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FCC call for new hearing on Sinclair is very bad news for Baltimore broadcaster

In a surprising move, Federal Communications Commission Chairman Ajit Pai Monday referred the request by Sinclair Broadcast Group to buy Tribune Media to an administrative law judge for hearing and review. The move sent the Baltimore-based broadcaster's stock prices tumbling.
In a surprising move, Federal Communications Commission Chairman Ajit Pai Monday referred the request by Sinclair Broadcast Group to buy Tribune Media to an administrative law judge for hearing and review. The move sent the Baltimore-based broadcaster's stock prices tumbling. (Jacquelyn Martin / AP)

It looks like Sinclair, the right-wing Baltimore-based broadcast group, might have finally gone too far in trying to end-run rules put in place by Congress to ensure diversity and some local ownership of TV stations.

Ajit Pai, the chair of the Federal Communications Commission who earlier this year was pilloried for reversing net neutrality, surprised many in the media world Monday by announcing that he had “serious concerns” about the deal by Sinclair to take over Tribune Media and was referring it for a hearing and further review before an administrative law judge.

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Some analysts see such a move as a deal killer. I wouldn’t go that far at this point, but the statement from Pai sent Sinclair stocks tumbling 6.5 percent in morning trading, while Tribune dropped 15 percent.

The action is certainly at odds with the statement from Sinclair CEO Chris Ripley last fall that he thought the deal, which was announced in May 2017, could close by the end of 2017.

HORSEY; SINCLAIR BROADCASTING; TRUMP; FAKE NEWS ** OUTS - ELSENT, FPG, TCN - OUTS **
HORSEY; SINCLAIR BROADCASTING; TRUMP; FAKE NEWS ** OUTS - ELSENT, FPG, TCN - OUTS ** (David Horsey)

The $3.9 billion deal would have allowed Sinclair, which was already the largest station owner in the U.S., to add 42 Tribune stations in such major markets as New York and Chicago, giving it more than 200 stations and access to 70 percent of American households.

At the time of Ripley’s optimistic statement on when the deal might close, Pai was using his post as chair and deciding vote on the commission to ease ownership rules right and left to make approval possible.

I wrote several pieces denouncing his moves and predicting infamy for Pai, a Trump appointee as chair who seemed hellbent on shredding regulations put in place by the Communications Act of 1934 to guarantee that the airwaves served the public interest of viewers as well as corporate interests of the owners. Pai and the deal have reportedly since come under investigation by the agency’s inspector general.

And then came Monday’s statement from the chairman focusing on the kind of deals Sinclair was trying to make to divest itself of enough stations to win FCC approval. In Sinclair’s case, though, it once again looked to some like divesting without really divesting — using a long-time practice of the company in having friends and business associates listed as owners of the station, while Sinclair actually ran them.

“Based on a thorough review of the record, I have serious concerns about the Sinclair/Tribune transaction,” Pai’s statement said. “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 went on to say, “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.”

America, meet Sinclair Broadcasting head David Smith
(KAL/Baltimore Sun)

To anyone who cares about the kind of local ownership and community accountability envisioned by the Communications Act of 1934, Pai’s statement was good news.

Indeed, it was applauded by such conservative media platforms as Newsmax and progressive consumer watchdog groups as Allied Progress.

“I applaud Chairman Pai’s decision today to designate the Sinclair-Tribune transaction for further review and hearings,” Chris Ruddy, CEO of the conservative media platform Newsmax said in a statement. “Clearly this decision is based on the facts and law — specifically that Sinclair has not complied with requirements set forth by the FCC to promote diversity, localism and competition.”

“Sinclair has a long track record of taking over respected stations, gutting local news coverage that communities rely on, and poisoning broadcasts with a partisan political agenda experts have called propaganda,” Karl Frisch, executive director of Allied Progress, said in a statement. “When Sinclair has been forced to sell stations during previous mergers, it has routinely sold them to family and friends and then signed agreements to control the programming on those stations. The FCC is right to call out this scheme.”

Amen.

But here’s why I think those alarmed at the expansion attempt by Sinclair should not yet let their guard down.

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President Trump has so polluted the regulatory environment that the move to a hearing before an administrative law judge might just be a way to take the heat off Pai for his actions on net neutrality.

Maybe Pai and Team Trump know something about how that hearing is going to proceed and who is going to be in charge.

If that sounds paranoid, so be it. If Trump can affect the Supreme Court to the extent that he has already done, what’s an administrative law judge on a station ownership hearing?

All I am saying to the many entities that opposed this deal: Stay vigilant.

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