Pai has proposed that the merger deal to be sent to an administrative law judge for review.
“Based on a thorough review of the record, I have serious concerns about the Sinclair/Tribune transaction,” Pai said in a statement. “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.”
Pai’s move is a surprise given that he has faced strong criticism for what opponents view as his cozy relationship with Sinclair leaders. Sinclair released a statement later in the day saying executives were “shocked and disappointed” by Pai’s move. The company emphasized that the ownership structure proposed in its divestiture plan are “consistent” with structures that the FCC has approved in the past for Sinclair and other broadcasters.
Pai’s statement continued, “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 has the votes on the FCC to approve the order. A source said Commissioner Brendan Carr was voting for it, and Commissioner Jessica Rosenworcel, a Democrat, said she also favors the move. In a statement, she said Pai’s decision was “welcome” and would vote in favor of Pai’s proposal.
“As I have noted before, too many of this agency’s media policies have been custom built to support the business plans of Sinclair Broadcasting,” Rosenworcel said. “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.”
Commissioner Michael O’Rielly said that he only support sending the merger to the administrative judge if there are “sufficient and defined timelines” for the hearing.
The $3.9 billion transaction that would create an unprecedented giant in local broadcasting, as Sinclair would be the largest owner of stations with a reach of almost 59% of the country. Under the plan, Sinclair would ultimately own 215 stations in 102 markets.
Sinclair’s effort to acquire the Tribune stations has been contentious, drawing opposition not just from an array of public interest groups but some cable industry trade associations as well as conservative news outlets like Newsmax, One America News Network and TheBlaze. On Thursday, the group Free Press dispatched a truck that displayed video images of John Oliver and others warning of the merger.
But Sinclair also has had to revise its plans to divest stations to comply with the FCC media ownership cap, which limits broadcast holdings to no more than 39% of the country. In April, Sinclair outlined a list of 23 outlets it plans to sell, but critics said the company was structuring the sales in such a way as to allow the company to continue to manage a number of the divested stations or to exert influence over the outlet.
Pai’s opposition to the divestiture plan could force Sinclair to agree to a much higher volume of station sales to secure approval of the deal. The merger was first proposed in May, 2017. Proceedings with an administrative law judge typically take several months to over a year, adding even further delay.
Opponents of the Sinclair-Tribune deal were quick to applaud Pai’s move.
Throughout the FCC review process of this transaction, we have had numerous meetings and discussions with the FCC’s Media Bureau to make sure that they were fully aware of the transaction’s structure and basis for complying with FCC rules and meeting public interest obligations. These structures are consistent with structures that Sinclair and many other broadcasters have utilized for many years with the full approval of the FCC. During these discussions and in our filings with the FCC, we have been completely transparent about every aspect of the proposed transaction. We have fully identified who the buyers are and the terms under which stations would be sold to such buyer, including any ongoing relationship we would have with any such stations after the sales. We have filed all relevant agreements documenting such terms as required by FCC rules.
While we understand that certain parties which oppose the transaction object to certain of the buyers based on such buyers’ relationships with Sinclair, a situation we are prepared to address if the FCC agrees with such views, at no time have we misled the FCC in any manner whatsoever with respect to the relationships or the structure of those relationships proposed as part of the Tribune acquisition. Any suggestion to the contrary is unfounded and without factual basis.
We were heartened by the Statement released by Commissioner O’Rielly objecting to ‘blindly sending decisions to the Commission’s Administrative Law Judge (ALJ).’ While we understand that Commissioner O’Rielly was specifically objecting to the lack of defined timelines in the ALJ process, we hope that the Commissioner O’Rielly and the other FCC Commissioners will also consider the appropriateness of blindly designating matters for hearing which have been fully disclosed to the FCC and which fully comply with FCC rules and widespread industry precedent.
We are prepared to resolve any perceived issues and look forward to finalizing our acquisition of Tribune Media. The proposed merger of Sinclair Broadcast Group and Tribune Media will create numerous public interest benefits and help move the broadcast industry forward at a time when it is facing unprecedented challenges. We look forward to working with regulators to make the merger a reality.