. HOLD SEPARATE
Until the divestiture required by this Final Judgment has been accomplished, Defendants shall take all steps necessary to comply with the Hold Separate Stipulation and Order entered by this Court. Defendants shall take no action that would jeopardize the divestiture ordered by this Court.
A. Within twenty (20) calendar days of the filing of the Complaint in this matter, and every thirty (30) calendar days thereafter until the divestiture has been completed under Section IV or V of this Final Judgment, Defendants shall deliver to the United States an affidavit as to the fact and manner of their compliance with Section IV or V of this Final Judgment. Each such affidavit shall include the name, address and telephone number of each person who, during the preceding thirty (30) days, made an offer to acquire, expressed an ...