The Department of Justice has extended its investigation of Sinclair Broadcast Group's planned acquisition of the eight television stations owned by Allbritton Communications Co.
According to Sinclair, the DOJ's inquiry is focused on two stations the Hunt Valley, Md., broadcaster would be buying in Harrisburg, Pa., and Charleston, S.C.
Sinclair owns or has a service agreement with an affiliate of one of the Big Four broadcast networks in those markets and would be acquiring Allbritton stations that are also affiliated with the Big Four in those markets.
Although the DOJ investigation of the $985 million deal is confidential, concerns about the impact on Harrisburg and Charleston have already been raised before the Federal Communications Commission, which is also investigating the deal. The FCC's review process is relatively open and the commission has solicited comment from the public and other interested parties.
The transaction faces opposition at the FCC from activists fighting media consolidation and the trade group for small cable companies, which have raised concerns about the deal's impact on the two markets. As a result, Free Press and the American Cable Association have asked the FCC to either block the deal or impose conditions limiting Sinclair's market power in those two areas.
FCC rules forbid one company from owning more than one station affiliated with a top-four rated network in any one market -- typically that means a broadcaster can own only one of the ABC, CBS, FOX or NBC stations in a market. In addition to meeting the Big Four limit, a company that wants to own two stations in a market, otherwise known as a duopoly, must also meet an FCC requirement that the market have at least eight stations held by different owners.
Sinclair intends to comply with the FCC duopoly limits in Harrisburg and Charleston by selling the stations it already owns. For instance, in Harrisburg it would sell its CBS affiliate WHP-TV to Deerfield Media Licensee LLC in order to buy Allbritton's ABC affiliate WHTM-TV. In Charleston it would sell its WMMP-TV (affiliated with MyNetwork) to HSH Charleston Licensee LLC in order to acquire Allbritton's ABC affiliate WCIV-TV.
The Justice Department generally defers to the FCC when examining the antitrust implications of broadcast deals, but it is not legally bound by the commission's rules.
Free Press, which also objects to Sinclair's purchase of Allbritton's Birmingham, Ala., station WCFT-TV, and the American Cable Association told the FCC in their petitions opposing the Allbritton deal that the divestitures aren't sufficient to comply with the FCC limits. They said that Sinclair would still control more than it is allowed to in Harrisburg and Charleston because of service agreements it would set up or has already established.
In Harrisburg, Sinclair plans to continue providing support services to the CBS station it is selling and would perform many station operations for the buyer.
In Charleston, Sinclair already has a servicing agreement with Fox affiliate WTAT-TV, which is owned by Cunningham Broadcasting Corp. Opponents argue that the Allbritton deal would bring Sinclair into violation of the Big Four restriction there, too.
The ACA said allowing one company to control two Big Four affiliates in a market is particularly harmful for smaller cable operators because it would give the broadcaster too much leverage to dictate terms of carriage agreements cable companies must negotiate with local broadcasters.
Because Sinclair would have authority to negotiate carriage agreements with stations it has entered service agreements with, the ACA told the FCC "the transaction would allow Sinclair to negotiate retransmission consent for both the CBS And ABC affiliates in Harrisburg and the Fox and ABC affiliates in Charleston."
The result will be higher prices for cable operators and their customers, the ACA said. The group said six of its member companies must negotiate carriage agreements with broadcasters in the Harrisburg market and two in the Charleston area.
The ACA has asked the FCC to block or put a condition on the deal because of the power Sinclair would be gaining to dictate terms to cable companies seeking to carry broadcast stations in those markets.
Sinclair has defended the deal and said its plan to shed the Harrisburg and Charleston stations is sufficient to comply with FCC standards because the commission has already declared that similar servicing agreements do not violate duopoly limits.
The spinoffs and service agreements "fully comply with all FCC rules and policies," the company said in its reply to the FCC, adding that "the commission cannot amend its multiple ownership and attribution rules" without carrying out a formal proceeding to change its rules.
The DOJ, however, does not have the same bright line rules on local TV ownership and would be free to challenge the transaction if it determined there was an antitrust problem.
In announcing the DOJ review, Sinclair said it would "respond promptly" to the agency and said it continued to expect the transaction would close in the first or second quarter of 2014.
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