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Tribune Media kills $3.9B merger with Sinclair after FCC's 'serious concerns'

Tribune says Sinclair breached its contract by misleading regulators.

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The merger would have created one of the largest broadcasting companies in the US.

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The controversial $3.9 billion merger between Sinclair Broadcast Group and Tribune Media is officially dead.

Tribune said Thursday it called off the sale of 42 TV stations to Sinclair and sued the company for breach of contract, saying in a statement that the broadcaster hurt the deal by trying to "maintain control over stations it was obligated to sell," by engaging in "unnecessarily aggressive and protracted negotiations with the Department of Justice and the Federal Communications Commission over regulatory requirements."

Sinclair announced separately that it had received Tribune's termination notice and has withdrawn the merger from consideration before the FCC

The news comes after FCC Chairman Ajit Pai last month expressed "serious concerns" regarding the merger, which would have created one of the largest broadcasting companies in the country and further consolidated the power of Sinclair, which owns nearly 200 local stations throughout the US.

If the merger had gone through as proposed, Sinclair would have had access to 72 percent of the TV viewing households in the US, exceeding a national ownership cap of 39 percent. Sinclair had proposed selling a number of stations to get under the cap, but the new owners have ties to the broadcaster, which would have allowed the company to continue to control the stations.

The FCC also accused Sinclair of misleading the agency about these relationships in an effort to get the deal approved. As a result, the FCC recommended the merger get an administrative hearing, the first step in rejecting the merger.

For these reasons, Tribune said in a statement that it didn't want to continue pursuing the merger.  

"This uncertainty and delay would be detrimental to our company and our shareholders. Accordingly, we have exercised our right to terminate the merger agreement, and, by way of our lawsuit, intend to hold Sinclair accountable," Tribune CEO Peter Kern said in the statement.

Tribune Media and Sinclair Broadcast Group had no further comment. The Department of Justice and FCC declined to comment. 

Critics warned of Sinclair's growing power

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.

These critics say they're relieved the merger won't be happening.

"Good riddance to a really bad deal that would have given Sinclair an unprecedented amount of control of our local media," Former FCC Commissioner Michael Copps said in a statement. "Broadcasters are supposed to serve the needs of the communities where they operate. But Sinclair has shown its only interest is taking over as many local stations as possible to become a national network at the expense of local programming and diverse viewpoints."

Many called the end of the merger a victory for independent journalism in the US. And they credited the work of grass roots activism for bringing awareness to the control Sinclair would have had on media throughout the country

"Already Sinclair's racist and biased must-run segments hurt local journalism and communities," Brandy Doyle, campaign manager for CREDO Action, a social change activist organization, said in a statement. "Thanks to grassroots pressure, even Trump's FCC had to acknowledge that this deal was bad for the public interest," she added. "The end of the merger is a victory for our media and democracy."

An unexpected ending 

The FCC's opposition to the deal came as a surprise, given that many had believed Pai had been 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.

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President Donald Trump has also been a strong supporter of Sinclair and its merger with Tribune. He even went so far as to bash the FCC on Twitter last month for trying to kill the mega deal, saying it was "so sad and unfair" that the FCC didn't approve the merger. He also lamented in his tweet that the would have provided a "conservative voice for and of the People." He compared the deal to the Comcast/NBC merger approved in 2011, which was a much different deal, combining a cable company with a broadcaster.  

"Liberal Fake News NBC and Comcast gets approved, much bigger, but not Sinclair. Disgraceful!" he tweeted.

This isn't the only time that Trump has inserted his views into deliberations of a major media merger. As a candidate for president, Trump vowed to block the merger between AT&T and Time Warner, saying it would concentrate too much power in one company. Trump's Justice Department sued to block that merger. But a judge didn't agree, and the merger was allowed to proceed without any conditions. AT&T and Time warner closed their deal in June. The DOJ has appealed that decision.

Originally published on August 9, 2018 at 6:54 am PT.
Update, 11:28 am PT: Adds information from Sinclair Broadcast Group and comments from critics of the merger. It also adds background information.

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