Sinclair’s merger with Tribune is in jeopardy – CNET

The Federal Communications Commission is trying to put the kibosh on Sinclair Broadcast Group’s controversial $3.9 billion takeover of Tribune Media. But the media giant has vowed to continue its fight.

On Monday, Chairman Ajit Pai said he has “serious concerns” over the merger, a signal the agency will recommend rejecting the deal.

The announcement was unexpected given how friendly many of Pai’s policies seemed to be toward Sinclair. Some worried Pai had gotten so cozy with the company that the inspector general of the FCC had reportedly begun investigating Pai to determine if he had inappropriately pushed for rule changes that would help make the Sinclair merger easier to approve.

Pai has repeatedly  denied these claims.

Critics of the merger, ranging from consumer rights groups to Democrats, say it would give conservative-leaning Sinclair, which already owns nearly 200 stations, too much power to influence local media. But Sinclair argues that the deal is critical to ensuring the future of free, over-the-air television and that it better positions the company to compete with online giants such as Facebook and Google for advertising.

In a statement Monday, the company said it was “shocked and disappointed” that the FCC has issues with the deal.  But the company said it isn’t giving up just yet.

“We are prepared to resolve any perceived issues and look forward to finalizing our acquisition of Tribune Media,” it said in a statement. “The proposed merger of Sinclair Broadcast Group and Tribune Media will create numerous public interest benefits and help move the broadcast industry forward at a time when it is facing unprecedented challenges.”

To help you make sense of what’s been going on, CNET has put together this FAQ.

Who are these companies again?

Sinclair Broadcast is the largest TV broadcasting company, owning 193 television stations and 589 channels in 89 markets.

Tribune Media owns 42 television stations. More importantly, many of those stations serve major cities such as New York, Los Angeles, Chicago and Washington, D.C.

Why are people concerned about this deal?

Sinclair is considered a conservative-leaning company and has routinely pushed its local stations to air so-called “must-run” segments. It would be one thing if these segments were locally produced and reflected that community’s views, but they are centrally produced and distributed to Sinclair’s local stations across the nation.

Former journalists at a Sinclair-owned station in Seattle have complained that the content is often politically biased and poorly produced, according to a New York Times report. “Must-run” segments included things like daily “terrorism alert” reports and a 2016 piece questioning support for Hillary Clinton on the grounds of the Democratic Party’s historic ties to slavery, the Times said.

Earlier this year, the company began forcing journalists at its affiliates to read these “must-run” scripts. An unnamed anchor told CNN in March that many people in the newsroom were “uncomfortable” with the new initiative called “anchor delivered journalistic responsibility messages.”

A video from Deadspin went viral in April showing how Sinclair had its news anchors across the country read the same script warning of alleged bias in reporting by other media outlets. The script featured in the Deadspin video sounds eerily similar to an editorial that aired last year from Scott Livingston, Sinclair’s vice president for news, accusing the national news media of publishing “fake news stories.”

Then there are Sinclair’s ties to the Trump campaign during last year’s election.

What’s the connection with Trump?

According to a December 2016 story in Politico, the Trump camp “struck a deal with Sinclair Broadcast Group during the campaign to try and secure better media coverage.” Trump’s son-in-law, Jared Kushner, reportedly told a group of executives that the campaign promised to give Sinclair more access to Trump. In exchange, Sinclair would broadcast their Trump interviews across the country without commentary, Politico reported.

In March 2017, the New York Post reported that Trump had close ties to the executive chairman and former CEO of Sinclair, David Smith, and that the two had discussed possible changes to media ownership rules. Pallone and Cummings noted these connections in the letter they sent to the inspector general.

In April, Trump also defended Sinclair against charges of bias in the wake of the Deadspin viral video.  

“So funny to watch Fake News Networks, among the most dishonest groups of people I have ever dealt with, criticize Sinclair Broadcasting for being biased,” Trump tweeted Monday. “Sinclair is far superior to CNN and even more Fake NBC, which is a total joke.

Are the Democrats worried about that connection?

Yep. Some expressed concerns that Trump’s relationship with Sinclair has flowed down to Pai, who was selected by the president to serve as chairman.

“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,” Democratic Reps. Frank Pallone from New Jersey, and Elijah Cummings from Maryland, wrote in their letter to the FCC’s inspector general..

What actions has the FCC taken that concerned critics?  

The FCC voted in November to relax several media ownership rules, including a provision that would allow broadcast groups to own two of the top four TV stations in a market, as well as eliminate a rule that prohibits ownership of both a newspaper and broadcast station in the same market.  The change would allow more broadcasters to combine with newspapers in the same market.

