1 00:00:00,120 --> 00:00:04,040 Speaker 1: Sinclair Broadcast groups proposed three point nine billion dollar deal 2 00:00:04,080 --> 00:00:07,800 Speaker 1: to purchase Tribune Media is awaiting f SEC approval, which 3 00:00:07,800 --> 00:00:10,400 Speaker 1: it will likely get in ten, though a lot of 4 00:00:10,440 --> 00:00:14,480 Speaker 1: work remains to be done. Sinclair's request for FCC approval 5 00:00:14,560 --> 00:00:18,400 Speaker 1: is opposed by Dish, small cable systems, and public interest groups, 6 00:00:18,680 --> 00:00:22,040 Speaker 1: and Somehouse Democrats are demanding answers from the f SEC 7 00:00:22,280 --> 00:00:26,439 Speaker 1: about what they say is possibly preferential treatment for Sinclair. 8 00:00:26,960 --> 00:00:30,640 Speaker 1: Joining me from our Bloomberg news room in Washington, d 9 00:00:30,720 --> 00:00:35,560 Speaker 1: C is Bloomberg litigation analyst Matt Chettenhelm. Matt, will you 10 00:00:35,720 --> 00:00:39,239 Speaker 1: map out the path for Sinclair getting approval for its 11 00:00:39,280 --> 00:00:42,559 Speaker 1: Tribune purchase? Sure? Sure, Jo, and I'd be happy too. 12 00:00:42,720 --> 00:00:47,000 Speaker 1: So so there's really two two elements to uh, Sinclair 13 00:00:47,040 --> 00:00:49,920 Speaker 1: getting this approved now. First, as you said that it's 14 00:00:49,960 --> 00:00:53,239 Speaker 1: proceeding at the FCC, they filed their application at the 15 00:00:53,280 --> 00:00:58,360 Speaker 1: FCC seeking approval, UH there in late June, and the 16 00:00:58,400 --> 00:01:01,800 Speaker 1: FCC tries to act on these these things in in 17 00:01:01,840 --> 00:01:04,039 Speaker 1: a hundred and eighty days. Now, it doesn't always stick 18 00:01:04,080 --> 00:01:07,520 Speaker 1: to that, but that would would would put this, uh, 19 00:01:07,560 --> 00:01:10,120 Speaker 1: you would you would look at a possible approval time 20 00:01:10,200 --> 00:01:15,120 Speaker 1: probably in early eighteen from from the agency. And right now, 21 00:01:15,120 --> 00:01:17,479 Speaker 1: what you see at the agency is as you said, 22 00:01:17,520 --> 00:01:20,360 Speaker 1: these other parties coming in and filing oppositions and and 23 00:01:20,400 --> 00:01:23,240 Speaker 1: telling the FEC why it shouldn't approve. The other angle 24 00:01:23,400 --> 00:01:26,800 Speaker 1: is the antitrust authorities at the Department of Justice are 25 00:01:26,880 --> 00:01:29,959 Speaker 1: also looking at this and they will look at whether 26 00:01:30,440 --> 00:01:35,400 Speaker 1: whether it passes muster under the antitrust laws. So why 27 00:01:35,480 --> 00:01:40,200 Speaker 1: do Dish, small cable operators, and public interest groups and 28 00:01:40,280 --> 00:01:45,039 Speaker 1: even some conservative media outlets opposed the deal. Sure, so, 29 00:01:45,200 --> 00:01:49,600 Speaker 1: I think there's two main reasons that the opposition presents 30 00:01:49,640 --> 00:01:53,040 Speaker 1: as to why the the FCC shouldn't approve this deal. So, 31 00:01:53,040 --> 00:01:57,680 Speaker 1: so Sinclair builds its business around using public broadcast spectrum 32 00:01:57,680 --> 00:02:01,280 Speaker 1: and historically, um, you know, not just anyone can get 33 00:02:01,320 --> 00:02:03,640 Speaker 1: into that business. You have to get a license from 34 00:02:03,680 --> 00:02:06,640 Speaker 1: the f c C and we we since spectrum is scarce, 35 00:02:06,760 --> 00:02:09,880 Speaker 1: the FEC attaches conditions to that so that you'll you'll 36 00:02:10,120 --> 00:02:13,000 Speaker 1: you'll you'll you'll serve