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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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Author’s Background and Caveats: ADVERTISING MATERIAL. The author has a robust communications and IT/IP practice and is available to advise on various legal fronts and issues, as well as serve as an expert witness in certain situations. He is well positioned to represent entities in various forums and before various government agencies, including the FCC.

Nothing contained in Pellegrin’s BriefCase is to be taken as the last word on any given subject discussed nor relied upon as legal advice; rather, the author’s comments on emerging trends in business and prescient decisions in the law and government regulations/interpretations/policy are meant to make the reader more aware of trending issues and risks.

Law and Business Consulting Services. At John D. Pellegrin, P.C. we view our role as legal counsel being essentially to “define the scope of the risk” for our clients. John also serves as Of Counsel to the law firm of Allred, Bacon, Halfhill & Young, PLC. He balances this full-time practice with active involvement in several community-based organizations. These include serving as Chairman/At Large Commissioner on the Fairfax County Small Business Commission; Rotary Club of West Springfield; Boy Scouts of America; National Eagle Scout Association; MVLE, Inc.; various Chambers of Commerce; MEPC (McLean Estate Planning Council), and the Purveyors Club. He has been recognized and honored with several awards over his lengthy legal career and for his community involvement, including a communications Golden Receiver Award, Community Champion Award (Springfield District, Volunteer Fairfax), and Distinguished Service Award (Rotary International).

The author may be reached at 703.250.1595 (ofc.); 703.598.0380 (mobile); or jp@lawpell.com. Website: www.lawpell.com; LinkedIn: https://www.linkedin.com/in/john-pellegrin-3178b31/; Twitter: @lawpell.

Pellegrin’s BriefCase is a Service Mark (SM) of John D. Pellegrin, P.C., and its contents are copyrighted ©, with all rights reserved. Pellegrin’s Briefcase/blog may be reposted or commented on if appropriate attribution is given this author.

Comments on/submissions to Pellegrin’s BriefCase are always welcome.

Pellegrin’s BriefCase SM/©

Volume 2, Issue #1 July 2018

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