Nexstar, Tribune TV deal poses test for Trump regulators

Nexstar Media Group’s deal to buy Tribune Media Company for $4.1 billion is the latest merger to test Trump administration regulators tasked with overseeing a rapidly consolidating media industry.

If approved, the deal will make Irving, Texas-based Nexstar the largest local TV broadcaster in the country, with 216 stations in 118 different markets reaching at least 39 percent of the nation’s television-viewing households.

The two came together to explore a merger after Sinclair Broadcast Group’s $3.9 billion deal to buy Tribune fell apart after running into opposition from regulators at the Department of Justice and the Federal Communications Commission (FCC).

{mosads}The FCC was concerned about a handful of side deals proposed by Sinclair to sell off certain stations from the combined company in order to bring it within the regulatory limits on media ownership. Some of the sales had proposed prices that were well below market value and the buyers were entities that were closely aligned with, or effectively controlled by, Sinclair.

The Sinclair deal also encountered popular opposition over the right-leaning broadcaster’s “must-run” editorial packages. Those segments included conservative and pro-Trump messages that Sinclair required its local stations to run.

Nexstar doesn’t have the same political baggage as Sinclair, but critics are just as concerned about its proposal to consolidate so many local news outlets across the country under one umbrella.

“Hopefully the FCC’s rejection of Sinclair’s attempt to buy up these same Tribune stations shows the agency’s newfound understanding of the need for more independent voices and local choices for news — and a rejection of its earlier consolidation-at all-costs policies,” Craig Aaron, the president and CEO of the group Free Press, said in a statement.

“The Sinclair deal’s demise should serve as a guide to rejecting the Nexstar proposal,” Aaron continued. “There’s an opportunity for the FCC to embark on a new path, and not simply serve up Tribune’s local stations to another giant conglomerate.”

A spokeswoman for FCC Chairman Ajit Pai declined to comment on the merger, which must be approved by his agency and the Department of Justice.

Sinclair’s failure to secure regulatory approval was largely one of its own making. In a surprise announcement in July, Pai stunned observers by announcing that he had “serious concerns” about the Sinclair-Tribune merger and would be subjecting it to an administrative law proceeding, a move that ultimately doomed the deal.

“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 at the time.

According to a lawsuit Tribune filed against Sinclair after the merger was abandoned, Sinclair executives refused to go along with demands from the Justice Department that it divest from TV stations in certain markets in order to win their approval.

Nexstar will have the chance to learn from Sinclair’s mistakes.

Nexstar CEO Perry Sook said on Monday that he had spoken with Pai that morning and will be presenting regulators with a divestiture plan that will keep the combined company from exceeding the national broadcast ownership limit.

“We have thoughtfully structured the transaction in a manner that positions the combined entity to better compete in today’s rapidly transforming industry landscape and better serve the local communities, consumers and businesses where we operate,” Sook said in a statement.

“As with our past transactions, we have developed a comprehensive regulatory compliance plan and believe we have a clear path to closing.”

The company will also benefit from Pai’s efforts to ease restrictions on broadcaster consolidation. Under his leadership, the FCC has voted to re-enact a loophole that allows broadcasters to buy certain local television stations with a so-called discount. That discount gives them more leeway for the ownership cap that allows companies to only reach 39 percent of the nation’s television-viewing households.

Free Press estimates that without taking the discount into account, the merger will give Nexstar an actual reach into 72 percent of the country’s television audience.

The commission also voted last year to eliminate restrictions on companies purchasing multiple stations in the same market.

Pai’s effort to ease media consolidation rules was a flashpoint in the rancorous debate over Sinclair’s failed merger.

Democrats accused Pai of pushing through the deregulatory measures to help Sinclair with its effort to buy the Tribune stations, which led to multiple FCC inspector general investigations at the request of House Democrats. The agency watchdog in August found that Pai did not show improper bias in favor of Sinclair, and on Monday the inspector general ruled that Pai had not concealed communications with the White House about the proceeding.

Critics say that, despite the differences between Nexstar and Sinclair, the thought of one company holding so many local television stations is concerning.

The deal also faces likely scrutiny from House Democrats when they gain new oversight powers in the next Congress.

“The proposed Nexstar/Tribune merger could result in significant aggregation of local television stations,” a spokesman for Democrats on the House Energy and Commerce Committee said in a statement to The Hill.

“Such a transaction should be reviewed meticulously to ensure it benefits consumers and the public interest. Committee members will take a close look at the proposed merger next year.”

Yosef Getachew, the director of the media and democracy program at Common Cause, says that such large broadcasting mergers threaten local journalism.

“Even if you don’t see the particular content that a company like Sinclair would try to drive through their stations, you’re still going to see similarity of programming among the stations that Nexstar owns,” Getachew told The Hill.

“A merger of this magnitude, when one company owns so many different stations across the country — it’s going to lead to less news, less information and less diverse independent voices.”