FCC Targets Sinclair Sidecar Deals In 3 Mkts.

The FCC’s Media Bureau has alleged that the sidecar transactions that Sinclair Broadcast Group has proposed in three markets as part of its $985-million pending acquisition of Allbritton Communications  — Charleston, S.C., Birmingham, Ala., and Harrisburg, Pa. — would violate agency ownership rules.

Under the deals at issue, Sinclair is proposing to take over the Allbritton ABC affiliates in those markets, spin off one of its existing stations in the markets to sidecar companies, in transactions that would give Sinclair some control over at least some operations of multiple TV stations in each market.

In a letter Friday to Sinclair, however, FCC Video Division Chief Barbara Kreisman said the way the deals were structured, Sinclair would lose grandfathered protections that it previously had that allow it to operate more than one TV station in each market through local marketing agreements. LMAs, which essentially allowed broadcasters to operate multiple stations in a market completely, are no longer legal.

“In three of the markets — Charleston, Birmingham and Harrisburg — the proposed transactions would result in the elimination of the grandfathered status of certain local marketing agreements and thus cause the transactions to violate our local TV ownership rules,” Kreisman said in her letter.

Kreisman also asked Sinclair to provide the agency with financial data showing that its sidecar partners in the three markets are genuinely running the programming operations of the stations.

A Sinclair source said the company intended to respond to Kreisman’s concerns “and we anticipate being able to work out all of the issues raised by the FCC,” and added that “it’s not uncommon for the FCC to seek further information about transaction details.”

A communications attorney with knowledge of the situation predicted that the FCC would require Sinclair to restructure the LMAs as shared services agreements, arrangements that allow a broadcaster to run virtually all of the operations, except programming, for multiple stations. SSAs are legal.

This attorney also said Sinclair would provide the FCC with financial documentation to demonstrate that the sidecar operators in the three markets “are getting something out of this, that this is not a simple ruse.”

Matt Wood, policy director for the watchdog Free Press, said: “We’re glad that the FCC is looking into the shady tactics that Free Press and others have brought to light in Sinclair’s deals. We look forward to the answers, and hope the commission will keep digging if and when Sinclair’s responses raise more questions than they resolve.”

American Cable Association President-CEO Matthew M. Polka responded to the news: “ACA is pleased that the FCC’s Media Bureau is closely scrutinizing the Sinclair-Allbritton deal.  This level of inspection is appropriate and necessary given the issues identified by the bureau and because the deal would permit Sinclair to increase its already prodigious market power over retransmission consent in two local TV markets through coordination agreements with stations owned separately in name only.”