×
You will be redirected back to your article in seconds

FCC Concerns Create New Doubts About Future of Sinclair-Tribune Deal

UPDATED WASHINGTON — FCC Chairman Ajit Pai put the brakes on Sinclair Broadcast Group’s proposed merger with Tribune Media, and now the question is: What happens to the deal?

Sinclair’s stock price on Monday fell almost 12%, while Tribune’s dropped almost 17%, signifying pessimism among investors. Under the plan, Sinclair would ultimately own 215 stations in 102 markets, making it the largest broadcaster.

There’s good reason for the doubts. Pai proposed sending the merger to an administrative law judge for a hearing, a process that some observers believe can take up to a year or even longer. One industry executive described it as a bureaucratic black hole that has scuttled past mergers. Pai has the votes on the commission to do that, but he had not announced whether there will be any type of expedited review or time frame set on the process.

In any case, there will be a further delay to a deal that already has been delayed a number of times, first because Sinclair didn’t produce a complete set of documents, and then because it didn’t come up with a sufficient plan to divest some of its station holdings, as a combination of Sinclair-Tribune would exceed media ownership limits.

It came up with a new plan in April, one that included the sale of 23 stations, but that, too, drew opposition, including charges that Sinclair was making “sham” divestitures and would continue to exert influence over a number of outlets it owned.

One example: Its plans included selling Tribune’s flagship, WGN, but the new owners would be an LLC run by Steven Fader, the CEO of Atlantic Automative Corp., a chain of auto dealerships. David Smith, executive chairman of Sinclair, holds a controlling interest in Atlantic Automotive. As it has with other stations, Sinclair also planned to still run sales and marketing for WGN.

In his statement, Pai said that “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.”

Sinclair spokesman Ronn Torossian denied that the company has misled the FCC. Reuters reported that the draft order to send the case to the administrative judge said that Sinclair’s application “potentially involve deception.”

“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.”

The Justice Department has also yet to say whether it would approve the deal, even though there has been speculation since the start of the year that some sort of a green light was imminent. But it was clear that the DOJ, too, had concerns about the divestitures.

Meanwhile, Rebecca Hanson, who was in charge of Sinclair’s government affairs efforts in DC, left earlier this month for HC2 Broadcasting.

FCC officials were said to be frustrated with Sinclair and its filings — against a backdrop in which public interest groups were hammering Pai for shepherding through rules changes favorable to the company.

Democrats sought and got the FCC inspector general to launch an investigation into whether Sinclair was being given favorable treatment — something that Pai’s spokeswoman called “absurd.”

Gigi Sohn, fellow at the Georgetown Law Institute for Technology Law & Policy and former senior adviser to FCC chairman Tom Wheeler, said she was “shocked” by Pai’s decision, “as was everyone else.”

Even though there has been focus on the conservative bent of Sinclair’s management team, including Smith, as well as its connections to the Trump administration, Sohn said that “this is not a simple left-right issue.”

Trump has praised Sinclair on Twitter, but he’s also friends with Chris Ruddy, the CEO of Newsmax, one of the most vocal opponents of the transaction. The list of critics also went well beyond DC public interest groups: the transaction has the American Cable Association, which represents smaller cable operators, lined up against it, and the attorneys general of Illinois, Iowa, and Rhode Island raised doubts about the divestiture plan.

Before the merger, Sinclair was drawing criticism for requiring that its stations run conservative commentaries. But Sinclair sparked new attention in March, when its anchors read a prepared statement that warned of “biased and fake news,” seemingly adopting a Trump talking point. Deadspin melded clips of anchors across the country together for a video that went viral, drawing more than 6 million views. Even Peter Chernin, the former News Corporation COO, chimed in, calling Sinclair’s mandate “insidious” and “propaganda.”

Sinclair argued that the statement was not partisan, but the furor didn’t help Sinclair’s case. The FCC reviews transactions to gauge whether they are in the public interest, including the impact that a merger has on localism.

