The Sinclair-Tribune merger might be in big trouble because of Sinclair's shady business tactics
FCC signals it will slow-track the merger, citing Sinclair’s practice of using legal loopholes to skirt ownership rules
On July 16, Federal Communications Commission (FCC) Chairman Ajit Pai issued a statement saying he had “serious concerns” about the pending acquisition of Tribune Media by conservative local TV giant Sinclair Broadcast Group. The statement said the FCC would not be able to approve the acquisition outright and Pai will recommend that the matter be sent to an administrative law judge -- a move, according to Politico, that is “often viewed as a deal-killer.”
In the July 16 statement, Pai cited evidence 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.” In other words, the FCC can’t approve the deal because Sinclair would be breaking the law -- and doing it so blatantly that even Pai, a Trump appointee who’s currently being investigated for leading the FCC in deregulation efforts that suspiciously benefit Sinclair, couldn’t turn the other way.
In fact, the company outlined in its final proposal to the FCC exactly how it would use legal loopholes to continue controlling stations in practice that it would legally be required to sell. It identified at least four local TV stations it was planning to sell, while simultaneously entering into agreements to continue controlling certain services and marketing for those stations -- WGN in Chicago, IL; KUNS in Seattle, WA; KAUT in Oklahoma City, OK; and KMYU in Salt Lake City, UT. It was planning to sell WGN to a newly formed company run by a Sinclair business partner, and to sell the other three to Sinclair-affiliated conservative pundit Armstrong Williams for well below market price. (Two additional stations, KDAF in Dallas, TX, and KIAH in Houston, TX, were going to be sold to another company affiliated with Sinclair, Cunningham Broadcasting.)
These legal maneuvers are commonly known as “sidecar” agreements, and Sinclair is notorious for using them in a manner that’s been described as bordering on “regulatory fraud.” Basically, when Sinclair bumps up against an ownership cap in a local market, it sells one of its stations to nominally fall below the cap. Then it uses “sidecar” agreements -- sometimes known as shared service agreements, joint sales agreements, or local marketing agreements -- to keep operating the station anyway.
For example, Sinclair doesn’t actually own any local TV stations in the Wilkes-Barre/Scranton area of Pennsylvania -- but it still controls some content and/or handles operations at three stations there (WOLF, WSWB, and WQMY). And because of Sinclair’s complicated web of agreements, one of those Wilkes-Barre stations (WOLF) is sharing news anchors with two other Sinclair stations in entirely different states.
According to Reuters, Pai's draft order to send the acquisition to a hearing goes so far as to cite potential "deception" by Sinclair in pursuing these kinds of legal arrangements. It’s unclear if the order for a hearing will definitely end Sinclair’s bid -- but it is a damning, if incredibly belated, recognition of the blatantly absurd regulatory tricks the company regularly employs to get its way.