FCC Votes 4-0 for Hearing Order Even After Sinclair Offers Changes to Tribune Deal

Changes to add a schedule structure to the ALJ process as proposed by Commissioner Mike O'Rielly were incorporated into the order, an official said. Tribune declined to comment. Sinclair didn't comment right away after business hours.

Sinclair and Tribune had just amended the transaction to remove some divestitures targeted by the draft hearing designation order (see 1807170053), in what attorneys told us was an unsuccessful attempt to prevent the order from being issued. O'Rielly was the last hold-out vote Wednesday, and officials told us he was waiting for his proposed changes to be incorporated to allow him to vote yes. Commissioner Brendan Carr told CNN after Sinclair announced and submitted its plan to withdraw proposed divestitures thought to be the focus of the draft HDO that he hadn’t seen anything that would cause him to change his vote.

DOJ was seen as close to OK'ing Sinclair/Tribune when the HDO proposal was announced. The Antitrust Division wouldn’t comment, beyond acknowledging the HDO and giving the status of the review of Sinclair/Tribune as “ongoing.” The department is unlikely to issue a ruling until a hearing process is resolved, communications attorneys said.

The letter amending Sinclair/Tribune to get rid of offending divestiture plans was posted Wednesday. Sinclair would hold on to Tribune’s WGN-TV Chicago and put former planned divestitures to frequent sidecar Cunningham Broadcasting -- KIAH Houston and KDAF Dallas -- into a divestiture trust to be sold.

The rearrangement would put Sinclair’s national audience reach at 38.9 percent under current rules, just under the current 39 percent cap. Without the UHF discount, which is seen as under threat by a pending U.S. Court of Appeals decision, Sinclair would be at 61.7 percent. Before the amendment, the deal’s non-UHF discount number was 58 percent, and it would have fit under a 60 percent cap number once forecast by Nexstar CEO Perry Sook. Sinclair CEO Chris Ripley has suggested the deal could be altered to fit under a 50 percent cap (see 1806140055). Attorneys say that would likely involve more sidecar sharing arrangements. Sinclair’s amendments don't address other divestitures in the deal to sidecar partners that involve options to purchase and low sale prices, such as those to Howard Stirk Holdings.

The draft HDO was seen as targeting the Dallas and Houston transactions. The draft order goes further on the WGN divestiture and alleges a lack of candor in Sinclair’s presentation of that deal, FCC officials said. That lack of candor made it unlikely the FCC would accept Sinclair’s attempt to fix the transaction, said deal opponent and broadcast attorney Howard Weiss, who represents Herndon-Reston Indivisible. “How many bites of the apple is Sinclair going to get?” Even if the specifics of the divestitures changed, the amendment doesn’t wipe out deception in Sinclair’s original proposal, Weiss said. Since Sinclair hasn’t seen the HDO, it can’t know the proposed changes will address FCC concerns, said Common Cause Director-Media and Democracy Yosef Getachew.

Former Commissioner Robert McDowell said before the vote that the specific focus of the HDO may mean Sinclair’s amendment could be successful. “What was noteworthy about this hearing designation order is that it was pretty specific regarding what defects it perceived needed to be cured,” McDowell said then. “If Sinclair complies with the FCC’s wishes, it could get more than half of the loaf it was pursuing in the first place.” Former Commissioner Michael Copps, now with Common Cause, doubted Pai would have circulated the HDO if he didn’t intend to pursue it. Copps said after so many amendments, Sinclair may be “wearing out their welcome” at the agency.

Attorneys and industry officials expect Sinclair to withdraw the deal rather than endure the hearing process. A hearing could be enlarged to include Sinclair’s existing licenses, and would likely involve extensive disclosure of Sinclair’s documents and operations. Sinclair’s attorneys likely will advise against going through such a hearing, non-affiliated broadcast lawyers said. Copps doesn’t agree: “Sinclair never gives up, they keep pushing and pulling and twisting.”

“That Sinclair has attempted to correct this deal now six times shows how much it would distort the marketplace,” said The Coalition to Save Local Media. “Sinclair can’t rescue this Titanic by shuffling the deck chairs,” said American Cable Association CEO Matt Polka.

The HDO reportedly “cited for hearings just three stations that Sinclair didn’t properly divest,” said Newsmax CEO Chris Ruddy. “We have brought to the FCC’s attention other stations that are still controlled by Sinclair that haven’t been properly divested.” Sinclair “has dozens of identical shell operations in numerous markets,” said Free Press before the vote. “If the new ones were improper, so are all the existing ones. Sinclair is in violation of the FCC’s rules, and no amending this application can fix that."