Editor’s Corner—Sinclair urges DOJ to fall 'in line with the realities of the marketplace' in $3.9B Tribune deal

Justice Department building inscription
Ben Munson

Sinclair Broadcast Group apparently has the support of the FCC in its bid to grow its footprint by buying Tribune Media for $3.9 billion, but now the company is pushing the U.S. Justice Department for similar support.

Sinclair Executive Chairman David Smith used his company’s earnings release this morning to applaud FCC’s proposed deregulatory rulemakings for recognizing that the competitive marketplace has changed and broadcasters “actually do compete against everyone for viewers and advertising dollars.”

“[The FCC’s] review also recognizes that the current rules no longer reflect the realities of today's media landscape and consumer viewing habits. We applaud the FCC's action to level the playing field, especially in light of emerging technologies and consolidation in the telecom and cable industries,” said Smith in a statement.

During today’s investors call, Smith pushed the DOJ to adopt a similar viewpoint on the broadcast television industry.

“In our view, they are not in line with the realities of the marketplace,” said Smith. “I think it’s incumbent upon them and the folks over there to really pay attention to what’s going on in the real world.”

The FCC has taken steps that seem to support Sinclair’s bid for Tribune, like reinstating the UHF discount, eliminating the main studio rules and proposing revised rules governing ownership of broadcast stations in single markets. While those moves have earned the commission and Chairman Ajit Pai the ire of countless opponents to deal, the DOJ has held Sinclair’s feet to the fire.

In September, the U.S. Senate approved President Donald Trump’s appointee Makan Delrahim, who previously worked as a lobbyist for AT&T and Qualcomm, to head up the DOJ’s antitrust division.

In August, the DOJ sent additional requests for information to both Sinclair and Tribune under the Hart-Scott-Rodino Antitrust Improvements Act of 1976. At issue is possible divestures in markets including Seattle and Portland, Oregon where Sinclair and Tribune have overlapping stations.

Sinclair CEO Chris Ripley said that swaps of stations instead of outright sales could potentially address this concern.

“Swaps are on the agenda. We have our process ongoing and we’ve received our first-round bids and already many of those did include swap alternatives, some of which included in-market swap alternatives which can be very accretive. That absolutely could be part of the solution,” Ripley said.

“We don’t really think there’s a defendable reason we have to sell any of these stations when you really look at it from an economic perspective,” said Ripley, adding that Sinclair’s divestiture plan will be determined by the DOJ’s decision but that, at the end of the day, the FCC’s new rules are helpful.

Despite the numerous vocal opponents to the Sinclair-Tribune deal—something that has seemed accelerate in the wake of a “Last Week Tonight with John Oliver” segment from July—the deal ultimately comes down to the FCC and the DOJ. And the dissonance between the two agencies outlooks on the deal is stark.

Dave Kully, a former Justice Department antitrust lawyer, told Crain’s Chicago Business that are certainly are times when the DOJ calls for divestitures that the FCC does not. And second requests during DOJ antitrust reviews often occur.

But while the FCC seems to be clearing a path for Sinclair, the DOJ—with its considerably more narrow-in-scope review of the deal—seems to be putting up a roadblock. It remains to be seen if Sinclair can get the DOJ to back off by urging it to wake up to reality, or if Sinclair will have to face the reality of selling off more stations than it wants.—Ben | @fiercebrdcstng