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AT&T-Time Warner, Sinclair-Tribune Test Trump Era Appetite for Big Media Mergers

As a candidate, Donald Trump warned of the dangers of media concentration. Now that he’s president, however, those dangers appear to exist on a case-by-case basis.

AT&T’s proposed acquisition of Time Warner, one of the biggest media mergers ever, has suddenly hit a speed bump after Justice Dept. lawyers told company officials last week that the merger would get the green light only if it divested either DirecTV or the Turner networks, including CNN, according to sources. That raised alarms that the DOJ had been influenced in some way by the White House, and was looking to damage a news network that Trump despises.

Progressives, some of whom have been championing stricter antitrust enforcement, find themselves suspicious of the motives behind the scrutiny of the AT&T-Time Warner deal. On the other side of the aisle, a handful of conservatives, who tend to stick to a strict hands-off policy when it comes to federal government interference, are warning of the concentration of news outlets in the hands of a few.

While that battle plays out, the FCC this week is expected to pass the most significant changes to its broadcast ownership rules in a generation, ones that are being cheered by broadcasters but have critics crying foul. Their gripes are not just that they believe the new rules will lead to consolidation in local markets, but that they seem to be tailor-made to allow Sinclair Broadcast Group’s proposed merger with Tribune Media.

Whatever happens, the Trump era is likely to usher in dramatic changes to the media landscape, and for the time being has scrambled notions of consistency when it comes to judging corporate consolidation.

Consider the issues pending before the federal government:

AT&T-Time Warner

The notion that Trump administration appointees were trending toward a much more permissive view of media mergers has run up against the reality of the Justice Dept.’s antitrust division’s demands that AT&T sell off assets.

Yes, there are lingering questions of whether the White House, allegedly out to harm Trump foil CNN, exercised some kind of influence over the DOJ, either directly or indirectly. AT&T CEO Randall Stephenson has denied reports of a required sell-off of CNN. But there also were plenty of warning signs that Makan Delrahim, the chief of the antitrust division, who only took office in September, would not just let the deal sail through.

As Delrahim was going through confirmation hearings, there was buzz that the AT&T-Time Warner combo could have a tougher time being approved once he took a look at it, even though he earlier had expressed views that he didn’t see any anti-trust issues in the transaction. A closer reading of his comments during the confirmation process offered some hints that he could give the AT&T-Time Warner transaction more scrutiny than some had expected: Delrahim expressed a preference for structural fixes, like selling assets, versus so-called behavioral remedies, in which conditions are placed on a transaction, as a solution to antitrust problems.

There has also been opposition from groups like the Writers Guild of America and Common Cause, and from unlikely foes, such as the conservative Tea Party Patriots.

Trump’s former chief strategist Steve Bannon, returning to his position as executive chairman of Breitbart News, has championed the idea that Facebook and Google should be public utilities and bashed Silicon Valley’s “lords of technology” in a political speech laced with populist anger at the elites.

On Wednesday, there was buzz that a Justice Department lawsuit was imminent, and CNBC reported that government antitrust attorneys were seeking the participation of state attorneys general in such litigation.

Trump Corporate Mergers Favoritism

Democrats recently cited the AT&T-Time Warner merger in their call for stricter antitrust enforcement, but they’re a bit puzzled by this latest wrinkle. A number of progressives would like the deal to be blocked, but they are also anxious to call out Trump for political interference.

Others, though, see Delrahim’s opposition as a sign to show he’s not a rubber stamp when it comes to antitrust enforcement. “I am actually giving the president the benefit of the doubt, which I don’t normally do,” says longtime public interest advocate Gigi Sohn, former counselor to FCC chairman Tom Wheeler, a Democrat. “There are legitimate reasons to demand divestiture of assets, and that is something people are losing sight of.”

Sinclair-Tribune

One of the tests of just how far the Justice Dept. is willing to go in blocking transactions will be whether it weighs in on Sinclair’s proposed purchase of Tribune Media, a deal that would make Sinclair the largest broadcaster in the country, with broad reach in local markets. The FCC also is reviewing the transaction, affording opponents a bigger public platform to oppose the deal.

In contrast to AT&T-Time Warner, which Trump said during his campaign that he would try to block and held up as an example of concentration of media, he has said little on Sinclair. Rather, Sinclair has been hammered by accusations that executive chairman David Smith’s friendship with Trump, along with its pro-Trump coverage
in news commentaries, have helped grease the wheels as it seeks to secure approval before the FCC.

FCC chairman Ajit Pai has defended his review of the Sinclair-Tribune merger, and has said that he did not discuss pending proceedings involving the company in his meetings with Trump.

Yet the Sinclair transaction has drawn ire not just from an array of left-leaning public interest groups and congressional Democrats but from conservatives and other friends of the president.

First and foremost is Chris Ruddy, a valued Mar-a-Lago club member for about a decade and the CEO of conservative media brand Newsmax, which has been highly critical of the merger as well as of the FCC’s actions.

In an interview, Ruddy said he’d like to see an investigation into a key change in the FCC’s rules, made earlier this year, that allows station groups to discount the reach of their UHF holdings so that they can fall within media ownership caps. A number of congressional Democrats have called on the FCC’s inspector general to open an investigation.

Pai was no fan of an FCC action last year that eliminated the UHF discount, and station groups had been publicly urging him to reverse that decision. In April, the FCC did. Without the rule change, it’s hard to see how the Sinclair deal could have transpired.

Ruddy said he finds it suspicious that Tribune and Sinclair seemed to know that the FCC was about to make such a rule change. “The whole thing stinks,” he said. Ruddy said he believes that Trump has a general awareness of the issues at stake, “but I am not sure he is aware of the fine details. A lot of it is flying under the radar screen, not only of the president but the Congress.”

An FCC spokeswoman said, “Any claim that Chairman Pai is modifying the rules now to benefit one particular company is completely baseless. For many years, Chairman Pai has called on the FCC to update its media ownership regulations — one of which dates back to 1975. The Chairman is sticking to his long-held views, and given the strong case for modernizing these rules, it’s not surprising that that those who disagree with him would prefer to do whatever they can to distract from the merits of his proposals.”

Media Ownership

A pending set of changes to the FCC’s long-standing rules governing ownership of local stations is generally being celebrated by broadcasters and opposed by other sectors of the
TV industry.

One proposal, to eliminate a rule barring the common ownership of a broadcast station and a newspaper in the same market, actually has some bipartisan support politically. More controversial is Pai’s plan to ease restrictions that could allow for media companies to own more than one of the top four stations in a media market. Instead of an outright ban, the rules would allow for such ownership after a “case-by-case” evaluation.

Dave Lougee, president and CEO of Tegna, which owns or operates 46 stations in 38 markets, said that Pai appreciates broadcasting. “He really understands how outdated the FCC’s definition of the market is, which is what this comes down to,” Lougee said, adding that the current rules don’t account for competition from cable, over-the-top digital video companies and social media in the local advertising market.

Analyst Barton Crockett of FBR Capital Markets thinks the pending rule changes are among the reasons TV station groups have “under-appreciated appeal” and that the loosened restrictions will boost sector value.

Broadcasters are bullish only to a point. Previous FCC efforts to loosen the broadcast ownership restrictions have been sidelined in court. The cable industry lobby, led by Republican former FCC chairman Michael Powell, has issues with the potential for two jointly owned TV stations to exert more leverage in retransmission consent negotiations — leverage that could cost cable operators dearly.

Observers trying to determine how the White House feels about such particulars won’t find much success. To candidate Trump, media concentration in the hands of a few was dangerous. But President Trump has been only occasionally alarmist.

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