As content creators and labor unions, First Amendment advocates and politicians increasingly warn of mergers and further consolidation, the battles may be fought by a different set of players than D.C.’s antitrust enforcers.
When California, New York and six other states sued this week to block a major broadcast merger between Nexstar and Tegna, the noted absence among the plaintiffs was the federal government. Nor is it expected to join the challenge.
Likewise, when an antitrust trial against Live Nation resumed this week, the lead plaintiff was no longer the Justice Department but rather dozens of states, holdouts from a federal settlement with the live music giant.
Similarly, with expectations that the Trump administration will give the greenlight to proposed mergers of Paramount and Warner Bros. Discovery, some state attorneys general, like California’s Rob Bonta, have vowed to closely scrutinize the deals.
“We have a job to do, and we are going to do it. That’s the bottom line,” Bonta said on a press call about the states’ Nexstar-Tegna lawsuit. “If would be preferred if the U.S. DOJ and the FCC did their job. They’re not. Unfortunately, while they retreat from their traditional role and a needed role the federal government has long played to enforce antitrust laws, we will step into the breach and step into the gap and get it done.”
The Nexstar-Tegna litigation claims the combined company, with 265 stations covering 80% of the country, would gain additional bargaining leverage over cable and satellite operators, allowing it to collect higher retransmission-consent fees that will be passed on to consumers. Although the transaction is still under review by the DOJ, New York Attorney General Letitia James told reporters they expect only a “cursory” federal review, but “the law is clear,” she said, “mergers that substantially reduce competition are illegal.”
RELATED: Nexstar-Tegna Merger Faces Another Antitrust Lawsuit As DirecTV Sues To Block Transaction
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The state challenges have added new turbulence for media companies anxious to close a transaction or avoid protracted litigation, but the state AGs’ go-it-alone approach is far from a sure thing. They are not unheard of, but there is not a lengthy track record of success.
The Live Nation case will be a significant test, as attorneys general in California and New York and other states declined to sign on to the settlement, finding it far from sufficient given the goal of winning a breakup of the company, which owns Ticketmaster.
In the instances where states have stepped forward when they believed that federal settlements were inadequate, “generally speaking, they haven’t had a lot of success in getting additional remedies,” said William Kovacic, professor of law and director of the competition law center at George Washington University.
Kovacic, former chair of the Federal Trade Commission, said that they have had their “greatest effect in merger litigation, pushing companies to make more concessions than if the FTC and DOJ alone had been a plaintiff in a case.”
“Their track record in getting results that go beyond what the government has achieved has not been very successful,” he said.
One of the highest-profile recent examples was T-Mobile’s merger with Sprint. In 2019, the Justice Department and the FCC cleared the transaction with divestitures and conditions, but a group of state AGs filed suit to block it, eventually losing the case the next year.
Going farther back, after the DOJ reached a settlement in the landmark Microsoft antitrust case in the late 1990s, a group of states held out, seeking their own remedies. Yet those ended up not being all that different from the federal consent decree, as an appeals court noted at the time.
That said, states going solo can force the federal government and the companies to provide more information on whether a settlement is suitable, Kovacic said. In the desire to close a transaction, merging parties may be more willing to come to the table.
“The states do serve as a backstop. They are a force that companies consider in doing merger planning,” Kovacic said.
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As they competed for Warner Bros., Netflix and Paramount met with state officials as they promoted their transactions as competitively sound.
Bonta has said that his office has not “come to a conclusion yet.”
“Whenever there’s major corporate consolidation like this, there’s a concern that we might see increased prices, lower wages, reduction in competition, limits in choice, lower quality, all those things,” he told Deadline earlier this month. “That’s why there is antitrust law in the first place.”
Paramount has said it expects the merger to see a rather quick close in the third quarter. The transaction passed the DOJ waiting period without any pushback, though regulators in international markets are still to weigh in. And for the record, the acting head of the DOJ’s Antitrust Division, Omeed Assefi, told Reuters this week that political factors will “absolutely not” come into play in their scrutiny of the transaction.
