It makes sense for Sinclair to keep things rolling at the FCC and close on the Tribune merger before a possible adverse court ruling on the FCC’s UHF discount, which could come in August or September. I think that Sinclair now understands the urgency. The regulatory and legal picture is complicated. But under all the scenarios, its chances improve the quicker it moves with the Fox deal, the FCC process and the closing.
An oral argument in a Washington courtroom last week seems to have lit a fire under Sinclair.
For nearly a year, Sinclair has been screwing around, working every angle in its grim determination to hang on to every Tribune station it could in the face of FCC ownership caps and Justice Department antitrust limits.
But then last Friday, a three-judge panel of the U.S. Court of Appeals in Washington questioned the UHF discount of the FCC’s national ownership rules, which the Pai FCC reinstated last fall.
Suddenly, the merger didn’t look like the regulatory lock it once did.
The merger relies on the discount. It allows Sinclair and other groups to reduce by half the coverage of their many UHF stations in calculating compliance with the national ownership cap (39% of TV homes).
Without that discount, the merger would put Sinclair way over the cap at 58.8%. What’s more, it would put Fox, one of the companies it is spinning off stations to, over the cap, too. If it buys all the stations it is expected to buy, Fox would end up at nearly 46%.
(For more on the dismal science of the national ownership cap and calculating the post-merger Sinclair and Fox caps, see my related discussion.)
Two business days after the hearing — Tuesday evening — the re-motivated Sinclair issued a press release in which it finally announced specifics on how it intends to comply with the FCC’s local and national ownership caps.
Nine stations would go a new group headed by Soo Kim, last seen selling Media General to Nexstar; one would go to Meredith; and seven would go to an unnamed buyer, which everybody presumes is Fox.
Sinclair elaborated on its plans in yet another amendment to its transfer application at the FCC on Wednesday.
Things are moving.
Is Sinclair-Tribune in trouble?
Probably not, according to attorneys I spoke with this week.
But it makes sense for Sinclair to keep things rolling at the FCC and close on the merger before a possible adverse court ruling, which could come in August or September.
That should be doable.
The spinoff deals with Kim and Meredith show that it has given up on trying to persuade the Justice Department that it can own two top-four stations in markets where it would have had such overlaps.
So, all it has to do now is wrap up its negotiations with Fox. I don’t know what’s delaying that deal, except that neither Fox nor Sinclair is famous for making concessions.
Once Sinclair does that, it can finalize its application and the FCC can complete it long-stalled review.
With Democrat Mignon Clyburn gone and the Republicans holding a 3-1 majority, there is close to a zero chance of the FCC not approving the deal, but it will take a while for the FCC to act. It has to give everybody a chance to shoot holes in the application via comments and Sinclair a chance to patch them.
Even so, the FCC could clear the path to a closing in July or early August, ahead of a court ruling.
And nobody I spoke with is conceding the FCC will lose the case.
Yes, a couple of the judges were skeptical about the discount, but they also questioned whether the petitioners had standing. The panel could throw out the case if the petitioners can’t make a showing that the cap sans discount is causing injury to actual people.
But let’s assume the standing showing is successfully made — the court gave petitioners until May 8 to bolster it — and the judges move on to the merit of the cases.
Despite what was heard in the courtroom, the court may side with the FCC, agreeing that the cap and discount are inextricably linked. Case closed.
And if the court comes down on the side of the petitioners, it might simply remand the case to the FCC for further review.
As it happens, the FCC already has that review of the entire national ownership cap underway and, in fact, has already received a couple of rounds of comments.
It will take a few more months to get that rulemaking to the Eighth floor for a vote, but there is no doubt how that vote will go. The majority will decide either to eliminate the cap or significantly raise it. The NAB has called for moving it to 78%.
So, even if petitioners win in the court, they could ultimately lose at the FCC.
There are many other scenarios on how all this could play out. For instance, sensing the court’s sympathy, the petitioners might ask for a stay and get it. That sounds like a long shot, however.
In any event, I think that Sinclair now understands the urgency. Under all the scenarios, its chances improve the quicker it moves with the Fox deal, the FCC process and the closing.
Possession is nine-tenth of the law, and that is no less true when the thing being possessed is a broadcast license.