Massive Sinclair Merger Still Faces Headwinds Despite FCC Boost

The DOJ looks set to crack down on Sinclair’s attempt to purchase Tribune Media even as the FCC clears a glide path.

FILE - In this Tuesday, Oct. 12, 2004, file photo, Sinclair Broadcast Group, Inc.'s headquarters stands in Hunt Valley, Md. Sinclair Broadcast Group, one of the nation's largest local TV station operators, announced Monday, May 8, 2017, that it will pay about $3.9 billion for Tribune Media, adding more than 40 stations including KTLA in Los Angeles, WPIX in New York and WGN in Chicago.
AP Photo/Steve Ruark
Nov. 15, 2017, 8 p.m.

Democratic lawmakers and liberal tech groups are sounding the alarm over the Federal Communications Commission’s planned Thursday vote to loosen the agency’s long-standing media-ownership rules. As the conservative Sinclair Broadcast Group prepares to purchase local-broadcasting conglomerate Tribune Media, opponents accuse President Trump’s FCC of greasing the wheels for the creation of a broadcast behemoth that will require local newscasts across the country to push right-wing programming.

But while the FCC does appear to be paving the way for the Sinclair-Tribune merger, the commission is not the only federal agency that must sign off on the proposed deal. The Justice Department’s Antitrust Division must also weigh in. And after last week’s surprising news that the DOJ is planning to block or severely restrict AT&T’s $85 billion bid to purchase Time Warner, observers from across the spectrum expect the department will also prove far less friendly to Sinclair’s planned $3.9 billion Tribune takeover.

“I think the likelihood that the Sinclair deal is cleared outright is zero,” said David Kully, a former antitrust official at the DOJ who’s now a lawyer at Holland & Knight. “I think that either the DOJ sues them because Sinclair isn’t willing to agree to divestitures, or they agree to divestitures.”

“Even if [the DOJ doesn’t] challenge the whole merger, I fully expect them to require divestitures,” agreed Michael Carrier, an antitrust professor at Rutgers University.

Some liberals—many of whom remain highly critical of the FCC’s apparent acquiescence to Sinclair—are nevertheless confident that Trump’s Justice Department will take their side. “I hope that DOJ will take a harder look, and I think they are going to take a harder look,” said Gigi Sohn, a former senior staffer for the previous Democratic FCC chairman. “This is a huge magnitude of merger here, in the broadcast space. It is so unprecedented.”

If Sinclair’s purchase of Tribune is allowed to go through without restrictions, the Trump-linked broadcasting conglomerate—already the largest in the country—would find its way into 72 percent of households in the United States. That would have been impossible earlier this year, before the FCC reinstated a rule allowing broadcasters to count only half of the area covered by high-frequency broadcast stations against the federal government’s nationwide audience cap of 39 percent.”

That decision, combined with the FCC’s impending relaxation of media-ownership rules and several other steps taken by the commission, has critics concerned that FCC Chairman Ajit Pai is working in lockstep with Sinclair and the White House to help spread Trump-friendly content to local news stations across the country.

On Monday, Reps. Frank Pallone and Elijah Cummings—the top Democrats on the House Energy and Commerce and Oversight committees, respectively—asked the FCC’s inspector general to open an investigation into whether Pai is coordinating with either Sinclair or the White House on the merger. “All of these actions—when taken in context with reported meetings between the Trump Administration, Sinclair, and Chairman Pai’s office—have raised serious concerns about whether Chairman Pai’s actions comply with the FCC’s mandate to be independent,” the lawmakers wrote.

Pallone’s concerns about a wide-ranging plot to usurp local media with Sinclair’s conservative programming also extends to the Justice Department, and the congressman holds little hope that its antitrust division will prove any less accommodating to Sinclair. “I’m concerned the administration is pushing Sinclair because of their ties to Sinclair,” Pallone told National Journal. “I would be shocked if the Trump administration did anything to block the Sinclair merger.”

But Pallone’s pessimism isn’t shared by many on the Left. Sohn says she’s known Antitrust Division head Makan Delrahim for a long time, calling him a “straight shooter.” And she believes the recent uproar over the DOJ’s targeting of the merger between AT&T and Time Warner—which many attribute to Trump’s disdain for CNN, a Time Warner subsidiary—could cause Delrahim to scrutinize Sinclair more carefully. “He may want to bend over backwards to show that the Justice Department is taking just as hard a look at conservative Sinclair as it is on so-called ‘liberal’ CNN,” she said.

There are structural issues that make DOJ intervention more likely. Unlike AT&T’s planned merger with Time Warner, Sinclair’s purchase of Tribune would be what’s known as a horizontal merger—the consolidation of two companies that previously operated in the same market. Those typically face much greater scrutiny than vertical mergers, and Carrier believes that, at a minimum, the DOJ will likely require Sinclair or Tribune to sell a significant number of stations to preserve competition in some broadcast markets.

Kully, who oversaw television acquisitions in his previous role at the DOJ, said the department has historically deferred to the FCC when it comes to approving or denying broadcast mergers. But as the FCC dismantles its prior limits to station ownership, he believes that deference could fall by the wayside. “If the FCC’s going to change its rules, that could change the dynamics and the nature of the investigation in a pretty material way,” he said.

On the political question, it may be too early to tell whether the Justice Department is part of a suspected conspiracy to promote conservative dominance in broadcasting. But Kully, at least, expects the DOJ to keep everything above-board. “I am confident that the DOJ staff attorneys are considering the merger on the merits, and are not considering the political impacts that this might have,” he said.

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