Sinclair Broadcast Group's $3.9 billion merger with Tribune Media has reached an inauspicious end. Tribune has formally announced that it's not only terminating the planned merger, but will be filing a lawsuit (pdf) against Sinclair for what the company states was an "unnecessarily aggressive" sales pitch to FCC regulators and the DOJ. According to Tribune, it's hoping to recoup its losses and "hold Sinclair accountable" for causing the companies' controversial merger to implode:
"In light of the FCC’s unanimous decision, referring the issue of Sinclair’s conduct for a hearing before an administrative law judge, our merger cannot be completed within an acceptable timeframe, if ever,” said Peter Kern, Tribune Media’s Chief Executive Officer. “This uncertainty and delay would be detrimental to our company and our shareholders. Accordingly, we have exercised our right to terminate the Merger Agreement, and, by way of our lawsuit, intend to hold Sinclair accountable."
If you recall, the merger was on life support after the FCC shoveled the merger off to an administrative law judge for review, a move traditionally seen as a death knell for such deals. The FCC was prompted, in part, by allegations from numerous critics on both sides of the partisan aisle alleging that the company had tried to use "sham" transactions to pretend the merger fell within media ownership limits.
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. Critics charge Sinclair attempted to skirt around this limit by trying to offload numerous stations to Sinclair-linked companies and allies, some of which had absolutely no broadcast experience, with an eye on simply re-acquiring them later at bargain-basement prices.
If you've watched the viral Deadspin video or John Oliver segment on Sinclair's creepy, facts-optional "news" reporting, you should have a pretty good idea why the merger was so controversial. It was, effectively, an attempt to dominate local broadcasting and fill the airwaves with what many have argued is little more than Trump-friendly disinformation.
Sinclair's efforts were buoyed by Ajit Pai's FCC, which had spent the better part of the last year attempting to neuter media consolidation rules in order to grease the skids for the deal. That included eliminating rules requiring a broadcaster have a physical local office, restoring obscure, un-needed regulations specifically to aid Sinclair's bid to limbo under media ownership rules (odd for a guy that endlessly whines about "unnecessary, burdensome regulations"), and even contemplating elimination of the media ownership cap entirely, authority the FCC doesn't actually have.
While the FCC tried to claim that the carefully-coordinated and times skid greasing was all just quirky happenstance, the effort was so blatant that it resulted in an ongoing FCC investigation into potential corruption and coordination by Pai. That investigation, in turn, likely helped contribute to Pai's about face on the deal, given it's abundantly clear that the agency head has post-FCC political ambitions (though his attacks on net neutrality may have something to say about that).
Granted while the deal is dead, the regulatory and market dysfunction that birthed it remains. And the massive FCC erosion of decades-old media consolidation rules also remains, paving the way to potentially even worse deals waiting just over the horizon.