Sinclair/Tribune Merger Implosion
Updated: Sep 5, 2018
While mergers and acquisitions in various business sectors continue apace, the proposed merger of Sinclair Broadcast Group and Tribune Media just hit the proverbial skids.
By John Pellegrin, July 2017
The Washington Post reported on August 10th that Tribune is terminating its $3.9 Billion deal to be acquired by Sinclair and is filing suit against Sinclair, seeking $1 Billion in damages.
The gravamen of Tribune’s complaint -- Sinclair’s alleged “misconduct” in its dealings and negotiations with the FCC and Department of Justice in the initial review process as to their proposed mega-merger. The FCC had just given the proposed merger of these two media giants the proverbial “kiss of death” by designating the necessary transfer/assignment applications covering all 42 Tribune TV and radio broadcast station licenses for evidentiary hearing before an FCC Administrative Law Judge. Such designation for hearing is a rare move on the part of any independent federal agency. This hearing was ordered by a unanimous vote of all five Commissioners (three Republicans and two Democrats), with pointed negative comments made by several Commissioners, including the Chairman.
In designating the proposed license transfers for hearing, the Commission stated it was very concerned that Sinclair had not been completely forthright as to its proposed spin-off of TV stations in Chicago, Dallas, and Houston to alleged independent third parties; rather, the FCC was of the view that Sinclair would still effectively control these stations through other business affiliations with admitted common business partners and Sinclair’s retention of the right to program these jettisoned stations. The FCC has always been concerned with “real party in interest” issues when it comes to broadcast licensee ownership, control and programming.
In the hearing designation Order, a unanimous Commission noted that Sinclair appeared to be less than fully candid or truthful in answering pointed FCC-and DoJ-posed questions as to the on-going effective control and programming of these particular stations.
While the FCC’s cross-ownership rules have been significantly relaxed over the past few years as to the number of stations a single entity may own within a given market as well as the total number of stations/percent of households nationwide, the FCC still has restrictions in place that must be observed. Here, the primary restriction or cap was the percentage of the American public/households that would be subject to any one given station owner’s reach and programming influence. The current percentage allowed is 29 percent of all U.S. households nationwide. The Sinclair/Tribune merger would have given Sinclair entre to 70 percent of the American populace/households. Hence, the DoJ’s and FCC’s insistence in negotiations with Sinclair that it divest several TV stations in major markets to bring it into closer compliance with the 29 percent maximum. (With the addition of all 42 Tribune stations, this merger would have given Sinclair a total of 233 stations in 108 broadcast markets.)
The FCC has as one of its statutory mandates the promotion of robust media competition and this proposed merger/consolidation raised many concerns on this front. Coupled with Sinclair’s perceived “misrepresentations,” “lack of candor,” dissembling and misleading statements, the Commission felt compelled to designate the overall merger application for hearing.
Take-away: It has been this author’s observation over the years in practicing before the FCC that the worst offense one might commit vis-à-vis a federal regulatory agency is to misrepresent, or be less than candid or completely truthful in any representations made to these agencies. When the FCC’s hearing designation Order recited these issues to be further investigated, the fate of Sinclair and the merger itself was undoubtedly doomed.
Pellegrin’s BriefCase SM/©
Volume 2, Issue #1 August 2018
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Pellegrin’s BriefCase SM/©
Volume 2, Issue #1 July 2018