FCC chief raises concerns on Sinclair deal
The Sinclair Broadcast Group’s plan to create a broadcasting behemoth that could rival Rupert Murdoch’s Fox News was dealt a potentially crippling blow Monday by the chairman of the Federal Communications Commission.
Sinclair, already the largest owner of local television stations in the United States, is seeking to buy rival Tribune Media for $3.9 billion.
The FCC’s chairman, Ajit Pai, said Monday that he had “serious concerns” with the acquisition and was seeking to have a judge review aspects of the deal.
The purchase has the potential to put Sinclair, which has emerged as a significant platform for conservative viewpoints, in control of broadcasters reaching seven in 10 households across the country, including in New York, Chicago and Los Angeles. That level of dominance has prompted an outcry from consumer and media groups.
Rules forbid a single company to control airwaves that reach such a large swath of the nation, so Sinclair proposed selling off 23 broadcast stations as part of its merger agreement with Tribune. The combined company would still control 215 stations, reaching 62 percent of households in 102 television markets.
It is that proposal that has come under scrutiny.
“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,” the commission’s chairman, Ajit Pai, said in a statement.
Four of the 23 stations that Sinclair has agreed to sell would effectively remain within its control through contractual agreements known as “sidecars.”
For instance, Sinclair proposed selling the Chicago station WGN-TV to a Maryland businessman, Steven Fader, who has ties to Sinclair’s executive chairman, David D. Smith. Sinclair would get $60 million in the sale, but it would continue to sell advertising and provide programming for the station. Sinclair would also take 30 percent of the station’s revenue in fees for that service. The company could end up taking a higher proportion of the station’s revenue by recouping costs associated with its ad sales services per the agreement.
Sinclair also agreed to sell a Dallas station and a Houston station to Cunningham Broadcasting, a privately held company that is controlled by Smith’s family, according to securities filings.
These contracts effectively provide regulatory cover by transferring the FCC license to another company, or name, while still allowing the seller to operate the business, said Craig Aaron, president of the consumer advocacy group Free Press.
“Sinclair is setting up front groups to run these stations to get around these rules,” he said.
Sinclair did not respond to requests for comment. Tribune declined to comment.