FCC Weighs Revamping Ownership Rules Before Sinclair Deal

  • Conversation with Chairman Pai, according to Newsmax’s Ruddy
  • Sinclair wants to buy 42 TV stations from Tribune Media

Federal Communications Commission Chairman Ajit Pai has told an opponent of Sinclair Broadcast Group Inc.’s proposed purchase of Tribune Media Inc. that the agency may review media ownership rules before ruling on the $3.9 billion deal, something that could delay a decision on the merger.

“Ajit Pai told me in my meeting that he has not decided to approve the merger first, that he may conduct a review of the ownership cap,"  Christopher Ruddy, chief executive officer of Newsmax Media Inc., said in an interview Friday. “I can confirm to you on the record that he told me that he had not decided and that he was open to doing the review first. And I encouraged him to do it."

Ruddy said Pai made his statement in a Sept. 27 meeting. The Newsmax chief said the merger would allow too much media concentration that could crowd out independent voices. Newsmax offers a TV channel that appears on cable systems and online.

A review of the complex ownership rules could take months, delaying the deal that as proposed in May would create a broadcast company exceeding current ownership limits, with 233 stations offering service to more than 70 percent of U.S. viewers.

Asked about Ruddy’s account of the meeting, FCC spokeswoman Tina Pelkey said in an email: "The chairman said what he says publicly: he hasn’t made a decision as to either the timing or substance of these issues."

A Sinclair spokeswoman declined to comment for this article.

Sinclair, based in Hunt Valley, Maryland, wants to buy 42 TV stations in 33 markets from Chicago-based Tribune. The company would have a presence in 108 markets, according to a Sinclair presentation to investors touting the company after the deal as “the largest broadcasting group.”

Read More: Merger Trump Derided as Candidate Pushes Forward

Sinclair announced the deal 18 days after Pai led the FCC to restore an obsolete rule that lets companies count just half the audience for some stations. Sinclair told investors it would have stations covering 72 percent of U.S. households, and told told the FCC the company would reach 45.5 percent of the national audience when counting half the audience for some stations. The limit is currently 39 percent.

The FCC last month told Sinclair the proposed deal would exceed the national TV ownership limit, and also violate of rules on local TV ownership in 10 markets where the broadcaster would have multiple stations. The company in an Oct. 5 filing said it would need to sell two TV stations to meet the national limit, and didn’t say which outlets it might sell.

Sinclair Chief Executive Officer Chris Ripley in an Aug. 2 earnings call said he expected the deal to close “around year-end.” He added that the “FCC has been very constructive in terms of its review,” according to a transcript of the call.

At the Sept. 27 meeting with Pai, Ruddy and a consultant expressed their opposition to the deal, questioning what they called “a rush to approve” and saying the combination raises concerns over media concentration, according to a disclosure filing.

Sinclair in its Oct. 5 filing said that “any divestitures may be impacted” by agency review of ownership rules so “it is premature at this point for Sinclair to know what specific steps it will take to comply.”

Pai in April said he’d begin a proceeding this year to examine media ownership rules; so far the agency hasn’t acted.

The ownership restrictions are designed to make sure communities are served by a diversity of voices.

Antitrust officials at the Justice Department also are examining the deal.

    Before it's here, it's on the Bloomberg Terminal.