Sinclair Faces Expanded Probe For Shady Behavior During Tribune Merger

from the shell-games dept

Back when Sinclair was trying to acquire Tribune Broadcasting, you might recall the company was accused of some highly unethical behavior in order to get the deal done. Despite the FCC doing its best to neuter most media consolidation protections to help move the deal forward, the union would have still resulted in the merged company violating media ownership limits and dominating local broadcasting in a huge number of new markets.

To get around those limits, Sinclair allegedly got, uh, creative. Consumer groups accused Sinclair of trying to offload several of its companies to Sinclair-owned shell companies to pretend the deal would remain under the government's ownership cap. The company also tried something similar in trying to offload some stations to friends and other partner companies at highly discounted rates, allowing it to technically not "own" -- but still control -- those stations. Some of the deals involved offloading stations to relatives and friends, for example:

"Under Sinclair’s plan, flagship Tribune station WGN in Chicago would go to a car dealer who is a business associate of a top Sinclair executive, while outlets in Dallas and Houston would be sold to a company formerly controlled by the estate of the executive’s mother."

The efforts were so transparently shady, even the industry-cozy Pai FCC was forced to balk despite having spent the better part of a year trying to help the deal succeed. Ultimately the FCC took administrative steps that effectively killed the deal. Tribune then sued Sinclair for what it called an "unnecessarily aggressive" sales pitch.

And the fun isn't over for Sinclair just yet. The company is also now facing an expanded probe by the FCC into whether the company intentionally misled regulators when it detailed plans to divest stations:

"The so-called “sidecar” deals arranged by Sinclair in order to effect the divestitures involved entities without broadcast TV experience and with business ties to Sinclair. In at least one case, the valuation given for the station was far below the going market rate, raising questions about the process."

When even Ajit Pai thinks a major media and telecom company has gone too far, you know you've screwed up. That said, the FCC's inquiry here may not entirely about a genuine interest in transparency and accountability. FCC Commissioner Jessica Rosenworcel, for example, seemed to imply that one benefit of the FCC conducting a non-transparent investigation is that the real scope of Sinclair's behavior isn't likely to be made public:

This investigation is warranted. But any @FCC settlement negotiated behind closed doors will leave us with more questions than answers about one of the nation’s largest broadcasters. The FCC should hold a hearing in public on these questions and do it now. https://t.co/zpKJWIBH3O — Jessica Rosenworcel (@JRosenworcel) June 27, 2019

As it stands, law prohibits any one broadcaster from reaching more than 38% of U.S. homes, a rule designed to protect local reporting, competition and opinion diversity from monopoly power. The Sinclair deal would have given the company ownership of more than 230 stations, extending its reach to 72% of U.S. households. And while Sinclair wasn't able to consummate this deal, this sort of mindless media consolidation was already a problem, as that viral Deadspin video from last year made pretty clear:

And it's more than this kind of homogenized, consolidation "news" being rather creepy and teetering toward disinformation. There's data to suggest that when you obliterate nuanced local journalism and replace it with monolithic, partisan crap from the likes of Sinclair, you wind up with a more divided and less informed populace. That populace is far less likely to think independently, and far more likely to just double down on partisan viewpoints, which can actually swing elections.

So while the idea of protecting the diversity of local media is often viewed as something that's "partisan" in and of itself, the protection of quality, truly local journalism is something that benefits everybody. It's not clear that's a lesson that has truly gotten through to many Americans, whether this particular merger succeeded or not.

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Filed Under: divest, fcc, investigation, merger, ownership, ownership rules, sidecar

Companies: sinclair, tribune