In Blow to Sinclair, FCC Chief Says He Has ‘Serious Concerns’ With Tribune Deal
Posted July 16, 2018 6:30 p.m. EDT
Updated July 16, 2018 6:43 p.m. EDT
The Sinclair Broadcast Group’s plan to create a broadcasting behemoth that could rival Rupert Murdoch’s Fox News was dealt a potentially crippling blow Monday by the chairman of the Federal Communications Commission.
Sinclair, already the largest owner of local television stations in the United States, is seeking to buy rival Tribune Media for $3.9 billion.
The FCC’s chairman, Ajit Pai, said Monday that he had “serious concerns” with the acquisition and was seeking to have a judge review aspects of the deal.
The purchase has the potential to put Sinclair, which has emerged as a significant platform for conservative viewpoints, in control of broadcasters reaching 7 in 10 households across the country, including in New York, Chicago and Los Angeles. That level of dominance has prompted an outcry from consumer and media groups.
Rules forbid a single company to control airwaves that reach such a large swath of the nation, so Sinclair proposed selling off 23 broadcast stations as part of its merger agreement with Tribune. The combined company would still control 215 stations, reaching 62 percent of households in 102 television markets.
It is that proposal that has come under scrutiny. “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,” the commission’s chairman, Ajit Pai, said in a statement.
Four of the 23 stations that Sinclair has agreed to sell would effectively remain within its control through contractual agreements known as “sidecars.”
For instance, Sinclair proposed selling the Chicago station WGN-TV to a Maryland businessman, Steven Fader, who has ties to Sinclair’s executive chairman, David D. Smith. Sinclair would get $60 million in the sale, but it would continue to sell advertising and provide programming for the station. Sinclair would also take 30 percent of the station’s revenue in fees for that service. The company could end up taking a higher proportion of the station’s revenue by recouping costs associated with its ad sales services per the agreement.
Sinclair also agreed to sell a Dallas station and a Houston station to Cunningham Broadcasting, a privately held company that is controlled by Smith’s family, according to securities filings.
These contracts effectively provide regulatory cover by transferring the FCC license to another company, or name, while still allowing the seller to operate the business, said Craig Aaron, president of the consumer advocacy group Free Press.
“Sinclair is setting up front groups to run these stations to get around these rules,” he said.
Sinclair did not respond to requests for comment. Tribune declined to comment.
Aaron and other close observers of the Sinclair-Tribune deal expressed bewilderment over Pai’s latest move. Since becoming chairman in January 2017, Pai has enacted or proposed a wish list of policy changes advocated by Sinclair. The FCC has eased a cap on how many stations a broadcaster can own and has relaxed a restriction on television stations’ sharing of advertising revenue and other resources.
“This is very surprising given Ajit Pai has used most of his tenure at the FCC to do favors to benefit Sinclair,” Aaron said. “I’m actually having to pick up my jaw off the floor.”
Pai has asked the agency’s four commissioners to hand off its review of the merger to an administrative law judge to determine the legality of Sinclair’s proposal.
Jessica Rosenworcel, one of the commissioners, said she would vote to put the decision in the hands of a judge. Another commissioner, Michael O’Rielly, approved the order as long as a timeline for the hearing is defined. Three of the four commissioners have to approve the order, but it cannot proceed until all four have voted.
Pai has been the subject of an investigation by the office of the FCC’s inspector general, which has been looking into whether he and his aides improperly pushed for the rule changes and whether they had timed them to benefit Sinclair. The status of the investigation is unclear.
Sinclair has required its stations to run conservative commentary, known internally as “must runs,” that often espouse talking points from the Trump administration.
As examples, Sinclair has ordered stations to run a daily segment from a “Terrorism Alert Desk” with updates on terrorism-related news from around the world. During the 2016 election campaign, it sent out a package that suggested in part that voters should not support Hillary Clinton because the Democratic Party was historically proslavery.
Sinclair’s acquisition of Tribune would further amplify its news programming. A Pew Research Center study from 2016 showed that almost 60 percent of adults got their news from television and that, of those, almost 50 percent relied on local stations.
Even other conservative media publishers have called for more scrutiny of the deal. Christopher Ruddy, the chief executive of the conservative news network Newsmax, praised Pai’s latest move.
“Republicans, Democrats and those that are concerned about the concentration of media power should join me in commending Chairman Pai for his independence and integrity,” he said.