Federal Communications Commission (FCC) chair Ajit Pai expressed "serious concerns" about Sinclair Broadcast Group's proposed plan to merge with Tribune Media on Monday, adding that under the Communications Act, the commission could not approve the deal as it currently stands.
In a statement, Pai questioned Sinclair's plan to get approval for the deal by selling off some of its TV stations. He also proposed that the merger deal be sent to an administrative law judge for review.
"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," Pai said.
"When the FCC confronts disputed issues like these, the Communications Act does not allow it to approve a transaction," Pai continued. "Instead, the law requires the FCC to designate the transaction for a hearing in order to get to the bottom of these disputes issues."
"For these reasons," Pai added, "I have shared with my colleagues a draft order that would designate issues involving certain proposed divestitures for a hearing in front of an administrative law judge."
Pai's statement dealt an unexpected setback to Sinclair, as the deal was predicted to be approved by the commission. The announcement could end up effectively blocking Sinclair's planned acquisition of Tribune Media, a deal valued at $3.9 billion. In 2011, AT&T and T-Mobile withdrew their merger application to the commission after then-FCC chair Julius Genachowski highlighted a similar proposal to the commission.
Pai's statement comes as something of a surprise. Sinclair had expected its proposed deal to find a sympathetic audience among regulators in the Trump administration.
According to the Hill, "The Sinclair, Tribune deal would have given the combined media company massive reach among the country's television-viewing audience, putting it over the top of the legal limit on serving 39 percent of households."
In order to gain approval for the Tribune deal, Sinclair agreed to sell 23 local television stations around the country. Some of those sales, however, reportedly would have been in name only, and would have left the company with operational control over those stations.
Critics said the divestments were an effort to move the blockbuster deal forward as it underwent scrutiny from the FCC.
"I think Sinclair has been disingenuous about divestitures for months now," Gigi Sohn, who served as an adviser to former FCC chair Tom Wheeler, told the Hill. "I think the last filing didn't satisfy anybody that Sinclair wasn't going to still have some control over these stations."
The announcement also comes as a welcome surprise for Democratic lawmakers and the company's Republican opponents, who have alleged that the the FCC has given Sinclair preferential treatment.
Jessica Rosenworcel, the lone Democrat on the commission, released a statement praising Pai's Monday announcement.
"As I have noted before, too many of this agency's media policies have been custom built to support the business plans of Sinclair Broadcasting. With this hearing designation order, the agency will finally take a hard look at its proposed merger with Tribune," Rosenworcel said. "This is overdue and favoritism like this needs to end."
Chris Ruddy, CEO of the conservative television network Newsmax and a critic of the merger, hailed Pai's decision in a statement.
"Clearly this decision is based on the facts and law — specifically that Sinclair has not complied with requirements set forth by the FCC to promote diversity, localism and competition," Ruddy said. "After a lengthy and fair process, Chairman Pai acted in a non-partisan manner in making this decision — a marked departure from the Commission's partisan actions during the Obama administration."