Those concerned about media consolidation had criticized the proposed merger between Tribune Media Company and Sinclair Broadcast Group. The concerns heated up after Sinclair made headlines in April by ordering dozens of its TV stations to present the exact same speech about “biased and false news.” The cookie-cutter speech was noticed by comic John Oliver, who called it propaganda.
In June, the Federal Communications Commission announced “serious concerns” about the merger. “The evidence we’ve received suggests that certain station divestitures that have been proposed to the FCC would allow Sinclair to control those stations in practice, even if not in name, in violation of the law,” said FCC chair Ajit Pai.
The merger would have allowed the Smith family, which controls Sinclair, to purchase over 30 stations from Tribune Media, adding to the 190 or more that it already owns.
Now, Tribune Media has decided to withdraw from the merger deal. Furthermore, it has filed a breach of contract lawsuit against Sinclair.
“Sinclair’s entire course of conduct has been in blatant violation of the merger agreement and, but for Sinclair’s actions, the transaction could have closed long ago,” said the Tribune in a statement.
It’s not entirely clear that the merger would actually have closed long ago. However, Tribune Media accuses Sinclair of following a strategy that served only its own interests despite being engaged in the deal.
The divestitures cited by Pai were apparently a sticking point. According to reports, Sinclair was planning to sell some stations to companies with close ties to the Smith family. Another issue was that it simply refused to sell stations in some markets to Tribune Media, even though selling them was required to meet regulatory requirements.
In addition, Tribune Media accuses Sinclair of engaging in “unnecessarily aggressive and protracted negotiations” with the FCC and the Justice Department, further straining the deal.
The breach of contract claim arises because, according to Tribune Media, Sinclair committed in the merger agreement to use its “reasonable best efforts” to obtain prompt regulatory approval, which included agreeing in advance to assist the regulatory process by divesting of stations in certain markets.
Instead, Tribune Media says that Sinclair may have omitted material facts or misrepresented them in its FCC applications in order to circumvent ownership restrictions. The FCC apparently concluded unanimously that it had done so, leading the agency to require the deal to go before a judge — which would have slowed the deal down.
“This uncertainty and delay would be detrimental to our company and our shareholders,” Sinclair said in its statement. “Accordingly, we have exercised our right to terminate the merger agreement, and, by way of our lawsuit, intend to hold Sinclair accountable.”