"The pressure is working!" declared the advocacy group Free Press, a critic of media consolidation, in response to Federal Communications Commission (FCC) Chairman Ajit Pai's remarks on Monday that he has "serious concerns" about right-wing Sinclair Broadcast Group's proposed $3.9 billion merger with Tribune Media.
— Free Press (@freepress) July 16, 2018
In a statement (pdf) announcing a draft order that would require merger applicants to attend a hearing in front of an administrative law judge, Pai said Monday: "Based on a thorough review of the record, I have serious concerns about the Sinclair/Tribune transaction. 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."
"This is a giant win for the public, and a huge setback for Sinclair's mega-merger plans."
—Matt Wood, Free Press
Reuters reported that the FCC has the three votes needed to approve Pai's proposal, and the draft order—which has not been publicly released—notes that "Sinclair's actions here potentially involve deception" and possible "misconduct."
"This is a giant win for the public, and a huge setback for Sinclair's mega-merger plans," responded Free Press policy director Matt Wood.
"Public outcry has been building over Sinclair's takeover of local television for months. Just last week, Common Cause and its allies delivered over 600,000 signatures to the FCC urging the agency to block Sinclair's merger," noted Michael Copps, Common Cause special adviser and a former FCC commissioner. "The message is loud and clear: local news should reflect the concerns and interests of the communities they serve, not the will of a wealthy, powerful few. Sinclair's merger would make it too large and too powerful."
Although the Communications Act requires that the FCC allow applicants to argue their case before a merger can be denied, as Wood explained, "it is extremely rare for transactions to be sent to a hearing in the first place, much less for parties to fight it out and beat the FCC in that hearing. That's why analysts and investors rightly see today's news as potentially a fatal blow for this merger."
In other words, an approved hearing order kicks off "a lengthy administrative process often viewed as a deal-killer," Politico pointed out. "The agency used the same move in 2015 with the Comcast-Time Warner Cable deal, which the companies abandoned rather than go through the hearing process."
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Wood added that perhaps "the most interesting part of Pai's announcement is his recognition that several of the divestitures Sinclair proposed are a sham that would leave the company in control of stations it purportedly sells off to relatives and cronies of Sinclair executives."
Earlier this year, 15 members of the Coalition to Save Local Media, including Common Cause, sent a letter to the FCC raising alarm about "sidecar arrangements" that Sinclair planned to use to make the merger appear to comply with federal audience-cap rules, even though the company would continue providing all services to the "sold" stations.
"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."
—Jessica Rosenworcel, FCC commissioner
"We're encouraged by Chairman Pai's apparent recognition that Sinclair's proposed divestiture of stations to shell companies is in fact unlawful," Wood concluded. "We encourage the FCC to examine all other such shell-company arrangements held by Sinclair, Tribune, and other broadcasters, too."
The development came as a surprise considering that Pai is a Trump appointee and former Verizon lawyer who often has been accused of being too cozy with industries and companies he's charged with regulating—including Sinclair.
The sole Democratic FCC commissioner, Jessica Rosenworcel, welcomed (pdf) the chairman's move.
"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. "This is overdue and favoritism like this needs to end."
Rosenworcel, who said she voted in favor of the order, added on Twitter:
For too long I have been the only one at the @FCC complaining about the favoritism this agency has shown Sinclair. I am glad that my colleague @AjitPaiFCC now shares my concerns. He deserves credit for the hearing designation order seeking to halt the merger with Tribune.
— Jessica Rosenworcel (@JRosenworcel) July 16, 2018