Why Sinclair's latest plan to sell major TV stations has critics crying foul

Wednesday , March 14, 2018 - 10:20 AM

Hamza Shaban

(c) 2018, The Washington Post.

Sinclair Broadcast Group’s new plan to help it win federal approval to become the nation’s largest broadcaster is pretty brazen, critics say.

The Maryland-based company recently proposed selling two major TV stations to satisfy the government’s ownership limit and secure its deal to buy Tribune Media for $3.9 billion. The problem with the arrangement, critics say, is that the stations’ prospective buyers have close ties to Sinclair’s executive chairman.

According to filings with the Federal Communications Commission, Sinclair plans to sell one station to an auto dealer who is a business associate of chairman David Smith and the other one to Cunningham Broadcasting Corp. The estate of Smith’s mother owns Cunningham, according to the Baltimore Sun. The strategy is Sinclair’s attempt to maintain control over the stations, critics say.

“Sinclair has a long history of trying to evade the FCC’s ownership rules,” said Craig Aaron, president of Free Press, an advocacy group that supports diverse media ownership. “This is the latest and most brazen example.”

Sinclair disputes the claims and says that regulators have approved similar deals in the past.

The FCC prohibits companies from reaching more than 39 percent of TV households. If allowed to combine with Chicago-based Tribune, Sinclair would reach 72 percent of TV households, according to the FCC, and would become the largest-single group of local TV stations numbering over 200.

If Sinclair receives regulatory approval from the FCC and the Department of Justice, then auto dealership executive Steven Fader would buy WGN in Chicago for $60 million. Sinclair would also sell WPIX in New York to Cunningham for $15 million. Both federal agencies are reviewing the proposed tie-up because it involves the transfer of licenses and is large enough to warrant an antitrust review.

The sale prices set for the stations are well below what a business without ties to Sinclair would pay, Aaron said, pointing to the 2002 sale of WPWR in Chicago, for $425 million. He also emphasized that the sales agreements give Sinclair joint control over the stations and grant the company the ability to buy them back in the future.

“In order to get under the national cap, Sinclair would pretend to sell these stations, but they have no intention of relinquishing any control,” Aaron said.

Rep. Tony Cárdenas, D-Calif., who sits on the House Energy and Commerce Committee and co-chairs the Congressional Multicultural Media Caucus, said the latest sales agreements raise concerns. “Sinclair’s ‘divestiture’ plans are a sham,” he said. “There are too many strings attached.”

Bothe the FCC and the Justice Department declined to comment on Sinclair’s sales agreements.

Sinclair said the deals are in line with what the FCC has approved before. “These agreements are structured to be consistent with similar agreements that the FCC has approved for over 10 years,” said Rebecca Hanson, senior vice president of policy for Sinclair.

Since the merger of Sinclair and Tribune Media was announced last year, critics have argued that the deal will further the concentration of media ownership into the hands of a few corporate titans, threatening public discourse, programming diversity and local news coverage.

“Sinclair is already a company that is too big and exerts too much power over our media landscape,” said Michael Copps, special adviser to the media and democracy program at Common Cause and a former FCC commissioner. “It should have been dead on arrival the day it arrived at the FCC.” Common Cause, a nonprofit government watchdog group, is a member of the coalition opposing the merger.

Sinclair has benefited from recent deregulatory moves under the Trump administration, analysts said. Last year, the FCC repealed rules that blocked TV stations in the same market from merging with each other if the combination would leave fewer than eight independently owned stations. The agency also took aim at rules restricting the number of TV and radio stations that any media company could simultaneously own in a single market.

According to multiple reports, the FCC’s inspector general is investigating whether the agency’s chairman, Ajit Pai, improperly pushed for the changes in the media ownership rules and whether they were timed to benefit Sinclair.

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