DirecTV Brings Antitrust Complaint Against Nexstar, Sidecars

DirecTV litigation accusing Nexstar and its broadcast sidecars Mission and White Knight of colluding to set retransmission consent fee prices is likely more a retrans consent negotiation tactic than a direct attack on sidecar operations, broadcast lawyers told us.

But we're also told the suit's intended audience might well go beyond the U.S. District Court for Southern New York to Congress or the FCC. DirecTV's complaint alleges violations of the Sherman Act and breach of contract and tortious interference under New York law.

The broadcasters' “unlawful price-fixing conspiracy” is the root cause of unsuccessful retrans talks with Mission and White Knight resulting in blackouts, said DirecTV's complaint. The three are coordinating to hike prices and retrans consent fees in overlap direct market areas where Nexstar and a sidecar each have a Big Four station, DirecTV said.

Nexstar’s "shared services agreements" with White Knight and Mission Broadcasting "are in full compliance with FCC rules, and each station group independently negotiates its own retransmission consent agreements,” emailed a Nexstar spokesperson. “This lawsuit is without merit and Nexstar looks forward to prevailing in court.”

DirecTV said evidence of the strategy includes that the sidecars use the same independent negotiator, Eric Sahl, as Nexstar, and the sidecars’ supposed management teams are merely fronts: in White Knight’s case, a full-time lobbyist with a trade association, while its headquarters is his house, and in Mission’s case some former Nexstar employees. That the cut-and-paste language used in Mission and White Knight news releases on DirecTV blackouts and in a Nexstar statement on a Verizon blackout is also proof of the collusion, said the complaint.

Nexstar negotiations are supposed to be separate from the sidecars’, but Sahl, in sidecar talks with DirecTV, referenced nonpublic information on Nexstar’s next-generation broadcasting technology and demanded retrans consent fees for the CW stations that White Knight didn't own just before Nexstar bought controlling interest in the network, said the complaint. Nexstar is using the sidecars as stalking horses, so the high price floor set in talks between it and the sidecars means Nexstar can go into its own negotiations “with confidence that it can attain a similarly supracompetitive rate,” it said.

Previously, Nexstar was involved in breach of contract cases with Charter and Comcast starting in 2021 over the same arrangements with Mission Broadcasting, but those cases settled when the MVPDs and Nexstar agreed to retransmission consent deals. The Comcast case was settled shortly after a judge ruled Nexstar must turn over documents about its arrangements with Mission (see 2211220061). Comcast also filed a good-faith complaint with the FCC over retrans negotiations with Nexstar for Mission’s station WPIX New York (see 2301180034). Those cases are signs Nexstar has been aggressive in retrans negotiations, which is likely also the case in negotiations with DirecTV, an attorney said.

It's possible a verdict for DirecTV could spark other legal challenges against other sidecar operations, but attorneys representing broadcasters said they don’t expect the case to continue that far. MVPDs are hard-hit by subscriber churn and perceive the regulatory environment to be less friendly to broadcasters now, possibly spurring the pushback against Nexstar, one attorney said.

DirecTV could face arguments that the court should defer to the FCC on matters of joint ownership and retransmission consent, because that agency has primary jurisdiction over those matters, attorneys said.

It is “undeniable” that sidecar stations are a “blatant” method for getting around FCC ownership rules, said Andrew Schwartzman, a critic of such arrangements and Benton Institute for Broadband & Society senior counselor. “It appears evident that the sidecar arrangements lead to higher revenues and to lower costs for the stations involved,” blogged Philp Verveer, senior counselor to then-Chair Tom Wheeler during the 2014 FCC effort to restrict such arrangements: “It also is evident that the sidecar arrangements undermine the values of competition.” In that same proceeding, Nexstar and NAB defended the arrangements as leading to more local news and facilitating ownership diversity.

Sidecars and their former parents frequently use the same outside negotiator, but it's rarely complained about because the bar is high to making such an antitrust complaint stick, said an attorney who regularly renegotiates retransmission consent agreements. He said retrans complaints typically settle because the cost for one side or the other of a blackout going on for years is too high. But the changing video programming ecosystem, with broadcasters increasingly moving their marquee programming to streaming platforms, could change that risk analysis, making prolonged fights while complaints work through regulatory or legal processes more likely, he said. He said the suit's audience, aside from the court, could be Congress or the FCC, with an eye on trying to push reform of sidecar rules and enabling legislation.

The suit is "yet another example of a massive broadcaster skirting the legal lines in a way that permits the parties involved to collude, resulting in higher prices for consumers who have already seen an exorbitant increase in fees per subscriber in the last year alone,” American TV Alliance said. It urged the FCC "to investigate the extent to which Nexstar and other station owners use these contrived ‘sidecars’ to evade ownership rules, exert unlawful control, and convert the public airwaves and American people who own them into their personal ATMs.”