FCC's suspicion of Sinclair reportedly deeper than publicly stated

fcc
The FCC moved against Sinclair's attempts to purchase Tribune. (FCC)

The Federal Communications Commission was on the verge of publicly accusing Sinclair Broadcast Group of being deceptive in its petition to be allowed to buy Tribune Media, but did not. Reuters reported that it has seen a draft of an FCC order that says "Sinclair's actions potentially involve deception" and noted possible "misconduct."

FCC Chairman Ajit Pai instead said he has “serious concerns” about the $3.9 billion deal, and included some less inflammatory language expressing suspicions about Sinclair’s intent to abide by conditions of the sale as he commended the case to an administrative law judge.

“The evidence we’ve received suggests that certain station divestitures that have been proposed to the FCC would allow Sinclair to control those stations in practice, even if not in name, in violation of the law,” Pai wrote.   

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Sinclair took umbrage at being stymied and denied allegations of misconduct. Its response: “Sinclair was shocked and disappointed today by the news that FCC Chairman Pai was circulating an order proposing to designate our acquisition of Tribune for an administrative hearing," the company said. "Although the actual Hearing Designation Order (HDO) has not yet been released, press reports indicate that a leaked version of the HDO suggests that Sinclair may have engaged in misrepresentation or lack of candor. To the extent that the HDO does in fact include any such allegations, we deny such allegations in the strongest possible manner,” Sinclair said.

Passing a case to an administrative law judge is often a kiss of death. Butto drag out this metaphor like a film series that should have ended with the first trilogya kiss is still a kiss and somebody else still has to decide whether or not to do the killing. Any judge weighing the merits of the case will see the same evidence that led at least some FCC commissioners to accuse Sinclair of deception and misconduct.

While many people expect Sinclair to walk away from the deal now, others are not so sure. Analyst firm Jefferies thinks both companies have invested too much in the merger and will attempt to tough out the process. “We assume both parties will look to salvage the deal, if possible,” its analysts said.

Tribune Media is operating with an interim CEO in expectation of being sold, if not to Sinclair then to some other suitor, Jefferies said. “Another option would be to sell off key assets such as the Food Network Stake, Real Estate, and FOX affiliates."