Sinclair Broadcast Group’s acquisition of Tribune Media Company has run into a major roadblock at the Federal Communications Commission.
FCC Chairman Ajit Pai said he won’t approve the Sinclair/Tribune acquisition as it’s currently structured, saying Sinclair’s plans for divested stations would violate the law. Pai is recommending that the merger be reviewed by an administrative law judge, a move that could ultimately kill the deal.
Pai’s decisions came after months of pressure from Democratic lawmakers, consumer advocacy groups, and industry lobby groups. Pai has been repeatedly accused of making regulatory changes that benefit Sinclair; the FCC’s inspector general in February agreed to investigate whether Pai has improperly coordinated with Sinclair on rule changes.
Pai’s FCC previously rolled back broadcast TV station ownership limits, a move that at the time gave Sinclair a better chance of buying more stations. But Pai’s statement today said that the FCC can’t approve Sinclair’s plan for Tribune:
The evidence we’ve received suggests that certain station divestitures that have been proposed to the FCC would allow Sinclair to control those stations in practice, even if not in name, in violation of the law. When the FCC confronts disputed issues like these, the Communications Act does not allow it to approve a transaction. Instead, the law requires the FCC to designate the transaction for a hearing in order to get to the bottom of those disputed issues. For these reasons, I have shared with my colleagues a draft order that would designate issues involving certain proposed divestitures for a hearing in front of an administrative law judge.
Pai’s statement did not say which station divestitures would break the law. Reuters reported that the draft order says, “Sinclair’s actions here potentially involve deception” in its application to acquire Tribune and divest WGN, a TV station in Chicago. The draft order also said that “this question of misconduct” bears not just on the WGN transaction but also on the entire merger application, Reuters wrote.
Critics of the merger say it could raise TV prices for consumers and reduce viewpoint diversity in local news. Sinclair also needs Justice Department approval of the deal.
Move may be a “deal-killer”
Sending a merger review to an administrative law judge can spell doom for a transaction. AT&T gave up its attempt to buy T-Mobile USA in 2011 after the FCC threatened to refer the case to an administrative law judge, for example.
described it as “a lengthy administrative process often viewed as a deal-killer.”
“[I]t’s extremely rare for transactions to be sent to a hearing in the first place, much less for parties to fight it out and beat the FCC in that hearing,” Free Press Policy Director Matt Wood said. “That’s why analysts and investors rightly see today’s news as potentially a fatal blow for this merger.”
FCC Commissioner Jessica Rosenworcel, the commission’s only Democrat, said that “too many of this agency’s media policies have been custom-built to support the business plans of Sinclair Broadcasting. With this hearing designation order, the agency will finally take a hard look at its proposed merger with Tribune. This is overdue and favoritism like this needs to end.”
Pai may have work to do in getting support from his fellow Republican commissioners, however. FCC Commissioner Michael O’Rielly today criticized administrative law judge hearings for being too lengthy and said he would support Pai’s referral only if it “include[s] sufficient and defined timelines for the ALJ to conduct and process a hearing.”
Republican Brendan Carr hasn’t weighed in on Pai’s decision yet. The commission currently has four members but would gain a fifth if the Senate approves Democrat Geoffrey Starks to fill the open seat.
Sinclair’s conservative tilt
Sinclair owns or operates 173 broadcast TV stations in 81 markets, while Tribune has 42 stations in 33 markets. If no divestitures were made, “the combined company would reach 72 percent of US television households and would own and operate the largest number of broadcast television stations of any station group,” the FCC notes.
Sinclair is known for having a right-wing tilt and for requiring its news stations to run certain political segments. In one recent case, Sinclair forced local TV news anchors to read a script that echoed President Trump’s complaints about “fake” news stories.
We contacted Sinclair about Pai’s decision today and will update this story if we get a response.
“The FCC’s order could effectively block the Sinclair merger, which would be a huge win for consumers,” US Rep. Frank Pallone, Jr. (D-N.J.) said. “I urge all FCC commissioners to vote quickly in support of it.”
Pallone is one of the lawmakers who requested the inspector general’s investigation into whether Pai improperly coordinated with Sinclair.
Pai gets rare praise from frequent opponents
Pai’s move earned rare praise from Free Press, an advocacy group that has frequently clashed with the chairman.
“Free Press hasn’t seen eye to eye with Chairman Pai since he took over the FCC. But today’s announcement is unequivocally the right thing to do under the law. This is a giant win for the public and a huge setback for Sinclair’s mega-merger plans,” Wood said.
Free Press said that Pai previously “removed public-interest safeguards that would have prevented Sinclair’s massive merger from being approved.” Free Press had already filed two lawsuits in federal court against the FCC over its weakening of media ownership limits.
Pai’s move also received praise from the American Cable Association (ACA), an industry lobby group that represents small and medium-sized cable companies.
“It’s well past time for Sinclair to realize that its effort to engage in massive media consolidation has failed and that it should withdraw the transaction without delay so the FCC no longer needs to devote any of its limited resources to a doomed endeavor,” ACA CEO Matthew Polka said.
Sinclair rival Newsmax Media chimed in today, saying that Pai’s “decision is based on the facts and law specifically that Sinclair has not complied with requirements set forth by the FCC to promote diversity, localism, and competition.”
Consumer advocacy group Public Knowledge said that the Sinclair/Tribune deal “would have harmed the public interest in multiple ways.” The combined company would have “unprecedented power” in channel carriage negotiations with cable operators, “giving rise to higher cable bills for consumers,” Public Knowledge said.
“Additionally, the merger would have significantly reduced viewpoint diversity in broadcast television—essentially eliminating the local component of local broadcasting and replacing it with centralized editorial content, disguised with trusted local broadcasters,” Public Knowledge said.