Cicilline: Sinclair’s Proposed Purchase of Tribune Media Threatens Consumers, Journalists, Free Press

Wednesday, November 1, 2017

WASHINGTON – U.S. Congressman David N. Cicilline (RI-01), who serves as Ranking Member of the House Judiciary Committee’s Subcommittee on Regulatory Reform, Commercial and Antitrust Law, today urged the U.S. Department of Justice (DOJ) and the Federal Communications Commission (FCC) to fully scrutinize Sinclair Broadcast Group’s proposed purchase of Tribune Media.

“A single gatekeeper of local news and programming is a threat to the free and diverse press. There is bipartisan agreement that this merger threatens to cripple a ‘free and diverse press, a bedrock principle of American democracy,’” Cicilline wrote in his letter. “Local stations acquired by Sinclair frequently complain that Sinclair’s programming, including ‘must-run’ segments, ‘are too politically tilted and occasionally of poor quality.’ In Providence, Rhode Island, these segments ‘have rattled viewers and [the station’s] own news reporters’ on Rhode Island’s ‘most watched television station.’”

DOJ and FCC are required by law to approve Sinclair’s proposed $3.9 billion merger with Tribune Media. If the merger is approved, Sinclair would become the nation’s largest single broadcaster, controlling an additional 42 local stations, bringing their market share to 233 stations that reach into 72% of American homes. Although FCC rules prohibit a single company from owning stations that reach into more than 39% of American households, the Trump administration reinstated the so-called “UHF Discount” earlier this year, allowing Sinclair to count only half their audience when stations broadcast on higher frequencies.

Cicilline added, “This unprecedented merger threatens to raise prices for millions of working American families through higher cable bills, result in layoffs in newsrooms and stations across the country, and undermine the freedom and diversity of the press. I urge you to closely scrutinize this merger to ensure that it will not harm consumers, workers, or the cornerstone of our democracy: a free and diverse press.”

Sinclair has fallen under criticism in recent months for inserting conservative political commentary into local news broadcasts:

·         In one case, Sinclair provided scripts to local station anchors asking, "Did the FBI have a personal vendetta in pursuing the Russian investigation against President Trump's former national security advisor Michael Flynn?"

·         Sinclair provides stations with so-called 'must-run' segments that include video op-eds from Sinclair executive Mark Hyman and political analyst Boris Epshteyn. Epshteyn, who joined Sinclair in April, was a senior adviser to Trump's presidential campaign and once claimed Obama won North Carolina because of voter fraud. Some local stations have protested by airing these must-run segments during pre-dawn times of very low viewership.

·         In December, Politico reported that Jared Kushner told television executives the Trump campaign struck a deal with Sinclair for more favorable coverage.

The media conglomerate’s efforts to skew local news coverage in a conservative direction are especially insidious considering viewers across the political spectrum view local news with a greater degree of trust than national news; friends, family, and acquaintances; and social networking platforms. Multiple stakeholders, including Dish Network LLC, the American Cable Association, Free Press, Public Knowledge, and Common Cause have requested the government to deny the proposed merger.

The text of Cicilline’s letter is embedded below. A PDF copy of the letter, as delivered, can be downloaded by clicking here.

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November 1, 2017

The Honorable Jefferson Sessions

Attorney General

Department of Justice

950 Pennsylvania Avenue, N.W.

Washington, D.C. 20530

 

The Honorable Ajit Pai

Chairman

Federal Communications Commission

445 12th Street S.W.

Washington, D.C. 20554

Dear Attorney General Sessions and Chairman Pai:

I write to express my strong concerns with Sinclair Broadcast Group’s proposed acquisition of Tribune Media. This unprecedented merger threatens to raise prices for millions of working American families through higher cable bills, result in layoffs in newsrooms and stations across the country, and undermine the freedom and diversity of the press. I urge you to closely scrutinize this merger to ensure that it will not harm consumers, workers, or the cornerstone of our democracy: a free and diverse press.

