FCC Confirms Sinclair Misled Agency To Try And Get Its Megamerger Approved

from the disinformation-nation dept

Last week, the FCC shocked many by sending the Sinclair Tribune merger to merger review purgatory. It was shocking, in part, because the FCC had spent the better part of the last year comically neutering decades-old media consolidation rules specifically at Sinclair's behest, only to suddenly turn around and find fault with Sinclair's logic, relegating the merger review to an administrative law judge (historically the death knell for similar deals). Many of these rules have traditionally had bipartisan support, since they prevent any one company from dominating local media and distorting public discourse.

In a statement, FCC boss Ajit Pai indicated that the company appears to have misled regulators in its bid to pretend the deal would fall under the national media ownership cap, which bans any one broadcaster from serving more than 39% of the population. Again, a stark and sudden reversal for an agency that, until last week, had been taking an ax to decades-old media consolidation rules specifically to help grease the skids for the controversial deal, which would have given Sinclair ownership of more than 230 stations reaching 72% of the public.

Sinclair's merger is controversial thanks to the company's comically-slanted and highly misleading local news coverage, which recently made headlines thanks to a viral Deadspin video showing the facts-optional claptrap the broadcaster forces local stations to air in somewhat creepy synchronicity. But Pai kept going out of his way not only gutting media ownership rules, but re-instating obscure bits of regulation specifically to help Sinclair tiptoe around such limits (odd for a guy that complains endlessly about "burdensome, unnecessary regulation").

Pai's efforts to aid Sinclair were so blatant, he's now facing an investigation by the FCC's nonpartisan Inspector General into whether he coordinated the assault on the rules with Sinclair.

In short, for Pai to retreat from his Sinclair cronyism, the company must have done something notably idiotic. That something was subsequently laid out in the full FCC order (pdf) shoveling merger review off to an administrative law judge, something traditionally seen as fatal for such deals. The order notes that Sinclair, as some consumer groups had noted, had been trying to tap dance around remaining ownership rules by offloading some broadcasters to shell companies, subsidiaries and Sinclair partners at highly-discounted rates, hoping to then reacquire those companies after the deal was approved.

The FCC's order is decidedly polite about it, but repeatedly notes how Sinclair tried to bullshit its way around the fact it had business ties to many of these potential partners and would, in many instances, still be running these broadcast stations post merger. Many of these partners had absolutely zero experience running local broadcasters, and were usually tied to Sinclair in some capacity. Like Steven Fader, CEO of a car dealership, who the FCC notes would have received a decidedly "below market value" deal as part of Sinclair's plan:

"By way of example, one application proposed to transfer WGN-TV in Chicago to an individual (Steven Fader) with no prior experience in broadcasting who currently serves as CEO of a company in which Sinclair’s executive chairman has a controlling interest. Moreover, Sinclair would have owned most of WGN-TV’s assets, and pursuant to a number of agreements, would have been responsible for many aspects of the station’s operation. Finally, Fader would have purchased WGN-TV at a price that appeared to be significantly below market value, and Sinclair would have had an option to buy back the station in the future. Such facts raise questions about whether Sinclair was the real party in interest under Commission rules and precedents and attempted to skirt the Commission’s broadcast ownership rules."

If you watched the FCC railroad consumer interest and trample all objective science during the net neutrality repeal, it's understandable why Sinclair executives thought they'd be able to peddle this sort of bullshit at the agency. But the FCC investigation into Pai, who has pretty obvious post FCC political ambitions, likely gave the agency boss pause. Others think that opposition to the deal by Trump pal Rupert Murdoch (who was also advocating for the blocking of the AT&T Time Warner deal) may have also played a role in the FCC's decision to walk back from this decidedly-unstable branch.

Regardless, Pai's blockade ensures that the Sinclair merger (at least as written) is likely dead, and it shows that Pai's agency does occasionally do the right thing, even if it's probably for the wrong reasons.

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Filed Under: ajit pai, fcc, merger, tv ownership

Companies: sinclair