the public interest in some ways. 37 00:02:13,040 --> 00:02:15,640 Speaker 1: And and what the public interest groups and and Dish 38 00:02:15,800 --> 00:02:18,320 Speaker 1: and others have said here is there's a real concern 39 00:02:18,440 --> 00:02:23,160 Speaker 1: that that letting Sinclair grow this much larger won't be 40 00:02:23,200 --> 00:02:25,600 Speaker 1: in the public interests and it isn't something we should 41 00:02:25,600 --> 00:02:27,880 Speaker 1: allow with with our public spectrum. And they say that 42 00:02:27,880 --> 00:02:31,080 Speaker 1: really for two reasons. One, there's a there's a concern 43 00:02:31,280 --> 00:02:34,680 Speaker 1: that they're not going to be focused on local markets 44 00:02:34,840 --> 00:02:37,640 Speaker 1: in the same way, uh that that they're going to 45 00:02:37,760 --> 00:02:40,880 Speaker 1: focus on growing as large as they can on a 46 00:02:41,000 --> 00:02:46,120 Speaker 1: national basis, sending out national stories to local affiliates and 47 00:02:46,280 --> 00:02:49,520 Speaker 1: local news which has sort of been the bread and 48 00:02:49,600 --> 00:02:54,160 Speaker 1: butter of of local TV. The public interest obligation might 49 00:02:54,200 --> 00:02:57,520 Speaker 1: get undermined in the process. The second piece of it 50 00:02:57,639 --> 00:03:00,960 Speaker 1: is that a company like Dish has to pay the 51 00:03:01,040 --> 00:03:05,560 Speaker 1: broadcast TV stations to carry that network on its pay 52 00:03:05,680 --> 00:03:08,480 Speaker 1: TV outlet. If you subscribe to Dish, if you want 53 00:03:08,480 --> 00:03:10,160 Speaker 1: to if you want to be able to see the 54 00:03:11,080 --> 00:03:14,560 Speaker 1: local broadcast news on your your Dish subscription, Dish has 55 00:03:14,600 --> 00:03:17,360 Speaker 1: to pay for it. And Dish and other small cable 56 00:03:17,400 --> 00:03:20,560 Speaker 1: operators are concerned that if Sinclair gets this big, it's 57 00:03:20,560 --> 00:03:24,559 Speaker 1: going to have so much leverage that costs are inevitably 58 00:03:24,680 --> 00:03:28,640 Speaker 1: going to go up, and there are caps on how 59 00:03:28,639 --> 00:03:32,800 Speaker 1: many households a single broadcast andity can reach. Will you 60 00:03:32,840 --> 00:03:36,880 Speaker 1: explain those briefly and how Sinclair is getting around them. Sure. 61 00:03:37,040 --> 00:03:39,360 Speaker 1: So one of the interesting things about this deal is 62 00:03:39,440 --> 00:03:42,720 Speaker 1: that before Donald Trump became the president, that there's no 63 00:03:42,760 --> 00:03:45,560 Speaker 1: way this deal could have happened. And that's because of 64 00:03:45,560 --> 00:03:50,600 Speaker 1: these existing media ownership caps that that limits a company 65 00:03:50,640 --> 00:03:55,720 Speaker 1: like Sinclair to only reaching thirty nine percent of US households. 66 00:03:55,880 --> 00:03:59,040 Speaker 1: What this deal does is it let Sinclair reach over 67 00:03:59,160 --> 00:04:02,240 Speaker 1: seventy per end of US households. Now. The only way 68 00:04:02,280 --> 00:04:05,560 Speaker 1: they can get that is that in May, the new 69 00:04:05,600 --> 00:04:09,720 Speaker 1: Republican FCC change the math for how you calculate which 70 00:04:09,720 --> 00:04:13,520 Speaker 1: households you reach. Now, even with that change, Sinclair still 71 00:04:13,640 --> 00:04:17,360 Speaker 1: violates the limit. It's still over thirty nine and it's 72 00:04:17,480 --> 00:04:21,000 Speaker 1: over by about six percent. So there's still an issue there. 