FCC votes against Sinclair/Tribune merger, likely dooming deal

FCC sends Sinclair/Tribune merger into purgatory—vote refers deal to a judge.

Jon Brodkin – Jul 19, 2018 12:45 pm | 52

A sign for the Sinclair Broadcast buildings seen on October 12, 2004 in Hunt Valley, Maryland. Credit: Getty Images | William Thomas Cain

Sinclair’s last-ditch change wasn’t enough

After Pai’s announcement, Sinclair said it would revise its station divestiture plan in an attempt to avoid the referral to a judge. But the FCC was not swayed.

Pai’s proposal was on circulation, meaning that commissioners could vote on it at any time even though there isn’t an FCC meeting this week. Pai’s proposal quickly gained support from Democratic Commissioner Jessica Rosenworcel and Republican Commissioner Brendan Carr. Republican Commissioner Michael O’Rielly said prior to the vote that he would only support Pai’s referral if it “include[s] sufficient and defined timelines for the [judge] to conduct and process a hearing.”

It’s not clear whether the order included such a timeline, but the FCC said it would release the full text of it sometime today.

Sinclair owns or operates 173 broadcast TV stations in 81 markets, while Tribune has 42 stations in 33 markets. If no divestitures were made, “the combined company would reach 72 percent of US television households and would own and operate the largest number of broadcast television stations of any station group,” the FCC notes.

UPDATE: The FCC has released the full order. Here’s one of the key parts:

Among these applications were three that, rather than transfer broadcast television licenses in Chicago, Dallas, and Houston directly to Sinclair, proposed to transfer these licenses to other entities. The record raises significant questions as to whether those proposed divestitures were in fact “sham” transactions. By way of example, one application proposed to transfer WGN-TV in Chicago to an individual (Steven Fader) with no prior experience in broadcasting who currently serves as CEO of a company in which Sinclair’s executive chairman has a controlling interest. Moreover, Sinclair would have owned most of WGN-TV’s assets, and pursuant to a number of agreements, would have been responsible for many aspects of the station’s operation. Finally, Fader would have purchased WGN-TV at a price that appeared to be significantly below market value, and Sinclair would have had an option to buy back the station in the future. Such facts raise questions about whether Sinclair was the real party in interest under Commission rules and precedents and attempted to skirt the Commission’s broadcast ownership rules. 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.

O’Rielly also released a statement, saying that he supported the order because it “requires that 15 days after the period by which applicable parties may apply to the ALJ [administrative law judge] to be heard, a complete schedule will be issued by the ALJ, including a date for completion.”

This will provide “a hint of due process,” O’Rielly said.