Newsmax, which has been a critic of the transaction, was responding to a revised merger plan that Sinclair filed last week in which it said it planned to sell Tribune Media’s TV stations in New York, Chicago and San Diego to comply with FCC ownership limits.
The $3.9 billion merger is pending approval from the FCC and Justice Department, but Sinclair needs to divest stations in order to comply with media ownership limits.
In its own filing with the FCC on Wednesday, Newsmax Media consultant John Simpson argues that Sinclair “attempts to give the impression that Sinclair will divest a significant number of broadcast stations to come into compliance with the broadcast ownership rules, when in fact Sinclair is engaged in a scheme to circumvent such rules and divest only a fraction of those stations while operating many stations via service agreements.”
Sinclair disclosed that it planned to divest Tribune’s WPIX-TV New York, WGN-TV Chicago and KSWB-TV San Diego, and also is seeking to receive an FCC waiver to own more than one of the top four stations in Indianapolis, Greensboro, N.C., and Harrisburg, Pa.
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But Sinclair said in its filing that in the case of WPIX and WGN, it has buyers lined up for both stations but it intents to continue running the outlets through an “options and services agreement.”
Newsmax takes issue with Sinclair’s approach, and is calling on the FCC to require a more specific filing showing how the company will comply with the media ownership limits.
“Buried in footnotes, Sinclair reveals that the divestiture proposals are essentially a sham because the sidecar arrangements will give Sinclair the ability to continue to manage these stations after they have been acquired by third parties,” Newsmax said in its filing. “The FCC must send a clear message to Sinclair that this type of game-playing will not be tolerated. If it does not, the FCC will be providing yet another unusual and suspicious regulatory favor to Sinclair in a transaction that is already rife with the appearance of impropriety and special treatment.”
A spokeswoman for Sinclair did not immediately return a request for comment.
The merger is expected to eventually gain regulatory approval, but it has faced delays as the Justice Department has sought divestitures from the combined company. Sinclair will be the largest broadcaster in the country, with more than 200 stations.
In its filing, Sinclair also identified eight markets where it needs to sell off stations, but the company said that it plans to enter into agreements with buyers in Seattle, Oklahoma City, and Greensboro, N.C. to continue operating them even after a sale.
Newsmax, led by Chris Ruddy, has been highly critical not just of Sinclair’s plans, but of the FCC and a number of rules changes that were made last year that it says shows “favoritism” toward one company.
Newsmax noted that in recent transaction, the Justice Department has barred companies from entering into “option and service agreements” with divested stations.
“The commission should follow the same approach here,” Newsmax said in its filing. “If the commission nevertheless seeks comment on Sinclair’s recent submission before DOJ completes its own jurisdictional process, this will not only show the commission’s overreach, but again would demonstrate a pattern of favoritism to one company.”
A spokeswoman for FCC Chairman Ajit Pai has said that the rules changes were “consistent” with his long-held views to update media ownership regulations. The FCC’s inspector general has informed Democrats on Capitol Hill that he is conducting an investigation of the timing of the Sinclair transaction and the FCC’s rules changes.
The FCC limits any one company from owning stations covering more than 39% of U.S. TV households. The Tribune acquisition would put Sinclair well over the cap, into the 45% range. That is even after accounting for a “discount,” in which the FCC calculates a UHF station’s reach as only half that of a VHF outlet. That allows major companies to fall within the current cap.
NCTA — The Internet and Television Association, a trade group that represents major cable companies, also is pressing the FCC to press Sinclair for more information about its planned station sales.
“These specifics are essential to understanding the competitive impact of the transaction, including the impact on future retransmission consent negotiations with Sinclair in these markets,” the group said in an FCC filing on Tuesday.
Sinclair has defended the size and scope of the merger, saying that it will better be able to compete against the growing strength of internet giants.