These rules, which were created more than 40 years ago, were meant to ensure a variety of perspectives on public airwaves.

Pai said that the rule is no longer needed and that it puts broadcasters at a disadvantage when competing for ad revenue with internet giants such as Facebook and Google.

The agency was also expected to vote in July to alter the limits on how many TV stations a company can own. Currently, broadcasters are capped at a national audience reach of 39 percent. It’s unclear what the suggested new cap would be. But the agency ended up not taking that vote.

Anything else?

Last summer the FCC reopened a decades-old regulatory loophole called the “UHF discount” that, critics say, essentially paved the way for the Sinclair-Tribune merger.

The UHF discount allows Sinclair to undercount the reach of some of its stations, which is important because of an FCC rule that no entity can own stations reaching more than 39 percent of the nation’s TV households.

The FCC eliminated this loophole in September 2016 when the agency was controlled by Democrats. Pai reinstated it in April, just ahead of the merger announcement in May.

What else has the FCC done that might help Sinclair?

The FCC also voted last year to adopt a new framework for a next-generation TV standard called ATSC 3.0, which would allow broadcasters to stream video to mobile devices. Commissioner Jessica Rosenworcel, a Democrat, has noted that Sinclair owns several patents for the technology, which has made her suspicious that the FCC rushed to adopt a standard to benefit Sinclair.

“Before we authorize billions for patent holders and saddle consumers with the bills, we better understand how these rights holders will not take advantage of the special status conferred upon them by the FCC,” Rosenworcel said.

How has Pai responded to this criticism?

A spokesman for Pai’s office in February denied there’s been any favoritism on behalf of Sinclair.

“Given that the FCC under Chairman Pai’s leadership recently proposed a $13 million fine against Sinclair, the largest fine in history for a violation of the commission’s sponsorship identification rules, the accusation that he has shown favoritism toward the company is absurd,” he said.

He added that Pai has for years called on the FCC to update its media ownership regulations.

“The chairman’s actions on these issues have been consistent with his long-held views,” the spokesman said.  “Considering the strong case for modernizing these rules, it’s not surprising that those who disagree with him would prefer to do whatever they can to distract from the merits of the reforms that the FCC has adopted.”

Why should consumers care about the changes to media ownership that make it easier for Sinclair and other media giants to consolidate?

Critics say these rule changes will result in increased media consolidation and fewer points of view at a time when consumers need access to a diversity of opinions.

“Many Americans still get most of their news about local electoral politics from broadcasters,” said Gigi Sohn, who worked for former FCC Chairman Tom Wheeler.  “It’s local broadcasters and newspapers who cover local politics and issues that are important to every community.”

Sohn said the changes will affect medium-size and small markets the most, where there may only be a handful of broadcasters already operating.

What do Chairman Pai’s comments mean for the merger?

Pai said he’s referred the merger for an administrative hearing due to concerns he has over the deal.  This is usually the first step the FCC takes when it prepares to block an acquisition. The Communications Act requires the FCC give merger applicants a shot at making their case before the agency withholds its approval, according to Matt Wood, director of public policy for the consumer advocacy group Free Press. He also said it’s “extremely rare for transactions to be sent to a hearing in the first place, much less for parties to fight it out and beat the FCC in that hearing.”

What concerns Pai about the deal?

If the merger were to close, Sinclair would exceed the FCC’s 39 percent ownership cap. The broadcaster would have access to 72 percent of the TV viewing households in the US. Even though Pai has advocated changing that cap, he hasn’t talked about eliminating it completely.

Sinclair has proposed selling a number of stations to get under the cap. But the new owners of those stations have ties to the broadcaster, which critics said would still allow the company to continue to control the stations.

It seems Pai agrees with that assessment.

“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 his statement.

What does Sinclair have to say?

The company defended the merger stating it has been transparent through the FCC’s review process about the station buyers. It also denied trying to mislead the FCC over its station divestitures.

“We have fully identified who the buyers are and the terms under which stations would be sold to such buyers, including any ongoing relationship we would have with any such stations after the sales,” the company’s statement reads. “We are prepared to resolve any perceived issues and look forward to finalizing our acquisition of Tribune Media.”

Originally published Nov. 15, 2017.

Updated July 17, 2018:  Added details about FCC Chairman Ajit Pai’s concerns about the deal, Sinclair’s statement defending the merger and other developments from earlier in 2018.

The Smartest Stuff: Innovators are thinking up new ways to make you, and the things around you, smarter.

Special Reports: CNET’s in-depth features in one place.