The Department of Justice has approved the Walt Disney Company's proposed purchase of 21st Century Fox properties on the condition that the company divests Fox-owned regional sports networks (RSNs).

That's bad news for Comcast, which has been trying to outbid Disney for the Fox properties. Fox is reluctant to sell to Comcast because of concerns about obtaining regulatory approval of such a deal. The DOJ's approval of the Disney/Fox deal gives Fox another reason to reject any further bids from Comcast.

Technically, the DOJ filed a court complaint to block the Disney/Fox merger today. But the agency also filed a proposed final judgment that would let the merger proceed if Disney agrees to the DOJ's conditions. That's standard procedure for when the DOJ wants to impose conditions on a merger but doesn't intend to block it entirely.

Disney has already said it is willing to divest the RSNs in order to complete the merger. The DOJ's court filings were made in US District Court for the Southern District of New York.

"American consumers have benefitted from head-to-head competition between Disney and Fox's cable sports programming that ultimately has prevented cable television subscription prices from rising even higher," DOJ antitrust chief Makan Delrahim said in an announcement. "Today's settlement will ensure that sports programming competition is preserved in the local markets where Disney and Fox compete for cable and satellite distribution."

Within 90 days of buying Fox, Disney would be required to sell all 22 Fox RSNs "to one or more Acquirers acceptable to the United States [government]," a DOJ filing said.

The Fox sale to Disney would include 21st Century Fox's film and television studios, cable entertainment networks, and international properties including Star in India and Fox's 39-percent ownership of Sky across Europe. The sale also includes Fox's 30-percent stake in Hulu. Disney already owns 30 percent of Hulu, so it would end up with a controlling share in the online video company.

The sale would not include assets such as the Fox News Channel, Fox Business Network, the Fox Sports national networks (FS1 and FS2), and Fox Broadcasting Company. Those would be spun off into a new company, and Disney would acquire 21st Century Fox after the spinoff.

Preserving sports TV competition

Without divestitures, the transaction would be anti-competitive, the DOJ complaint said.

"Disney's proposed acquisition of Fox's assets would combine two of the country's most valuable cable sports properties—Disney's ESPN franchise of networks and Fox's portfolio of Regional Sports Networks ('RSNs')," the complaint said. This "would eliminate the substantial head-to-head competition that currently exists between Disney and Fox and would likely result in higher prices for cable sports programming in each of the [geographic markets]," the DOJ wrote.

The Fox RSNs are Fox Sports Arizona, Fox Sports Carolinas, Fox Sports Detroit, Fox Sports Florida, Fox Sports Indiana, Fox Sports Kansas City, Fox Sports Midwest, Fox Sports New Orleans, Fox Sports North, Fox Sports Ohio, SportsTime Ohio, Fox Sports Oklahoma, Fox Sports San Diego, Fox Sports South, Fox Sports Southeast, Fox Sports Southwest, Fox Sports Sun, Fox Sports Tennessee, Fox Sports West, Prime Ticket, Fox Sports Wisconsin, and the YES Network.

"In the aggregate, the Fox RSNs have approximately 61 million subscribers across the country and have rights to telecast live games of 44 of 91 (48 percent) US professional sports teams in three of the four major sports leagues," namely Major League Baseball, the National Basketball Association, and the National Hockey League, the DOJ wrote.

This isn't quite a done deal because Fox and Disney shareholders still have to approve the merger. Comcast is also reportedly considering another attempt to outbid Disney.