But if the DOJ does pass on a Paramount-Warner Bros, lawsuit, a challenge for states would be to show why they find market concentration problematic when the federal government did not.
Diana Moss, vice president and director of competition policy at the Progressive Policy Institute, said that the Paramount-HBO streaming combination would not trip federal guidelines for a merger, unlike Netflix-HBO. “So it is unlikely that the DOJ would flag concentration in the streaming market as a concern. If the DOJ doesn’t flag it, it would be a heavy lift for the states to do so,” she said.
That said, streaming is just one area of scrutiny. Bonta, for instance, has cited the merger’s potential impact on “good-paying job opportunities,” raising the prospect that the transaction will get scrutiny for its impact on labor market competition.
“If I were a betting man in gambler’s economy, I would say to expect challenge from California or any collection of states,” said Lee Hepner, senior legal counsel at the American Economic Liberties Project. He cites the nonprofit’s own analysis that the amount of debt Paramount will take on with the purchase will require thousands of workers to be laid off.
Hal Singer, managing director of the consulting firm Econ One, said that the fact that the DOJ may have passed on a case makes it harder for states to pursue one. But, he said, he would “hope that the court would recognize the circumstances in which the DOJ is not involved and appropriately discount their absence.”
Most observers expect Bonta to lead a group of AGs to challenge the merger.
“It’s certainly possible they could persuade a court to block the deal — much will depend on what evidence of harm that states develop. But our going-in view is a court would ultimately side with the companies,” said TD Cowen analyst Paul Gallant.
While there are antitrust issues, Paramount-Warner Bros. can make strategic concessions to weaken a state case, Gallant said. He sees one pro-competitive benefit: the combination of Paramount+ and HBO Max “materially improves competition” in the streaming market.
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One of the hurdles a state or a collection of states have in bringing a lawsuit is limited resources.
“When the federal government falls short of its obligation to enforce the law, it really leaves a serious resource gap for the states that are enforce the law to protect the public,” Hepner said.
Yet he said that he is optimistic that states have become much more skilled at pooling staffs and coordinating across jurisdictions.
In the Live Nation case, a noted antitrust lawyer, Jeffrey Kessler, is now one of the lead attorneys on behalf of the states. On Tuesday, he questioned a Live Nation employee about Slack messages he sent to a colleague, saying that the ancillary fees being charged the consumers “were robbing them blind, baby.”
The disclosure created a new headache for Live Nation, while the employee called his comments “very immature and unacceptable,” per the Associated Press.
Politically, the Live Nation case has created an opening for Democrats to claim that the Trump administration is willing to cave to corporate interests with a settlement that, they say, won’t lower ticket prices. But Congress does not have a say in whether mergers get approved and, as the minority party, Democrats have limited oversight power.
DOJ officials dispute that, pointing to the settlement terms, including one in which Ticketmaster will allow venues to use a variety of companies to sell tickets. They also said that they weighed whether continuing to pursue litigation would still lead to a better result than the settlement.
After the settlement was announced, Democrats seized on a report that antitrust officials were facing lobbying from Trump allies, working on behalf of Live Nation, to settle the case as it went to trial. Then, Gail Slater, the chief of the antitrust division, was ousted.
In the wake of the Live Nation case, Sen. Amy Klobuchar (D-MN), who wrote a book on antitrust, this week introduced legislation that requires much more disclosure on settlement terms, how they were reached and the communications between the parties. Other provisions would bolster court oversight of settlements, as well as strengthen the ability of state attorneys general to weigh in as a judge considers whether to sign off on an agreement.
In the press call Thursday, James and Bonta dismissed the notion that the lack of a federal plaintiff will hurt their Nexstar-Tegna litigation.
“Whether it’s the U.S. DOJ and the FTC who are presenting those same facts and that same law, or our coalition of states, the facts and the law don’t change,” Bonta said. “We believe we have a very strong case.”
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