Following nearly a year-long review, the Federal Communications Commission (FCC)'s Media Bureau recently announced that it would refer a proposed transaction between my company, Standard General, and local broadcaster TEGNA for review by an administrative law judge (ALJ). Designed to not make headlines, this seemingly mundane regulatory action is a brazen overreach of authority, which if allowed to stand, has significant implications for our market economy.
Some background: Last February my firm announced an agreement to acquire TEGNA. It was a modest deal in the landscape of tech and media. But for me—an immigrant raised in Queens who learned English watching Sesame Street—the chance to lead one of the largest broadcast companies in America was a culmination of a long journey.
The deal would involve careful review by the Department of Justice (DOJ) and FCC but we had no reason to doubt final approval. It was structured so that post-deal TEGNA would be slightly smaller than pre-deal. CEO Deb McDermott and I have been turning around television stations successfully for the past 12 years by investing in people and improved processes. Our firm currently holds in good standing FCC licenses. Furthermore, the deal aligned with stated FCC policy goals, including our intention to increase investment in local news and the fact that it would increase diversity in media ownership. The markets shared our confidence with TEGNA shares trading near the deal price post-announcement.
It was not surprising that the deal had a few objectors, namely pay-TV advocates and a representative of labor. What was uncommon was how ugly that process became. Vague allegations were raised about "foreign influence" despite me being a U.S. citizen and my company being U.S.-based. One critic shamelessly said the deal "does not promote ownership diversity as it is understood by the public interest and civil rights community," suggesting that Asian Americans are not included within the concept of diversity.
But we trusted the system and took confidence that we had followed all the rules and precedent. That faith was tested as a review meant to be undertaken within an informal 180-day "shot clock" stretched out to nearly a year. The customary single public comment period was extended to an unprecedented three rounds.
During this time, we tried repeatedly, with little success, to dialogue with the FCC chair's office and Media Bureau to get feedback on our responses to petitioners' concerns. We were told that at the appropriate time they would invite us to discuss the outstanding issues.
And then with no warning the hammer dropped. The decision to designate this transaction for an administrative hearing wasn't a procedural step. This was a carefully aimed kill-shot designed to evade a formal vote by the commissioners, as well as potential oversight by Congress or the courts. By waiting a full year, the Media Bureau will extend the process far beyond the May 22 final merger termination date—a full 15 months since announcement. And without an actual ruling, the Media Bureau presents no recourse.
The Media Bureau's stated reasons for its actions are risible. They claim the ALJ needs to review additional evidence related to potential impacts on jobs and consumer prices. Yet the parties have already turned over millions of pages of evidence, sat through hours of depositions, responded to all comments and inquiries of fact and law, and offered concrete commitments to address these very issues. Not to mention the fact that jobs and pricing are not technically issues that fall under the Media Bureau's jurisdiction (and the DOJ, which does have authority to act allowed the review period to expire without challenge).
Commenting on the precedent this action sets, Blair Levin, an analyst who served in previous Democratic-led FCCs, wrote "we struggle to find any institutional or judicial constraint on any chair effectively blocking any transaction on any grounds." This is the first time the FCC has ever acted through the Media Bureau in a manner designed to kill a pending transaction without referencing a single rule or regulation that the proposed transaction might violate and without any consideration of conditions that would address any outstanding concerns. It is also the first time the FCC has ever acted to effectively kill a TV merger without so much as a vote by the full commission.
Put simply, the Media Bureau is being allowed to scuttle this deal because they don't seem to think I should own these stations. Who knows why? Maybe because we manage an investment fund. Maybe it's my background or my personality. And therein lies the danger.
By arbitrarily defining "public interest," the Media Bureau—an office within the FCC bureaucracy—has effectively made itself judge and jury. This issue merits broader public attention and scrutiny. Because if this outcome stands, it is impossible to know where it ends.
Do we want a future administration making such unreviewable decisions about media ownership? How confident can anyone be that other agencies won't similarly find ways to interfere in their respective markets? The FCC commissioners who were actually appointed by the president and confirmed by the Senate need to step forward from behind the Media Bureau and vote, guided by the facts and the rules. If they do so—we remain confident—they will approve our deal on the merits. If they don't, then no one can say they weren't warned when another bureaucracy in this or a future administration breaks with its precedents to grab unaccountable power when and where it can.
Soo Kim is managing partner and chief investment officer of Standard General.
The views expressed in this article are the writer's own.
Uncommon Knowledge
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