FCC chair rejects Sinclair-Tribune merger

FCC chair rejects Sinclair-Tribune merger
© Greg Nash

Federal Communications Commission (FCC) Chairman Ajit Pai on Monday said that he has "serious concerns" about the proposed merger between Sinclair Broadcast Group and Tribune Media, a surprising move that could kill the controversial $3.9 billion deal.

In a statement, Pai questioned the company's plans to get the deal approved by selling off some television stations and said he would propose sending the deal to be reviewed by an administrative law judge.

"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.

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The move toward an administrative law proceeding is a likely step toward killing the merger altogether. In 2011, AT&T and T-Mobile withdrew a merger application after then-FCC Chairman Julius Genachowski circulated a similar proposal to the commission.

But on Monday, Sinclair remained defiant, saying it still believed in the merger and insisted that it has been transparent throughout the regulatory process.

"We are prepared to resolve any perceived issues and look forward to finalizing our acquisition of Tribune Media," Sinclair spokesman Ronn Torossian said in a statement. "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.”

The Sinclair-Tribune deal would have given the combined media company the ability to reach nearly three-quarters of the country's television-viewing audience, putting it over the top of the legal limit on serving 39 percent of households.

In order to bring the merger in compliance with the ownership limit, the two companies agreed to divest 23 local television stations around the country.

But some of those sales would still leave Sinclair with a degree of control over the stations' operations.

Critics said the sidecar deals were an effort to evade the law while still allowing Sinclair, a right-leaning broadcaster, to spread conservative and pro-President TrumpDonald John TrumpLondon terror suspect’s children told authorities he complained about Trump: inquiry The Memo: Tide turns on Kavanaugh Trump to nominate retiring lawmaker as head of trade agency MORE programming.

"I think Sinclair has been disingenuous about divestitures for months now," Gigi Sohn, who served as an adviser to Democratic former FCC Chairman Tom Wheeler, told The Hill in an interview. "I think the last filing didn't satisfy anybody that Sinclair wasn't going to still have some control over these stations."

Monday's move was a shocking blow to a merger that many expected to be approved.

Last year, the FCC had given the merger a boost when the agency's Republican majority voted to reinstate the so-called UHF discount, a loophole that allows companies like Sinclair to count just half the reach of ultra-high frequency television stations when tallying up their nationwide audience.

Monday's announcement came as a welcome surprise for many opponents of the deal who had been concerned that the FCC was giving conservative Sinclair special treatment.

The agency's inspector general had opened an investigation into whether Pai's efforts to deregulate the broadcasting industry were intended to clear regulatory roadblocks for specifically for the Sinclair-Tribune deal. Pai has denied that his campaign to roll back media ownership restrictions was designed to help any single company.

Sinclair has long been at the center of controversy.

The company's practice of distributing “must-run” programming to its stations has alarmed critics. Earlier this year, the online news outlet Deadspin published a video showing local news anchors around the country reading from a script parroting Trump’s criticisms of journalists.

The video went viral, prompting a widespread outcry from Sinclair’s critics that caused the president to rush to the company’s defense.

“So funny to watch Fake News Networks, among the most dishonest groups of people I have ever dealt with, criticize Sinclair Broadcasting for being biased,” Trump tweeted in April. “Sinclair is far superior to CNN and even more Fake NBC, which is a total joke.”

The scale of the deal also attracted an unlikely alliance of groups on the left and right in opposition.

Last week, a coalition of liberal consumer groups, cable companies and the conservative news outlet Newsmax, petitioned the FCC to delay its review of the merger while a federal court reviewed the agency’s decision on the UHF discount. The discount rule had been repealed during the Obama administration, making it harder for broadcasters to consolidate.

During oral arguments before the D.C. Circuit Court of Appeals in April, a panel of judges raised concerns about the agency’s vote to reinstate the rule.

Opponents of the Sinclair-Tribune merger argued that it would give too much power to a single media giant, allowing it to push out smaller outlets and gain an anticompetitive edge when negotiating with cable companies.

“It’s well past time for Sinclair to realize that its effort to engage in massive media consolidation has failed and that it should withdraw the transaction without delay so the FCC no longer needs to devote any of its limited resources to a doomed endeavor,” Matthew Polka, CEO of the American Cable Association, said in a statement Monday.

Jessica Rosenworcel, the lone Democrat on the commission, hailed Pai's decision.

"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. With this hearing designation order, the agency will finally take a hard look at its proposed merger with Tribune," she said in a statement. "This is overdue and favoritism like this needs to end."

The decision also rattled investors, with Sinclair's stock price sliding 5 percent and Tribune’s down nearly 12 percent.

Updated Tuesday at 9:14 a.m.