DOJ Studying Sinclair-Allbritton SSA Plan

The Department of Justice has asked Sinclair Broadcast Group for more information about the impact that shared service agreements proposed as part of the company’s pending $985 million acquisition of Allbritton Communications might have on ad sales and retransmission consent negotiations in two Allbritton markets — Harrisburg, Pa., and Charleston, S.C. — a source close to the issue says.

Sinclair already owns or controls TV stations in the Harrisburg and Charleston DMAs (numbers 43 and 95, respectively) where Allbritton also owns ABC affiliates WHTM and WCIV, respectively. So as part of pending acquisition of Allbritton, Sinclair has proposed spinning off its stations in the two markets to comply with FCC local ownership rules.

At the same time, Sinclair announced plans to provide “sales and other non-programming support services to each of these stations pursuant to customary shares services and joint sales agreements,” deals that would allow it to retain some influence.

Those side deals have drawn heavy flak in petitions to deny at the FCC, on grounds that the arrangements would give Sinclair too much power in those markets, including over retransmission consent negotiations with cable operators.

A source close to the issue tells TVNewsCheck that the Department of Justice is investigating the same allegations raised in the petitions to deny at the FCC.

“Sinclair has been particularly inclined toward orchestrating these [sharing] deals for the purposes of subverting the commission’s rules, in the process gathering to itself unprecedented dominance in this country’s broadcast industry,” said the watchdog Free Press, in its petition to deny the transaction at the FCC.

“The transaction would allow Sinclair to negotiate retransmission consent for both the CBS and ABC affiliates in Harrisburg and the Fox and ABC affiliates in Charleston,” added the American Cable Association, in a separate petition to deny at the FCC.

Sinclair representatives could not be immediately reached for comment. But in a Sept. 26 filing at the FCC, Sinclair said the commission already has been scrutinizing JSAs in a pair of rulemaking proceedings, and that any changes in the JSA rules should be made there, not spot-welded onto its TV station deal.

“The transactions and associated agreements [in the Allbritton deal] are squarely within the boundaries of what the commission has repeatedly approved in the past,” said Sinclair in its FCC filing.

Also in its FCC filing, Sinclair urged the agency to straight-arm ACA. “The ACA petition represents nothing more than a thinly veiled attempt by a trade group representing one side of a business negotiation to attempt to use the government to gain an advantage it would not otherwise have in such negotiations,” Sinclair said.

Former FCC Chairman Julius Genachowski tabled a proposal that would have required broadcasters to attribute JSAs, apparently because he couldn’t get sufficient support from his fellow commissioners, said Jack Goodman, a former National Association of Broadcasters general counsel who is now an attorney in private practice.

Either DOJ or the Federal Trade Commission regularly conducts confidential reviews of major merger transactions for potential anticompetitive problems, while the FCC also reviews station deals to ensure that they’re in the public interest.

Veteran Washington communications attorneys tell TVNewsCheck that the FCC and DOJ usually work closely together on media-related transactions, and that the FCC will usually put deals on hold until after the DOJ completes its own investigation.

DOJ occasionally makes a so-called “second request” for additional information when it has particular concern about some aspect of a major transaction — although industry attorneys say the fact that a second request is issued does not mean that the agency has necessarily concluded that there’s a problem.

DOJ’s second request in this case was originally announced Oct. 7 in joint news release issued by Sinclair and Perpetual Corp., Allbritton’s parent. In the release, Sinclair and Allbritton said they intended to respond promptly to the second request, which they also said was “standard part” of the DOJ review process. “Although there can be no assurances, the parties expect the transaction to close in the first or second quarter of 2014,” the joint release said.

When it originally announced the Allbritton deal July 29, Sinclair said it hoped to complete it before the end of 2013.

In an Aug. 23 news release, Gannett Co. and Belo Corp. announced that they had also received a second request from DOJ, which is reviewing Gannett’s $2.2 billion proposed acquisition of Belo.

In their release, Gannett and Belo provided no details about what aspect of their deal has drawn the additional scrutiny, and a spokesman today declined to provide further comment.

Gannett’s deal, however, has also been challenged in petitions to deny at the FCC, with one from Time Warner Cable, DirecTV and ACA alleging that the transaction would give Gannett “new virtual duopolies and facilitate coordinated retransmission consent negotiations” in St. Louis, Phoenix and Tucson, Ariz.

A DOJ spokesperson could not be reached for comment due to the federal government’s partial shutdown.