Sinclair/Tribune Filing Too Light on Specifics for FCC to Proceed, Say Deal's Opponents

Sinclair's divestiture trust proposal to bring its planned buy of Tribune into compliance with FCC rules (see 1802210062) doesn’t contain enough specifics to merit turning the deal’s paused shot clock back on, opponents said Wednesday in interviews and filings. “Sinclair hasn’t delivered with this filing,” said Brian Thorn, strategic research associate at the National Association of Broadcast Employees and Technicians (NABET-CWA). “There isn’t enough to assuage our concerns.”

The divestiture trust plan “contains gaping holes that prevent the FCC from assessing whether the transaction is in the public interest,” said Newsmax in a Wednesday letter in docket 17-178. NABET-CWA is among members of Sinclair/Tribune opposition group the Coalition to Save Local Media, which was “re-energized” by Sinclair’s filing (see 1802260036), Thorn said.

“Divestiture trusts are used in cases like this, where we are still in the process of negotiating with numerous parties,” a Sinclair spokesperson said. “The ultimate buyers will be made public after we have filed our signed purchase agreements with the FCC, at which point the public will have ample opportunity to comment.”

Though Sinclair CEO Chris Ripley seemed to say on an earnings call Wednesday (see 1802280016) that the shot clock was restarted, the clock remains paused, an FCC spokesman said. Ripley said the divestiture plan was filed to “get the clock ticking at the FCC," and that submitting the plan “got the FCC timeline going.”

Sinclair lacks “technical approval” from DOJ and the FCC on Tribune, “but we feel we’re getting close,” said Ripley. The company thinks approval is “close enough that we could move forward” with the divestiture trust plan, he said. The strategy is to close the deal as soon as the divestiture trust plan is FCC-approved, “and not have to wait to figure out where the buyers will be for the various stations,” he said. Sinclair expects to close the Tribune buy in Q2, said Chief Financial Officer Lucy Rutishauser.

For anyone who thought DOJ “would play favorites with Sinclair” on the deal, “that’s unequivocally not true,” said Ripley when asked to characterize the tone of the company’s dealings with the authorities. “They have scrutinized this transaction very closely, more than any transaction we’ve done in our history.” DOJ examiners have “done their work; they’ve been very diligent,” he said. “We’re just awaiting the final answer of their process.”

Sinclair’s amended application doesn’t make it clear who will own the stations being divested or which precise stations will be unloaded, Thorn said. “Neither the public nor the Commission can evaluate this transaction without knowing which stations Sinclair intends to retain and which it is going to sell to come into compliance with the Duopoly Rule,” NCTA said in a letter to the FCC posted Wednesday. The American Cable Association, also a coalition member, supports NCTA’s position, said ACA Senior Vice President-Government Affairs Ross Lieberman.

Portions of the Sinclair filing also seem to indicate that the company could still have influence over some of the divested stations through “options and services agreements,” NCTA said. The divestiture proposals “are essentially a sham because the sidecar arrangements will give Sinclair the ability to continue to manage these stations after they have been acquired by third parties” Newsmax said. Sinclair has a history of “egregious” abuse of joint sales agreements and other sidecar arrangements to get around FCC ownership rules, said United Church of Christ Office of Communication Policy Adviser Cheryl Leanza in an interview. UCC is also a coalition member. Sinclair’s history with sidecar agreements makes it especially important to establish specifics about its divestiture plans, Leanza said. For the FCC to approve a deal incorporating such workarounds on top of the allowances made by the agency’s recent relaxation of ownership rules “would be shocking,” Leanza said.

The FCC also should consider the deal in the context of the legal challenge of the reestablished UHF discount, said Leanza, who's involved in the case in opposition to the FCC. Oral argument in the U.S. Court of Appeals for the D.C. Circuit is set for April, which could mean a decision by the summer, Leanza said. Since Sinclair/Tribune would be wildly over the national ownership cap without the UHF discount, the deal would need to be almost immediately unwound if the FCC loses in court, she said. In a filing in docket 17-318 on the FCC’s reinstatement of the UHF discount and proposed elimination of the national cap, the attorneys general of Illinois, California, Iowa, Maine, Massachusetts, Pennsylvania, Rhode Island and Virginia cited the deal as a reason to eliminate the discount and leave the cap in place.

Deal opponents seem divided over whether the FCC should seek comment on Sinclair’s submission. Lieberman believes it would be “prudent” to seek comment on the proposals, as NCTA suggests. Newsmax asks the FCC not to seek comment until the plan is clarified. “Only when Sinclair submits a filing that clearly and unambiguously states how Sinclair will comply with the ownership rules should the divestitures be put out for public comment and the 180-day shot clock restarted,” Newsmax said. A coalition letter filed Wednesday has some members urging the FCC not restart the shot clock until comments have been received on the Sinclair filing. Though the letter said comments shouldn’t be sought until after Sinclair updates its submission, that addendum is in a footnote at the end. The members asking for comments include Public Knowledge, Common Cause, NTCA, NABET-CWA, the Competitive Carriers Association, Computer and Communications Industry Association, ITTA and the Sports Fan Coalition. Coalition members The Blaze and Newsmax didn’t sign.

The FCC “must send a clear message” to avoid the appearance of favoritism to Sinclair, Newsmax's filing said. The inspector general is investigating Chairman Ajit Pai’s actions on media ownership and Sinclair (see 1802150031). If the FCC allows the deal to proceed without gathering more information, the agency “will be providing yet another unusual and suspicious regulatory favor to Sinclair in a transaction that is already rife with the appearance of impropriety and special treatment,” Newsmax said.