Sinclair Broadcast faces a major regulatory roadblock to its planned acquisition of Tribune Media, with FCC Chairman Ajit Pai releasing a statement Monday expressing “serious concerns” about the deal and proposed an administrative review hearing.
Politico characterized the hearing that Pai announced as “a lengthy administrative process often viewed as a deal-killer.”
Specifically, Pai took issue with certain proposed TV station divestitures, which many critics have previously said would still give Sinclair control over based on services agreements.
“Based on a thorough review of the record, I have serious concerns about the Sinclair/Tribune transaction. 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 a statement. “When the FCC confronts disputed issues like these, the Communications Act does not allow it to approve a transaction. Instead, the law requires the FCC to designate the transaction for a hearing in order to get to the bottom of those disputed issues. For these reasons, I have shared with my colleagues a draft order that would designate issues involving certain proposed divestitures for a hearing in front of an administrative law judge.”
The FCC did not specify which divestitures would be reviewed.
Sinclair previously disclosed that it had lined up deals to sell 23 TV stations to buyers including Fox Television Stations, Cunningham Broadcasting and Standards Media to bring the $3.9 billion deal into compliance with media ownership rules. However, some of the agreements included joint sales and shared services agreements.
In late May, industry group the American Cable Association raised concerns that Sinclair had withheld too many details regarding planned station divestitures, in particular surrounding the abovementioned transactions. In an ex parte letter, the group noted that some “appear to contemplate an ongoing commercial relationship between Sinclair and the divested station’s new owner or to give Sinclair rights to purchase retain stations in the future.”
ACA said this raises “obvious questions” about compliance with ownership rules and antitrust rules.
Sinclair’s proposed merger would see it absorb 42 Tribune stations in markets like New York and Chicago, bringing its national station total to more than 200 stations.