The proposed Sinclair-Tribune merger would combine two significant television broadcasters into the single largest broadcaster in the country. As a result of the merger, Sinclair would reach 72% of American households through its control of 223 television stations in 108 markets, including 78% of the nation’s top markets. Furthermore, Sinclair would eliminate a direct competitor in a dozen local markets. Sinclair’s own President and Chief Executive Officer, Christopher S. Ripley, has said that the transaction would create “the largest broadcast group by a country mile” and that the “industry needs to consolidate to two or three large broadcasters, and really just one to two strong local players in each market.” This market has already experienced a wave of consolidation over the past decade, resulting in significant, durable barriers to entry for competitors and fee inflation that is “unsupported by a rational explanation.”

Allowing this proposed merger could lead to higher cable bills and worse content and service for American consumers. Television broadcasters compete to provide programming, including local news, to attract a large audience to earn advertising revenue. As the Justice Department noted in 2013, the combination of size, loyalty, and reach enables television broadcasters to extract high retransmission fees. This is precisely because advertisers “covet” these spots since “they have the largest audience and can reach all the television viewers in an area.” As a result of this transaction, Sinclair will have increased bargaining power to demand excessive retransmission rates. Invariably, these price increases would be passed onto consumers in the form of higher cable bills and diminished quality of content and service. As one programming distributor concluded, this merger “should not, and cannot, be approved” unless the merging parties can either show that prices will not increase as a result of this transaction “or explain why consumers deserve to pay more for inferior content.”

The proposed merger may also threaten the economic security of hardworking Americans. Sinclair has a long and entrenched track record of “slashing budgets and downsizing newsrooms,” resulting in “high turnover, low morale, and even instances of bullying.” Professor Dow Smith, a former NBC news director in Detroit, stated in 2004 that if “I were a Sinclair news director I'd quit.” Since then, this anti-worker atmosphere has not improved. For example, a sales assistant at a local broadcast station who was laid off after it was acquired by Sinclair described the station as “very hostile” because of Sinclair’s management style:

When Sinclair came in and bought our company, things just continued to grow worse. Our best managers either left or were laid off. High turnover rate with little to no replacement — more added work and less flexibility to schedule time-off. The work environment is very hostile. Managers tend to play favorites and company morale is at an all-time low. Workplace bullying is also common but it tends to be more passive-aggressive so executives can get away with it.        

Sinclair is also known for creating “efficiencies” through broadcast sharing agreements, which as the Communications Workers of America has noted, “lead to significant job loss” and “result in fewer stations producing news, less time devoted to local news, and also fewer broadcast station employees and journalists.” As the White House Council of Economic Advisers noted last year, this form of outsized power over wages and workers—also called monopsony power— “can reduce wages, employment, and overall welfare.” The antitrust laws were clearly intended to prevent this form of market power through mergers.

Allowing a single company to serve as the gatekeeper of broadcast television for the majority of American households in an already concentrated market is likely also presumptively anticompetitive under the antitrust laws. It is well established that a merger that will significantly increase concentration in a market that is already concentrated is presumptively anticompetitive. In a landmark case, the Supreme Court held in 1963 in Philadelphia National Bank that a merger that causes a single company to control an undue share of the market while significantly increasing the concentration of firms in that market is “so inherently likely to lessen competition substantially that it must be enjoined in the absence of evidence clearly showing that the merger is not likely to have such anticompetitive effects.” Since then, lower courts have continued to apply this standard, noting that significant concentration “creates, by a wide margin, a presumption that the merger will lessen competition.”