73 00:04:21,080 --> 00:04:24,320 Speaker 1: And there's an issue that that another FCC rule limits 74 00:04:24,360 --> 00:04:29,200 Speaker 1: to limits YouTube not own multiple stations in local markets. 75 00:04:29,200 --> 00:04:31,920 Speaker 1: Sinclair has about ten markets. If this deal goes through 76 00:04:32,000 --> 00:04:34,719 Speaker 1: where that that that would they would run a follow 77 00:04:34,760 --> 00:04:37,480 Speaker 1: that rule. And so in both cases, Sinclair hasn't told 78 00:04:37,480 --> 00:04:39,680 Speaker 1: this exactly how it's going to get around that, but 79 00:04:39,760 --> 00:04:42,000 Speaker 1: I think a likely path is that the FCC is 80 00:04:42,000 --> 00:04:43,760 Speaker 1: going to have to look at that and grant a 81 00:04:43,800 --> 00:04:46,960 Speaker 1: waiver uh and to allow the company to go forward 82 00:04:47,000 --> 00:04:50,960 Speaker 1: with with owning so many stations that still continue to 83 00:04:50,960 --> 00:04:54,040 Speaker 1: to violate existing law. Well, won't there be a lot 84 00:04:54,080 --> 00:04:58,480 Speaker 1: of litigation over this? Yeah, so that there's surely will, 85 00:04:58,560 --> 00:05:01,240 Speaker 1: and there already is when and the FEC changed the 86 00:05:01,279 --> 00:05:06,000 Speaker 1: math in in April on counting that a lawsuits were 87 00:05:06,000 --> 00:05:09,640 Speaker 1: filed by public interest groups. But what's what's important though 88 00:05:09,680 --> 00:05:13,799 Speaker 1: for this deal is that anytime the FCC changes its rules, 89 00:05:14,200 --> 00:05:17,840 Speaker 1: the normal practice is that the rule takes effect immediately 90 00:05:18,160 --> 00:05:21,000 Speaker 1: and then it takes like a year, maybe sometimes two 91 00:05:21,080 --> 00:05:24,120 Speaker 1: years to litigate whether the FEC could change the rule 92 00:05:24,200 --> 00:05:26,880 Speaker 1: like that. And so that's what's happening with the change 93 00:05:26,880 --> 00:05:28,920 Speaker 1: in the MATH, and I suspect it will happen with 94 00:05:29,000 --> 00:05:32,640 Speaker 1: these other aspects that that that Sinclair still violates, the 95 00:05:32,680 --> 00:05:35,560 Speaker 1: FEC may be changing those rules. Those will be litigated, 96 00:05:35,760 --> 00:05:39,440 Speaker 1: but that takes time. And in the meantime, Sinclair can 97 00:05:39,440 --> 00:05:42,760 Speaker 1: go ahead close on this deal and and say we'll 98 00:05:42,800 --> 00:05:45,480 Speaker 1: worry about that later if we have to. What's your 99 00:05:45,480 --> 00:05:48,680 Speaker 1: reaction to Three House Democrats sent a letter to the 100 00:05:48,800 --> 00:05:53,240 Speaker 1: FEC chair saying that as the largest owner of television 101 00:05:53,279 --> 00:05:56,400 Speaker 1: broadcast stations in the country, Sinclair had expanded to the 102 00:05:56,440 --> 00:05:59,600 Speaker 1: limits of the FCC ownership rules. We hope this letter 103 00:05:59,640 --> 00:06:03,039 Speaker 1: will it as an opportunity to respond to report suggesting 104 00:06:03,480 --> 00:06:07,159 Speaker 1: you fail to exercise adequate independence as FCC chair and 105 00:06:07,160 --> 00:06:10,159 Speaker 1: you may that may have resulted in the agency giving 106 00:06:10,240 --> 00:06:15,760 Speaker 1: unusual and possibly preferential treatment to Sinclair. That sounds like 107 00:06:15,800 --> 00:06:19,560 Speaker 1: a like a really tough charge. Sure, and and and 108 00:06:19,640 --> 00:06:22,880 Speaker 1: I think that's that's something that has been raised that 109 00:06:22,880 --> 00:06:27,320 Speaker 1: that that a Jeeppie, the