FCC Moves to Beat Back Covert Consolidation

In a rare move, the Federal Communications Commission has thrown a wrench into a company’s plans to consolidate.

Two weeks ago, the Wall Street Journal reported that the FCC has intervened in the Sinclair Broadcast Group’s plan to buy seven TV stations from Allbritton Communications. The agency asked Sinclair to “amend or withdraw” its plans to sidestep ownership rules that limit how many stations one company can own.

Earlier this fall, Free Press pushed the FCC to block this deal, citing Sinclair’s use of outsourcing agreements and shell companies to skirt the rules. In new research, we revealed how Sinclair and other companies are using all kinds of shady tactics to grow their empires at viewers’ expense.

In response to our report, Sinclair argued that it “completely complies” with the law. However, it would seem the FCC disagrees and is raising significant concerns about this kind of covert consolidation.

The agency’s response is encouraging because the stakes here are so high. In just the last two years, Sinclair has set in motion deals that would more than double the number of stations it controls and the number of communities it reaches.

The $985-million Sinclair/Allbritton deal is just one of seven local TV deals Sinclair is pursuing right now. If the FCC approves every deal, Sinclair will reach nearly 40 percent of U.S. households.

The only thing not increasing at Sinclair is the number of journalists. The company recently fired 30 people from stations in Portland and Seattle and the average number of employees per station has declined by nearly 20 percent since 2001.

The company has shown little regard for meaningful journalism in the past. Over and over it has used the public airwaves for political gain — even forcing its journalists to read partisan scripts on the eve of key elections.

Sinclair uses outsourcing agreements to control 46 stations in addition to the 115 stations it owns outright. It has set up three shell companies to hold the licenses to 30 of the 46 stations that it operates under these agreements.

How do we know these companies are fake? Let us count the ways …

  • In most cases, Sinclair produces 100 percent of any original programming, including news, that airs on stations these shell companies own.
  • Legal documents show that Sinclair receives nearly all of the stations’ profits and is on the hook for bank loans these shell companies take out.
  • Contracts show that these fake companies are legally bound to sell their TV stations to Sinclair for bargain-basement prices if the FCC relaxes its ownership rules.
  • When Sinclair talks to investors and the Securities Exchange Commission, it admits it has de facto control of these fake companies and stations.

The deals pending at the FCC and the agency’s decisions on how to address the rise in covert consolidation will test new FCC Chairman Tom Wheeler’s commitment to boosting competition.

Wheeler and the FCC have an opportunity to turn the tables on media companies that are squatting on the public’s airwaves and making huge profits while eroding local journalism. There is no legitimate reason to allow any owner to control multiple TV stations in a single community. We should put more of the airwaves back in the hands of the public and send companies like Sinclair packing.

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