The Justice Department’s horizontal merger guidelines expressly provide that mergers significantly “increase concentration and result in highly concentrated markets are presumed to be likely to enhance market power.” This presumption against anticompetitive mergers in concentrated markets is consistent with the economic literature, which suggests that concentration is correlated with higher prices. Renata Hesse, the former Acting Assistant Attorney General Renata Hesse of the Justice Department’s Antitrust Division, observed last year that “we are learning more and more that mergers among substantial competitors tend to lead to higher prices.” Because these large mergers “often fail to deliver on the gains their proponents sought to achieve . . . we should be skeptical of the claim that mergers among substantial competitors are beneficial.” Of course, merging parties may rebut this presumption by clearly demonstrating that the merger will not harm competition. But to date, Sinclair has not demonstrated that acquiring Tribune will not harm competition, as several public interest and labor organizations argue.                                                                                                                                                  

I am also concerned that allowing this transaction would frustrate the legislative intent of the Clayton Act’s prohibition of mergers that may substantially lessen competition. Congress established this standard response to “a fear of what was considered to be a rising tide of economic concentration in the American economy.” This concern was bolstered by “evidence of the danger to the American economy in unchecked corporate expansions through mergers, as well as the effects of concentration on other democratic values.

The proposed merger may also not meet the public interest standard under the Communications Act, which directs the Federal Communications Commission to deny license transfers for any communication transaction that is not in the public interest. Congress has long admonished the Commission to protect against broadcast mergers that would harm competition, diversity, and localism. Allowing a single broadcaster to reach 72% of American households while eliminating direct competition in local markets, as this unprecedented merger appears to do, the Commission must find that the proposed merger “would enhance, rather than merely preserve, existing competition.”

The effects of this concentration will be harmful for local communities and, in particular, communities of color. The majority of Americans get their news from local television newscasts, while a large share of viewers rely on local broadcast television. Communities of color and low-income households rely heavily on local news. Free Press, an independent public-interest group, notes that this dynamic “means that any negative consequences of changes in the broadcast television market will likely disproportionately harm communities of color and low-income families who more often depend on broadcast for news and information.”

Worse still, a single gatekeeper of local news and programming is a threat to the free and diverse press. There is bipartisan agreement that this merger threatens to cripple a “free and diverse press, a bedrock principle of American democracy.” Local stations acquired by Sinclair frequently complain that Sinclair’s programming, including “must-run” segments, “are too politically tilted and occasionally of poor quality.” In Providence, Rhode Island, these segments “have rattled viewers and [the station’s] own news reporters” on Rhode Island’s “most watched television station.”

Conservative media groups have also raised concerns that the transaction “will homogenize the content available to U.S. consumers, eliminate unique viewpoints and reduce press diversity, especially in the delivery of local news.” The Blaze, a conservative outlet founded by Glenn Beck, commented that “[r]egardless of political affiliation, we should agree that robust democracy demands a variety of viewpoints from a myriad of sources; yet, the wave of consolidation across the industry threatens this core value. And the Sinclair-Tribune merger would exacerbate this troubling trend.”

In sum, I am deeply concerned that the proposed Sinclair-Tribune merger may raise prices and reduce economic opportunities for hardworking Americans, threaten the freedom and diversity of local reporting, and appears to presumptively violate the antitrust laws and the public interest. Accordingly, I respectfully request that you to closely scrutinize this merger to determine that there is a clear showing that it will not harm competition, consumers, or workers and that the public interest is served by allowing these parties to merge.

Sincerely,

David N. Cicilline

Ranking Member

Subcommittee on Regulatory Reform, Commercial and Antitrust Law

Committee on the Judiciary

 

cc: The Honorable Bob Goodlatte, Chairman, the Committee on the Judiciary

The Honorable Tom Marino, Chairman, the Subcommittee on Regulatory Reform, Commercial and Antitrust Law of the Committee on the Judiciary

The Honorable Makan Delrahim, Assistant Attorney General, Antitrust Division, Department of Justice

The Honorable Mignon Clyburn, Commissioner, Federal Communications Commission

The Honorable Michael O'Rielly, Commissioner, Federal Communications Commission

The Honorable Brendan Carr, Commissioner, Federal Communications Commission

The Honorable Jessica Rosenworcel, Commissioner, Federal Communications Commission

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