new FCC chairman, UM seems 110 00:06:27,360 --> 00:06:31,120 Speaker 1: to uh have have enacted policies that are that that 111 00:06:31,200 --> 00:06:33,280 Speaker 1: really allowed this deal to go through in a way 112 00:06:33,320 --> 00:06:35,599 Speaker 1: that it wouldn't before. The Truth of it, though, is 113 00:06:35,640 --> 00:06:38,320 Speaker 1: that this is these are kind of long standing positions 114 00:06:38,320 --> 00:06:42,200 Speaker 1: that that that a Gepie has has been UM pushing, 115 00:06:42,600 --> 00:06:46,080 Speaker 1: and so I think I think it's probably I think 116 00:06:46,120 --> 00:06:48,919 Speaker 1: it's probably being being true and honest when he says 117 00:06:48,960 --> 00:06:51,640 Speaker 1: that this isn't about one particular company, this is about 118 00:06:52,000 --> 00:06:56,240 Speaker 1: my my UM truly felt beliefs that that these rules 119 00:06:56,240 --> 00:06:59,920 Speaker 1: were adopted in this in you know, forty years ago, 120 00:07:00,240 --> 00:07:03,560 Speaker 1: and in this new world of competition from the Internet 121 00:07:03,800 --> 00:07:06,279 Speaker 1: and from cable TV, they really don't make as much 122 00:07:06,279 --> 00:07:10,000 Speaker 1: sense as as they once did. Matt just briefly, if 123 00:07:10,040 --> 00:07:13,720 Speaker 1: the litigation, let's say the the other groups win against 124 00:07:14,040 --> 00:07:17,880 Speaker 1: against the FCC, but Sinclair deal has already gone through 125 00:07:17,920 --> 00:07:20,960 Speaker 1: and they have those stations, do they have to turn 126 00:07:21,000 --> 00:07:24,000 Speaker 1: those stations over, sell them or are they let keep them? 127 00:07:24,160 --> 00:07:26,760 Speaker 1: So that's going to be a very interesting question if 128 00:07:26,800 --> 00:07:29,960 Speaker 1: the FCC loses some of these lawsuits, as it might, 129 00:07:30,120 --> 00:07:33,600 Speaker 1: and I think you know, there's certainly going to to 130 00:07:33,760 --> 00:07:37,360 Speaker 1: be pressure on the company to divest those stations at 131 00:07:37,400 --> 00:07:40,800 Speaker 1: that point. What we don't know, though, is how aggressively 132 00:07:41,040 --> 00:07:45,440 Speaker 1: this FCC, controlled by Republicans, would enforce those limits. It 133 00:07:45,480 --> 00:07:49,440 Speaker 1: has a practice historically of granting waivers and saying, Okay, 134 00:07:49,560 --> 00:07:51,560 Speaker 1: do it in two years, and then they come back 135 00:07:51,560 --> 00:07:54,320 Speaker 1: two years later and they grant another waiver, and so 136 00:07:54,840 --> 00:07:58,440 Speaker 1: maybe so so there's the potential that that threat comes along, 137 00:07:58,560 --> 00:08:01,960 Speaker 1: especially after a change into the next administration. If it 138 00:08:02,000 --> 00:08:05,160 Speaker 1: goes back democrt, we'll have to leave it there. Fascinating. 139 00:08:05,440 --> 00:08:09,400 Speaker 1: That's Bloomberg Litigation analyst Matt shettle Helm, And if you 140 00:08:09,440 --> 00:08:11,160 Speaker 1: want to read more of his analysis, go to be 141 00:08:11,240 --> 00:08:13,680 Speaker 1: I go on the Bloomberg terminal. That's it for this 142 00:08:13,800 --> 00:08:16,680 Speaker 1: edition of Bloomberg Law. Thanks to our producer David Suckerman 143 00:08:16,720 --> 00:08:20,800 Speaker 1: and our technical director Charlie Vohmer. I'm June Grosso. Coming 144 00:08:20,880 --> 00:08:24,640 Speaker 1: up next Bloomberg Markets with Corey Johnson and guest host 145 00:08:24,760 --> 00:08:27,120 Speaker 1: Caroline High. This is Bloomberg.