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WHDH-TV v. Comcast Corp.

United States District Court, D. Massachusetts

May 16, 2016

WHDH-TV
v.
COMCAST CORP.

MEMORANDUM AND ORDER ON DEFENDANT’S MOTION TO DISMISS

RICHARD G. STEARNS, UNITED STATES DISTRICT JUDGE

This case raises the issue of whether, and if so, how, a court can order an unwilling supplier to renew a contract with a long-term distributor whose services it no longer wants or needs. WHDH-TV, an independently owned NBC affiliate station serving the Boston area, alleges that Comcast Corporation, the media conglomerate that acquired NBC in 2011, engaged in unfair, deceptive, and anticompetitive practices when it refused to negotiate a renewal of WHDH’s affiliation contract. Comcast moves to dismiss the Complaint for failure to assert a claim upon which relief can be granted. Fed.R.Civ.P. 12(b)(6). The court heard oral argument on May 12, 2016.[1]

BACKGROUND[2]

Broadcast television is licensed and regulated by the Federal Communications Commission (FCC). Under the Communications Act of 1934, television broadcasters are required to operate in the “public interest, convenience, and necessity.” 47 U.S.C. § 310(d); Compl. ¶ 29; see also 47 U.S.C. § 214(a). Consistent with this mandate, over-the-air broadcasters have statutory and regulatory obligations to air content that is responsive to the community they serve. Compl. ¶ 29. Affiliate stations fulfill their public service obligations by providing free over-the-air access to the network’s regular entertainment, news, and sports programs, as well as community tailored content including news, weather reports, traffic bulletins, public affairs and public emergency announcements, and special coverage of local political races, high school sports events, and community activities. Id. ¶¶ 30-31. WHDH has been a top-performing and award-winning NBC affiliate station since 1995. Id. ¶¶ 34-43. WHDH’s free over-the-air programming is available to more than 7 million viewers in southern New England. Id. ¶ 45.

Cable networks, on the other hand, are not subject to the same community service requirements that apply to broadcast stations. Id. ¶ 32. Cable networks compete with broadcast stations for viewers and have an economic incentive to supplant free over-the-air content with subscription-based programming. Id. Comcast is the largest cable subscription company in the world. Id. ¶ 9.

In 2009, Comcast announced its intention to acquire a controlling interest in NBC from its then owner, General Electric (GE). Id. ¶ 49. Because the acquisition would result in an unprecedented concentration of media services, the merger required the approval of the FCC and the Department of Justice. Id. During the public comment period, various groups, including NBC affiliate stations, expressed the concern that the acquisition would have an anticompetitive effect, particularly in markets like Boston, where, as the dominant cable provider, Comcast might be tempted to subordinate the public interest served by local NBC broadcast affiliates to its more lucrative cable business. Id. ¶¶ 50-54.

To assuage these concerns, in January of 2010, Comcast, GE, and NBC filed a Public Interest Statement with the FCC to “publicly affirm[] their continuing commitment to free, over-the-air broadcasting.” Id. ¶¶ 71-72. The parties represented to the FCC that “local broadcast affiliates [would] benefit by having the full support of Comcast, a company that is focused entirely on entertainment, information, and communications and that has strong incentives - and the ability - to invest in and grow the broadcast businesses it is acquiring, in partnership with the local affiliates.” Id. ¶ 73. The triad explained that “the transaction places the ownership of NBCU [(NBC Universal)]’s free over-the-air broadcast businesses into a joint venture that will have greater incentives to grow and strengthen these businesses, to the benefit of the company, its broadcast affiliates, and consumers.” Id. They also put forward sixteen voluntary commitments that would become binding on Comcast upon completion of the merger. Id. ¶ 71. At the core of these commitments was

Commitment # 1: The combined entity remains committed to continuing to provide free over-the-air television through its O&O [(owned-and-operated)] broadcast stations and through local broadcast affiliates across the nation. As Comcast negotiates and renews agreements with its broadcast affiliates, Comcast will continue its cooperative dialogue with its affiliates toward a business model to sustain free over-the-air service that can be workable in the evolving economic and technological environment.

Id. ¶ 73.

To overcome any lingering resistance on the part of the NBC affiliate stations, Comcast negotiated an “Agreement” with the NBC Television Affiliates Association (NBCTAA), the trade organization representing the affiliates’ interests. Id. ¶¶ 55-60; see Compl. - Ex. A (the NBCTAA Agreement). Among other terms, the Agreement incorporated Commitment #1 of the Public Interest Statement. See Id. at 1. “In furtherance of this commitment, Comcast will, for a period of ten (10) years after consummation of the Transaction: [] Maintain the Network - as made available for broadcast over the air by the Network’s broadcast television affiliates - as a premier general entertainment programming service . . . .” Id. After the execution of the Agreement, the NBCTAA submitted a public comment supporting the acquisition. Compl. ¶ 70.

In January of 2011, the FCC approved the merger subject to a series of “remedial conditions to address potential harms likely to result from the transaction.” Id. ¶ 75; FCC Approval Order (https://transition.fcc.gov/FCC-11-4.pdf, last accessed) at 3-4; 118-144. The FCC Approval Order also incorporated Sections 2, 3, and 7 of the Agreement between Comcast and the NBCTAA.[3] Compl. ¶ 77, FCC Order at 68-69, 134. Comcast became the majority owner of NBC on January 18, 2011, and acquired the remainder of GE’s interest in NBC in March of 2013. Compl. ¶ 81.

WHDH’s affiliate contract with NBC (entered in 1995) expires on January 1, 2017. Id. ¶¶ 34, 42. Beginning in 2013, WHDH made repeated overtures to Comcast to begin the renewal discussions. Id. ¶ 88. Comcast told WHDH several times that it was not ready to negotiate because of the uncertainty in the retransmission market, [4] and wanted to defer any decision until the expiration date of WHDH’s current contract drew nearer. Id.

In July of 2013, Comcast transferred NECN, a regional Boston cable news channel that it long owned, from the cable side of its business to the NBC broadcast side. Id. ¶ 84. NECN sales representatives reportedly began informing major advertisers in the Boston area that NECN would take over as the local NBC broadcast affiliate beginning in January of 2017. Id. ¶ 85. When WHDH queried Comcast about the reports, Comcast dismissed the “rumors” and assured WHDH that it intended to eventually open negotiations. Id. ¶ 86. During 2014 and 2015, Comcast built a new, state-of-the-art broadcast studio for NECN, updated others of NECN’s facilities and equipment, and hired an experienced news management team to oversee the station. Id. ¶ 90.

On September 11, 2015, Comcast informed WHDH that it would not renew the affiliate contract and intended to replace WHDH with a Comcast-owned start-up station based at NECN’s new facility. Id. ¶ 91. The following week, Comcast offered to purchase WHDH’s assets (which WHDH values at $500 million[5]) for $200 million. Id. ΒΆ 94. Comcast acknowledged that its offer reflected a diminished valuation of WHDH ...


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