In the coming months, there will be other twists that could jeopardize the transaction. The DC Circuit Court of Appeals is expected to decide on whether the FCC should have eliminated the so-called UHF discount. That is a rule, dating to the 1980s, that allows station groups to count their UHF holdings at just half of their reach.

Sinclair has depended on the discount to amass the Tribune stations and still fall within a 39% ownership cap. Under its current merger plan and divestitures, Sinclair would reach almost 59% of the country. So without that break for its UHF holdings, it may have to sell many more stations than those already in the works. Much will depend on how the appellate court frames its opinion.

There are other risks. Barton Crockett, managing director and research analyst at B. Riley FBR, wrote in a note that “companies typically back off rather than fight before an administrative judge, to avoid legal risk. For instance, if an administrative judge determines that a company has lied, it’s our understanding that such a determination could imperil other licenses not tied to this deal.”

For now, Sinclair has indicated that it would continue to pursue the transaction.

“We are prepared to resolve any perceived issues and look forward to finalizing our acquisition of Tribune Media,” Torossian said.

More Politics

  • Trump Jim Acosta CNN White House

    The Gradual Disappearing Act of the White House Daily Press Briefing

    WASHINGTON — The Trump White House has dropped an event that used to be a prized invite for journalists and their families in D.C.: A holiday party for the media. But another tradition has been disappearing from the West Wing agenda as well: the daily press briefing. The regular televised afternoon back and forth between [...]

  • Nexstar Logo

    Nexstar Settles With Justice Department Over Sharing of Ad Information

    WASHINGTON — Nexstar Media Group, which recently announced plans to acquire Tribune Media and become the largest owner of TV stations in the country, has settled with the Justice Department as it investigates broadcasters’ sharing of competitive advertising rate information with rivals. Six other station groups, including Tribune Media, reached a settlement with the DOJ [...]

  • Donald Trump

    National Enquirer Parent Admits to Making Karen McDougal Payments to Help Trump in 2016 Election

    WASHINGTON — Federal prosecutors said National Enquirer’s parent company, American Media, admitted that it made a $150,000 payment to ex-Playboy model Karen McDougal “to ensure that the woman did not publicize damaging allegations” about Donald Trump in advance of the 2016 presidential election. AMI’s admission could bolster any case prosecutors make against Trump for violating [...]

  • Ajit Pai

    FCC to Launch Review of Media Ownership Rules, Including Ban on Broadcast Network Mergers

    WASHINGTON — The FCC will review whether to modify or even eliminate a series of media ownership proposals, including a current ban on mergers among the four major broadcast networks. The review, mandated by Congress every four years, includes no specific policy proposals, but will take public comment on whether changes are warranted. The FCC will [...]

  • US Supreme Court Justice Ruth Bader

    Ruth Bader Ginsburg Says She's 'Feeling Just Fine' After Falling Last Month

    WASHINGTON — As Justice Ruth Bader Ginsburg watched Focus Features and Participant Media’s “On the Basis of Sex” for the first time at a National Archives screening in Washington, D.C., she got big applause for how she described her wellbeing after suffering a fall last month. “I’m feeling just fine, and I am meeting my [...]

  • Michael Cohen

    Michael Cohen Sentenced to Three Years in Prison

    Michael Cohen was sentenced to three years in prison after pleading guilty to a series of charges, including a campaign finance violation in which he implicated President Trump. In an appearance in a New York federal court before his sentencing, Cohen said that he was sorry for his crimes, explaining that when he served as [...]

  • Sundar Pichai Hearing

    Key Takeaways From Google CEO Sundar Pichai's Day in Congress

    WASHINGTON — Google’s CEO Sundar Pichai made it through a 3.5-hour hearing before the House Judiciary Committee free of committing the company to new business practices or behavior. He didn’t even promise not to pursue a censored search engine in China, even as human rights groups have called on the company to abandon the project. [...]

More From Our Brands

Access exclusive content