FCC claims Sinclair–Tribune Media merger would not be ‘in the public interest’July 19, 2018
The Federal Communications Commission has published its order calling for a hearing regarding the proposed Sinclair Broadcast Group acquisition of Tribune Media, following an unexpected announcement by Chairman Pai earlier this week where he said he had “serious concerns” about the deal. The order claims that, as proposed, the merger between the two media giants would “not be in the public interest.”
The administrative hearing was approved yesterday after the Commission voted unanimously to take a closer look at the merger. In its initial response after the agency called for the hearing, Sinclair revised its $3.9 billion acquisition of Tribune Media in an attempt to salvage its deal in light of the FCC’s announcement. In the new deal, Sinclair would also acquire the WGN-TV Chicago station, along with two other Tribune stations in Texas — Dallas and Houston — that would then be put into a trust and sold by an independent trustee after the deal with Tribune is approved.
“Although these three applications were withdrawn today, material questions remain because the real party-in-interest issue in this case includes a potential element of misrepresentation or lack of candor that may suggest granting other, related applications by the same party would not be in the public interest,” the agency wrote.
Sinclair has denied any claims that it has attempted to mislead the agency.
In the newly released document, the agency dissects Sinclair’s new plan and claims that the three proposed divestitures have the potential to be “sham” transactions; the transfer of Tribune’s WGN-TV-Chicago to Steven Fader was highlighted as an example. Fader has close working ties with Sinclair’s executive chairman, David Smith, and no former experience in broadcasting, either. That transfer would also cost Fader $60 million, an amount that is far below market value. The FCC noted that Sinclair would have an opportunity to buy back the station at a later date. Similarly, the Dallas station was proposed to be sold to Cunningham Broadcasting, another company Smith has ties to.
If the merger is approved by both the FCC and Department of Justice, the combination of companies would own enough stations to reach nearly three-quarters of homes in the US. This would break the 39 percent limit that the FCC has set. Sending the merger to a hearing halts the transaction, and prolongs the process which could jeopardize the merger in the long run.
“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 said.