Sinclair Broadcasting'smay not be a slam dunk after all, as the Federal Communications Commission prepares to block the deal.
FCC Chairman Ajit Pai said in a statement Monday that he has "serious concerns" over the merger. It would create one of the largest broadcasting companies in the country and further consolidate the power of Sinclair, which owns nearly 200 local stations throughout the US. Sinclair is well known for its conservative views. Pai said he's concerned with key parts of the deal and plans to have an administrative law judge review the merger, which is usually the first step the FCC takes when it prepares to block an acquisition.
If the merger were to go through as proposed, Sinclair would have access to 72 percent of the TV viewing households in the US, exceeding a national ownership cap of 39 percent.
"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," Pai said in his statement.
Sinclair had proposed selling a number of stations to get under the cap, but the new owners have ties to the broadcaster, which critics said would allow the company to continue to control the stations.
Pai seemed to agree with those arguments.
Consumers advocacy groups, who often don't see eye-to-eye with Pai, applauded his decision.
"We're encouraged by Chairman Pai's apparent recognition that Sinclair's proposed divestiture of stations to shell companies is in fact unlawful," said Matt Wood of Free Press. "We encourage the FCC to examine all other such shell-company arrangements held by Sinclair, Tribune, and other broadcasters, too."
The announcement is unexpected given that many critics believed Pai was actively relaxing policies to pave the way for the Sinclair-Tribune merger. In February, the inspector general of the FCC reportedly began investigating Pai to determine if he had inappropriately pushed for rule changes that would help make the Sinclair merger easier to approve. Pai has denied these claims.
Critics of the merger, ranging from consumer rights groups to Democrats, have argued that a combined Sinclair-Tribune would be too influential, with many Americans still getting their news from local stations. They fear that independent voices could be silenced in many communities after reports emerged of Sinclair dictating must-air programming with a decidedly conservative veiwpoint at many of its US stations.
Earlier this year, the Maryland-based company had news anchors reading the same script warning viewers of "fake news." An online video that went viral showed dozens of TV hosts reading that script in unison.
While the FCC hasn't yet said it will block the deal, the FCC chairman's referral an administrative law judge sends a signal that it will likely deny the merger.
"Designating a transaction for a hearing is the FCC's first step toward denying the deal," Wood said. He said the Communications Act requires the FCC give merger applicants a shot at making their case before the agency withholds its approval. He also said it's "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."
Sinclair said in a statement that it was "shocked and disappointed" by the FCC's decision to refer the merger to an administrative hearing. And the company vowed to fight for the merger.
"We are prepared to resolve any perceived issues and look forward to finalizing our acquisition of Tribune Media," Ronn Torossian, a company spokesman, said in a statement.
"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. We look forward to working with regulators to make the merger a reality."
Updated Tuesday, July 17 at 11:55 am PT: The story was updated with a statement from Sinclair.
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