The Bait and Switch
The Federal Communications Commission (“FCC”) has an admirable and often-stated goal of increasing ethnic diversity in ownership of broadcast stations and ensuring that a broad diversity of voices and viewpoints are delivered on the public airwaves.
Nexstar pretended to support this objective by partnering with Marshall Broadcasting Group (“MBG”) to obtain FCC approval for a transaction, but as soon as the deal was done, it purposefully worked to undermine MBG.
This “bait and switch” flies in the face of the FCC’s quest for diversity in ownership and programming and is a dangerous precedent that could affect ALL minority-owned businesses in the telecommunications space.
Sabotage was the Plan All Along
From day one, Nexstar set out to use MBG’s minority-ownership status to obtain FCC approval of a larger transaction and then drive MBG out of business so that it could obtain MBG’s stations for pennies on the dollar.
Nexstar financially hobbled MBG and limited the company’s ability to operate the stations by:
- Overcharging for its stations at the outset
- Working to drive MBG out of business by attempting to cause the company to default on its credit facility.
- Consistently interfering in MBG’s sales and programming operations, in direct violation of FCC directives and mandates.
Nexstar’s Point of View
Nexstar wants to avoid discussing its bait and switch before the FCC.
On the day MBG’s acquisition of its stations was announced, Nexstar lauded the partnership as “a model to increase media ownership diversity and minority-oriented programming” and MBG’s owner as “having the background and skills necessary to serve local interests while maintaining independent operations and programming decisions for the stations.”
Once the deal was signed, however, Nexstar’s behavior was controlling and punitive – even forcing MBG to sell off real estate assets to keep itself afloat.
The Lawsuit–Disregard for Contractual Obligations
MBG clearly sees now that its minority-ownership status was used by Nexstar to get a deal done with the FCC. In short, MBG was good for the “diversity optics,” but of little use to Nexstar once the deal was completed. After years of flagrant breaches of agreements and punitive behavior from Nexstar, MBG has filed suit to be made whole.
The Broader Story: It Can Happen to You
Every minority business owner should hear about this story – it is about so much more than some company not playing fair. Nexstar’s behavior provides a dangerous road map for other companies to take advantage of ethnic, women, and veteran-owned businesses in any industry. Not only does it show companies how to use minority-owned businesses to gain tax benefits and increased profits, but shows how to squash those minority-own businesses once the ink on the deal is dry.
The FCC’s Prime Objective of Promoting Diversity and Localism at Stake
The number of black-owned full powered, commercial TV stations in the US represents not much more than an embarrassing statistical rounding error. If Nexstar’s behavior is allowed to go unchecked, the FCC’s goal of promoting diversity in ownership and programming would be at greater risk than it is currently.