The Washington PostDemocracy Dies in Darkness

FCC chairman has ‘serious concerns’ about the Sinclair-Tribune merger and could seek to block the deal

The headquarters of the Sinclair Broadcast Group in Hunt Valley, Md., which is the largest owner of local television stations in the United States. (Win McNamee/Getty Images)

(A previous version of this story said that FCC Chairman Ajit Pai made his statement on Thursday. Pai spoke on Monday. This version has been corrected.)

Sinclair Broadcasting’s bid to create a conservative television giant appeared to be in doubt on Monday after federal regulators highlighted “serious concerns” with the proposed acquisition of Tribune Media, which is seeking to stretch the boundaries of what is allowed in U.S. broadcast ownership.

The chairman of the Federal Communications Commission, Ajit Pai, said that he intends to send key parts of the $3.9 billion deal to be reviewed by an administrative law judge, which is typically the first step the FCC takes when it seeks to block a deal. The sudden clampdown on the Sinclair deal marks a shift from Pai’s previous moves to deregulate the broadcast industry.

Sinclair’s proposed merger would give the conservative broadcaster unprecedented grip over American TV screens. Its original proposal, if approved, would grant Sinclair access to 72 percent of television households in America, far surpassing a national ownership cap of 39 percent. The FCC’s national ownership cap limits the reach of any one broadcast company, in an effort to ensure enough independent voices can thrive on the airwaves.

To get beneath the cap, Sinclair had proposed spinning off several stations. But a number of the owners of the stations that would be spun off have close ties to Sinclair, which critics said would allow Sinclair to stay in control of the stations it sold — divestitures that appeared designed to evade the FCC’s rules.

Pai said Monday he found those arguments persuasive.

“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,” said Pai.

Sinclair said in a statement late Monday that it has been transparent with the regulator. “At no time have we misled the FCC in any manner whatsoever with respect to the relationships or the structure of those relationships proposed as part of the Tribune acquisition,” the company said.

Sinclair signaled that it intends to pursue the deal for Tribune. “We are prepared to resolve any perceived issues and look forward to finalizing our acquisition of Tribune Media. The proposed merger of Sinclair Broadcast Group and Tribune Media will create numerous public interest benefits and help move the broadcast industry forward at a time when it is facing unprecedented challenges.” Sinclair’s stock ended down more than 11 percent Monday.

Sinclair’s political leanings highlight the political undertones to the deregulation Pai has spearheaded. Sinclair is a supporter of President Trump, and the acquisition of dozens of Tribune media stations would give conservative media a wider platform. But Pai has faced criticism from lawmakers and consumer groups for approving policy changes that could benefit Sinclair as it seeks to close its deal.

Pai’s tenure leading the FCC since 2017 has been marked by multiple efforts to relax regulations on TV broadcasters. The agency last year repealed one rule that required local broadcast stations to operate a physical studio in the markets for which they hold a license. In another move, the FCC said it would no longer block media mergers that left fewer than eight remaining independent stations in a market.

In February, Pai reportedly came under investigation by the FCC’s own inspector general to determine whether he inappropriately pushed for rule changes that could help Sinclair’s deal pass regulatory muster. But Pai has also sought to distance himself from Sinclair at times, in one case pushing to fine the company $13.4 million over its alleged failure to inform viewers that the subject of some of its news content had paid for the exposure.

The merger under investigation — proposed last spring — sought to bring Tribune’s 42 TV stations under Sinclair’s roof. Tribune controls stations in seven of the nation’s top 10 markets. The initial merger sought to build the biggest television company in America, with reach into 233 stations across 108 markets.

“In general, this kind of media ownership concentration is dangerous for our democracy,” said Victor Pickard, a media scholar at the University of Pennsylvania’s Annenberg School for Communication. “Americans are still very reliant on local television news.”

To satisfy regulators, Sinclair said earlier this year it was willing to sell TV stations in a number of major media markets, including WGN in Chicago and WPIX in New York. Sinclair said it would spin off the Chicago network to Steven Fader, a business associate of Sinclair chairman David Smith. The New York station would go to Cunningham Broadcasting Corp., a media company said to have family ties to Smith. The company later said WPIX would not be spun off, but that Cunningham would still be buying at least two other stations in Dallas and Houston.

The sales of the stations in Dallas, Houston and Chicago proved problematic for Pai, according to three people familiar with the matter, speaking anonymously in order to discuss internal agency deliberations.

Pai’s draft proposal that the divestitures be reviewed characterized the Chicago spinoff as “potentially involv[ing] deception,” according to two of the people.

Although the request for legal review narrowly targets those divestitures, the outcome could dramatically affect the merger’s overall fate.

“The divestitures are really key to the deal going through," said Matt Wood, policy director for the advocacy group Free Press. “There’s no way Sinclair can sit under the national ownership cap without them.”

Critics of the deal say it could limit the number of independent voices on the air, after news reports of programming on Sinclair-owned stations being dictated from its Maryland corporate headquarters. Sinclair did not respond to The Post’s requests for comment at the time, but Sinclair executives defended the programming internally in a memo, according to CNN, saying the company’s mission is to share information “to alert, protect and empower our audiences.”

Sinclair has been known to write scripts in the past that local anchors are required to read; in April, an online video of such a performance went viral — showing dozens of TV hosts intoning against the dangers of “fake news" and warning that other members of the media “use their platforms to push their own personal bias and agenda to control exactly what people think.” The company also requires its stations to run conservative commentary by Boris Epshteyn, a former Trump White House official, as often as nine times a week.

The FCC has used the administrative law review tactic to effectively block mergers in the past, such as AT&T’s failed bid for T-Mobile in 2011 and Comcast’s ill-fated purchase of Time Warner Cable in 2015. The court-like proceeding is complex and can take multiple years to resolve. As a result, companies faced with the prospect have resorted to canceling their deals rather than going through with the process.

Pai’s proposal already has the necessary three votes to move forward. Brendan Carr, a Republican FCC commissioner, voted in favor, according to an FCC official, speaking on condition of anonymity to discuss internal agency deliberations. Democratic commissioner Jessica Rosenworcel also said in a statement she intends to support the recommendation.

“Too many of this agency’s media policies have been custom built to support the business plans of Sinclair Broadcasting," Rosenworcel said in a statement. "With this hearing designation order, the agency will finally take a hard look at its proposed merger with Tribune.”