Sinclair Faces Expanded Probe For Shady Behavior During Tribune Merger

from the shell-games dept

Back when Sinclair was trying to acquire Tribune Broadcasting, you might recall the company was accused of some highly unethical behavior in order to get the deal done. Despite the FCC doing its best to neuter most media consolidation protections to help move the deal forward, the union would have still resulted in the merged company violating media ownership limits and dominating local broadcasting in a huge number of new markets.

To get around those limits, Sinclair allegedly got, uh, creative. Consumer groups accused Sinclair of trying to offload several of its companies to Sinclair-owned shell companies to pretend the deal would remain under the government's ownership cap. The company also tried something similar in trying to offload some stations to friends and other partner companies at highly discounted rates, allowing it to technically not "own" -- but still control -- those stations. Some of the deals involved offloading stations to relatives and friends, for example:

"Under Sinclair’s plan, flagship Tribune station WGN in Chicago would go to a car dealer who is a business associate of a top Sinclair executive, while outlets in Dallas and Houston would be sold to a company formerly controlled by the estate of the executive’s mother."

The efforts were so transparently shady, even the industry-cozy Pai FCC was forced to balk despite having spent the better part of a year trying to help the deal succeed. Ultimately the FCC took administrative steps that effectively killed the deal. Tribune then sued Sinclair for what it called an "unnecessarily aggressive" sales pitch.

And the fun isn't over for Sinclair just yet. The company is also now facing an expanded probe by the FCC into whether the company intentionally misled regulators when it detailed plans to divest stations:

"The so-called “sidecar” deals arranged by Sinclair in order to effect the divestitures involved entities without broadcast TV experience and with business ties to Sinclair. In at least one case, the valuation given for the station was far below the going market rate, raising questions about the process."

When even Ajit Pai thinks a major media and telecom company has gone too far, you know you've screwed up. That said, the FCC's inquiry here may not entirely about a genuine interest in transparency and accountability. FCC Commissioner Jessica Rosenworcel, for example, seemed to imply that one benefit of the FCC conducting a non-transparent investigation is that the real scope of Sinclair's behavior isn't likely to be made public:

As it stands, law prohibits any one broadcaster from reaching more than 38% of U.S. homes, a rule designed to protect local reporting, competition and opinion diversity from monopoly power. The Sinclair deal would have given the company ownership of more than 230 stations, extending its reach to 72% of U.S. households. And while Sinclair wasn't able to consummate this deal, this sort of mindless media consolidation was already a problem, as that viral Deadspin video from last year made pretty clear:

And it's more than this kind of homogenized, consolidation "news" being rather creepy and teetering toward disinformation. There's data to suggest that when you obliterate nuanced local journalism and replace it with monolithic, partisan crap from the likes of Sinclair, you wind up with a more divided and less informed populace. That populace is far less likely to think independently, and far more likely to just double down on partisan viewpoints, which can actually swing elections.

So while the idea of protecting the diversity of local media is often viewed as something that's "partisan" in and of itself, the protection of quality, truly local journalism is something that benefits everybody. It's not clear that's a lesson that has truly gotten through to many Americans, whether this particular merger succeeded or not.

Filed Under: divest, fcc, investigation, merger, ownership, ownership rules, sidecar
Companies: sinclair, tribune

FCC Boss Being Investigated By His Own Agency For Being Too Cozy With The Industry He Regulates

from the not-particularly-shocking dept

If you watched FCC boss Ajit Pai's rushed repeal of net neutrality there really shouldn't be any question about where Pai's loyalties lie, and it certainly isn't with smaller companies, healthy competition, transparency, openness, innovation, or American consumers. The agency head repeatedly lied about the justifications for the repeal, casually using fabricated data to justify what may just be the least popular policy decision in this history of modern technology. Pai's fealty to giant monopolies runs so deep, his agency now just directs reporters to lobbying talking points when they question the flimsy logic propping up the repeal.

So for those paying attention, it's probably not too surprising to see news that the FCC's own Inspector General is investigating the agency boss for being a bit too cozy with the giant companies he's supposed to be holding accountable:

"Last April, the chairman of the Federal Communications Commission, Ajit Pai, led the charge for his agency to approve rules allowing television broadcasters to greatly increase the number of stations they own. A few weeks later, Sinclair Broadcasting announced a blockbuster $3.9 billion deal to buy Tribune Media — a deal those new rules made possible.

By the end of the year, in a previously undisclosed move, the top internal watchdog for the F.C.C. opened an investigation into whether Mr. Pai and his aides had improperly pushed for the rule changes and whether they had timed them to benefit Sinclair, according to Representative Frank Pallone of New Jersey and two congressional aides."

Sinclair's $3.9 billion acquisition of Tribune Media has already faced broad, bipartisan opposition by those concerned that the merger will dramatically damage both competition and opinion diversity across countless markets nationwide. The Sinclair Tribune tie up would give Sinclair ownership of more than 230 local broadcast stations around the nation, allowing it to reach 72% of the public with "reporting" frequently lamented as grotesquely distorted on a good day.

Sinclair's latest merger couldn't occur without Pai's decision to gut numerous media consolidation rules over the last few months, including several decades old rules specifically designed to prevent any one company from unfairly dominating a media market and crushing local competition. Unsurprisingly, consumer groups were quick to seize on the news suggesting that the agency should suspend its review of the merger until the Inspector General inquiry is complete:

"Until the inspector general’s investigation is complete, Chairman Pai and any other FCC staff subject to this inquiry should recuse themselves from all dealings related to Sinclair’s proposed takeover of Tribune Media," Free Press Senior Counsel Jessica J. González said in a statement. "If the investigation finds that Pai or any other FCC staff did indeed let their own bias and favoritism shape decisions related to the deal, they must not be permitted to vote on this matter and they should be subject to other appropriate ethics-review processes."

Of course if you're familiar with Pai's work, you know that won't be happening, and in Pai's ideologically-blinded brain this will all be dismissed as the errant rantings of partisans. But again, opposition to this deal is fairly uniform across the spectrum. Conservatives don't like it because they realize Sinclair is going to squeeze smaller media outlets out of the equation unfairly. Liberals don't like it because they know Sinclair is going to fill the airwaves with more nonsense just as we're trying to get a hold on problems inherent in foreign influence, disinformation, and discourse quality.

Regardless, Pai's going to have a very busy few years. He's already facing several different inquiries into why his agency made up DDOS attacks and turned a blind eye to identity theft as part of an apparent attempt to downplay massive public opposition to his policies. He's also facing several law enforcement inquiries (one of which he's actively blocking) and numerous lawsuits into his agency's blatant disregard of the public interest. And while this particular inquiry may not conclude that Pai technically broke the law or violated agency rules, it's pretty hard to act confused about where Pai's loyalties truly lie.

Filed Under: ajit pai, crony capitalism, fcc, inspector general, media ownership, ownership rules
Companies: sinclair broadcasting, tribune media