FCC Chairman Raises “Serious Concerns” About Sinclair-Tribune Merger

UPDATED to include background and comment: FCC chairman Ajit Pai issued a statement today raising “serious concerns” about Sinclair Broadcast Group’s proposed $3.9 billion acquisition of Tribune Media. At issue are Sinclair’s plans to divest some stations to meet ownership limits in a way that would allow Sinclair to retain control of them “in practice, if not in name, in violation of the law,” Pai noted.

Pai said he had asked fellow commissioners to vote to send the deal to a hearing before an administrative law judge, implying months of delay, if not derailing the deal.

“Based on a thorough review of the record, I have serious concerns about the Sinclair/Tribune transaction,” Pai said in a statement issued this morning.

Sinclair’s stock fell nearly 6% in morning trading to $31 a share, off from the opening price of $32.95. Tribune Media’s shares fell off even more dramatically, dropping 15% to $32.60 this morning, down from $38.56 at the start of the trading day.

For a while, the transaction seemed likely to win regulatory approval easily. The FCC, under the Trump administration, relaxed or eliminated a number of rules governing broadcasters, including one that limits station ownership.

Clouds began to gather in February, when the Justice Department’s antitrust division was locked in a battle with Sinclair over how many stations it would need to sell to gain the deal’s approval.

Meanwhile, the office of FCC inspector general began investigating whether Pai and his aides had improperly pushed for the rule changes following their extensive contact with Sinclair executives that was detailed in a New York Times investigation.

FCC commissioner Jessica Rosenworcel applauded Pai’s decision.

Sinclair said in April that it would divest 23 television stations to win approval, but noted in regulatory filings that although it planed to sell the Chicago and New York stations to third parties it would enter into agreements to run them.

The Communications Workers of America and two of its major union affiliates last month petitioned the FCC to block the long-gestating Sinclair-Tribune merger, saying it would reduce competition, eliminate jobs and diminish the diversity of voices.

“Sinclair’s most recent divestiture proposal does not resolve these merger-related harms,” the petition argued. “In fact, the details of the divestiture proposal indicate that the inadequate plan will exacerbate these harms, as Sinclair will maintain effective control over at least six of those stations through ownership relationships and sidecar agreements.”

The consumer watchdog group Allied Progress issued a statement this morning saying Pai was right to call out Sinclair’s scheme of selling stations to close business associates so that it could retain control over the programming.

“Sinclair has a long track record of taking over respected stations, gutting local news coverage that communities rely on, and poisoning broadcasts with a partisan political agenda experts have called propaganda,” said Allied Progress Executive Director Karl Frisch. “When Sinclair has been forced to sell stations during previous mergers, it has routinely sold them to family and friends and then signed agreements to control the programming on these stations. The FCC is right to call out this scheme.”

American Cable Association President and CEO Matthew M. Polka went further, calling on Sinclair to abandon the deal, which he said would hurt consumers through higher fees.

“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,” Polka said.