The FCC, as promised, released a hearing designation order asking an a judge to determine whether the Sinclair Broadcast Group “engaged in misrepresentation” in its pending $3.9 billion acquisition of Tribune Media.

Central to the review is how Sinclair presented its plans to divest stations in Chicago, Dallas and Houston in order gain regulatory approval. Those so-called “sidecar” deals could enable Sinclair to effectively continue operating the stations, FCC Chairman Ajit Pai said, in violation of federal rules.

Under those arrangements, WGN in Chicago would have been owned by a business associate of Sinclair chairman David Smith, the longtime former CEO and the son of the founder of Sinclair. In Texas, KDAF in Dallas and KIAH in Houston would go to to Cunningham Broadcast Corp., which the FCC describes as having an “intertwined relationship” with Sinclair. One Sinclair associate, longtime investment banker Michael Anderson, acquired Cunningham for a below-market price of $400,000.

Maryland-based Cunningham owns 20 television stations, 14 of which are operated through management agreements with Sinclair, the FCC pointed out. The children of Sinclair’s controlling shareholders are the beneficiaries of trusts controlling non-voting shares in Cunningham.

“Multiple formal pleadings have been filed opposing this latest divestiture plan,” the FCC notes in its order. “Most opponents challenge the divestitures as ‘shams’ intended to circumvent the local and national television multiple ownership rules.”

It goes on to note, “We are unable to find, based upon the record before us, that grant of the applications would be consistent with the public interest.” The Republican-controlled agency is requesting a hearing before the Administrative Law Judge to determine whether to transfer the broadcast licenses for the stations.

The FCC said it would halt review of the larger Tribune transaction until the questions have been resolved, raising larger questions about whether the media deal could unravel. After Pai this week raised what he called “serious concerns” about the sidecar transactions, many observers felt that move seriously jeopardized the deal to create a local TV power with reach into 62% of U.S. households.

Sinclair then outlined a plan to revise the divestiture scheme, finding new third-party buyers in Dallas and Houston and acquiring WGN as part of the overall Tribune purchase, as it said FCC rules permit.

The stocks of both companies have plummeted this week on the news, which threatens a transaction that has been pending since May 2017. Reacting to the HDO, RBC Capital Markets analyst Leo Kulp said Sinclair appears to be willing to play out the string, hoping to keep the deal on track. Even if it were to give up, it would still be the largest owner of stations in the U.S. and have many options open to it. “A lot will depend on Sinclair’s next move,” Kulp wrote in a research note. “If the company pursues the deal, the stock could remain at current valuations. If the company is able and decides to walk away from the deal, the stock could bounce as investors contemplate what Sinclair does with its lean balance sheet.”

The vast reach of the combined new company has kept the regulatory review in the headlines and has drawn criticism from both sides of the aisle. For decades, owners have been limited to having stations that collectively reach 39% of U.S. homes, though the FCC is also in the midst of reassessing the cap and is likely to ease it to about 50%. Pai’s maneuver with the HDO made many observers scratch their heads given the widespread perception that his majority was rapidly stripping away regulation, actions that de facto favor giant station groups like Sinclair.

Ties between Sinclair and President Donald Trump have intensified the controversy over the merger, whose views are often amplified in commentary segments that stations must air (some delivered by former Trump White House staffer Boris Epshtyn). Over the past year, Sinclair has found itself in the cross-hairs of late-night comedian John Oliver and featured in a viral video compilation of the company’s anchors reading scripted, suspiciously Trump-like “anti-fake-news” commentary.