An Alabama law firm that advertised on television is accusing the six biggest owners of local television stations, including Hunt Valley-based Sinclair Broadcast Group, of scheming to artificially inflate the price of ads, according to an antitrust class action lawsuit.
The firm, Mobile-based Clay, Massey & Associates, has filed suit in federal court in Illinois against Sinclair, Tribune Media Co., Gray Television Inc., Hearst Corp., Nexstar Media Group Inc. and Tegna Inc., which collectively own, operate or offer service to more than 443 local stations as of 2016, the lawsuit says.
Sinclair and Tribune, which are seeking regulatory approval for a controversial $3.9 billion merger, faced a potential roadblock last month when the Federal Communications Commission sent the deal for review by an administrative law judge at the agency. Such a move is viewed by some as a death knell for such mergers.
Last week, reports surfaced that the Justice Department is investigating whether communications between advertising teams at TV station groups like Sinclair and Tribune Media violated antitrust laws, the lawsuit said. The Justice Department investigation stemmed from the agency’s review of Sinclair’s proposal to acquire Tribune, the lawsuit said.
In filing the lawsuit Wednesday, the law firm identified the six TV station owners as subjects of the Justice Department investigation. Clay Massey bought TV ad time from some of the broadcasters named as defendants.
“In today’s media landscape, spending on television ads is falling fast,” said Hollis Salzman, co-chair of the antitrust and trade regulation group for New York-based Robins Kaplan, attorneys for the plaintiff, in a statement. “Our client’s complaint alleges that the defendants tried to defy the gravity of that decline by colluding to raise their prices.”
A representative of Sinclair said Thursday that it had nothing to say about the lawsuit at this time.
The lawsuit says local TV stations’ revenues are expected to increase to nearly $28 billion this year from $26.2 billion last year in spite of the decline in overall TV ad spending.
The lawsuit echoes criticisms from opponents of Sinclair’s merger with Tribune, saying the deal was made possible by a series of moves by the FCC to deregulate the broadcast industry and ease station ownership rules.
The suit seeks to represent a class of buyers of ad time on local TV from the broadcasters named in the lawsuit from January 2014 to now.
“Defendants and their co-conspirators shared proprietary information and conspired to fix price and reduce competition in the market,” the lawsuit says.
Deregulation has fueled consolidation across the industry, making conditions ripe for anti-competitive agreements, the lawsuit alleges.
Sinclair’s acquisition of Tribune, as originally announced in May 2017, would give Sinclair control of 233 TV stations, including 42 Tribune-owned stations and a presence in such top markets as New York and Chicago. Under that proposal, Sinclair stations would reach 72 percent of U.S TV households. (Tribune Media was formerly part of Tribune Co., which once owned The Baltimore Sun and other newspapers, but spun them off in 2014.) To stay under the national TV ownership cap, Sinclair had proposed shedding 23 stations, including 14 owned by Tribune and nine of its own.