WASHINGTON (CN) – Federal Communications Commission Chairman Ajit Pai threw cold water on a highly anticipated $3.9 billion merger between Sinclair Broadcast Group and Tribune Media Monday, saying he had concerns about Sinclair’s divestment if the deal is approved.
Sinclair Broadcast Group, a conservative media company, has been on track to acquire Tribune Media since May 2017 but on Monday, Pai issued a statement saying he had “serious concerns” about the deal.
“Based on a thorough review of the record … 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.
The potential for conflict prompted Pai to schedule a hearing at the FCC to weigh the merger more closely. According to his statement, he, along with fellow FCC commissioners will submit their questions about the proposed merger to an administrative law judge.
The hearing could take months and in the hours after Pai’s statement, Tribune’s stock dropped more than 10 percent and continued to flounder while Sinclair’s stock dropped more than 15 percent.
Sinclair owns 192 television stations and is the largest owner of television broadcasters in the United States. Tribune Media owns 42 stations in 33 markets. Sinclair said in April that when the merger was done, the company would sell off 23 stations to meet FCC regulations which limit broadcast ownership to those outlets that reach 39 percent of all U.S. households.
During a Senate Appropriations Committee hearing in May, where Pai was grilled about the pending deal, Sen. Patrick Leahy, D-Vermont, offered his early disapproval. If Pai green lit Sinclair, Leahy warned, Sinclair and Tribune together would create a massive broadcast group with access to more than 72 percent of all households in its reach.
Competing media outlets could be squeezed out by the partnership and while Sinclair has regularly reported it would divest, even if it did, some of the stations it would sell off would remain under their control, like the Tribune Media flagship WGN in Chicago.
FCC Commissioner Jessica Rosenworcel, who was staunchly opposed to Pai’s reversal of net neutrality rules, welcomed Pai’s announcement Monday.
“Too many of this agency’s media policies have been custom built to support the business plans of Sinclair Broadcasting,” Rosenworcel said. “With this hearing designation order, the agency will finally take a hard look at its proposed merger with Tribune. This is overdue and favoritism like this needs to end.”
A “hard look” through a hearing at the FCC could potentially squash the deal altogether. In 2011, the FCC’s threat of a hearing caused AT&T to surrender its takeover of T-Mobile.
In a statement Monday, Sinclair representative Ronn Torossian said the company was “shocked and disappointed” by Pai’s decision to put the merger up for review before an administrative law judge.
An official hearing order has not yet been released, Torossian noted. He also expressed concern that media reports suggesting the company “misrepresented” its intent with divestments were “unfounded and without factual basis.”
“Throughout the FCC review process of this transaction, we have had numerous meetings and discussions with the FCC’s media bureau to make sure that they were fully aware of the transaction’s structure and basis for complying with FCC rules and meeting public interest obligations. These structures are consistent with structures that Sinclair and many other broadcasters have utilized for many years with the full approval of the FCC,” Torossian said.
During Sinclair’s discussions with the FCC and according to their filings, the company has been “completely transparent about every aspect of the proposed transaction,” Torossian said.
“We have fully identified who the buyers are and the terms under which stations would be sold to such buyer, including any ongoing relationship we would have with any such stations after the sales. We have filed all relevant agreements documenting such terms as required by FCC rules.”
Representatives from Tribune Media and the FCC did not immediately respond to request for comment.