Sinclair Broadcast Group, Inc. and Tribune Media Company, Applications for Transfer of Control of Tribune Media Company and Certain Subsidiaries, WDCW(TV)

AGENCY:

Federal Communications Commission.

ACTION:

Notice.

SUMMARY:

This document commences a hearing to determine whether granting the applications filed by Tribune Media Company (Tribune) and Sinclair Broadcast Group, Inc. (Sinclair) seeking to transfer control of Tribune subsidiaries to Sinclair would be in the public interest. The Commission has designated the applications for hearing after finding that there were substantial and material questions of fact as to whether; Sinclair was a “real party in interest” to the sale of certain broadcast stations; Sinclair engaged in misrepresentation and/or lack of candor in its applications with the Commission; and consummation of the overall transaction would be in the public interest, including whether it would comply with § 73.3555 of the Commission's rules.

DATES:

Persons desiring to participate as parties in the hearing shall file a petition for leave to intervene not later than September 17, 2018.

ADDRESSES:

File documents with the Office of the Secretary, Federal Communications Commission, 445 12th Street SW, Washington, DC 20554, with a copy mailed to each party to the proceeding. Each document that is filed in this proceeding must display on the front page the docket number of this hearing, “MB Docket No. 17-179.”

FOR FURTHER INFORMATION CONTACT:

David Brown, David.Brown@fcc.gov, Media Bureau, (202) 418-1645.

SUPPLEMENTARY INFORMATION:

This is a summary of the Hearing Designation Order (Order), MB Docket No. 17-139, FCC 18-100, adopted July 18, 2018, and released July 19, 2018. The full text of the Order is available for inspection and copying during normal business hours in the FCC's Reference Information Center at Portals II, CY-A257, 445 12th Street SW, Washington, DC 20554. The full text is also available online at http://apps.fcc.gov/ecfs/.

Summary of the Hearing Designation Order

1. On June 28, 2017, Sinclair Broadcast Group, Inc. (Sinclair) and Tribune Media Company (Tribune) filed applications seeking to transfer control of Tribune subsidiaries to Sinclair. Sinclair and Tribune have amended their applications several times thereafter, in an attempt to bring the transaction into compliance with the Commission's national television multiple ownership rule, as well as the public interest requirements of the Communications Act of 1934, as amended (the Act).

2. Among these applications were three that, rather than transfer broadcast television licenses in Chicago, Dallas, and Houston directly to Sinclair, proposed to transfer these licenses to other entities. According to the proposals, Sinclair would divest WGN-TV, Chicago, Illinois, to WGN TV, LLC, a newly-created entity by Steve Fader, an individual with no broadcast experience, for a purchase price of approximately $60 million. Sinclair would also divest KDAF(TV), Dallas Texas, and KIAH(TV), Houston, Texas, to Cunningham Broadcast Corporation (Cunningham) for a combined purchase price of approximately $60 million. The Commission notes that the proposed transfer applications to Fader and Cunningham were withdrawn on July 18, 2018.

3. Multiple formal pleadings have been filed opposing this latest divestiture plan. Most opponents challenge the divestitures as “shams” intended to circumvent the local and national television multiple ownership rules and find most egregious the proposed divestitures to Fader and Cunningham. Some parties question whether Sinclair will hold de facto control over WGN TV, LLC. Specifically, they question the reasonableness of the terms of the transaction, including a purchase price of only $60 million, and Sinclair's plans to enter into a Joint Sales Agreement (JSA), Shared Services Agreement (SSA), and Option with WGN TV, LLC at closing. The parties also question Fader's independence from Sinclair given that Fader and David Smith, currently a director and controlling shareholder of Sinclair and formerly its CEO, are business partners outside of the broadcast industry. Specifically, Fader is the CEO of Atlantic Automotive Group (Atlantic), in which David Smith has a controlling interest and serves as a member of its board of directors, and Atlantic is a Sinclair advertiser and tenant. Similarly, some parties argue that the sale of stations in Dallas and Houston to Cunningham are in name only and warrant a hearing. According to the objectors, problematic aspects of the proposed divestitures of the Texas stations include: The intertwined relationship between Sinclair and Cunningham, particularly in light of past Commission findings regarding the nature of the relationship; the recent acquisition of the voting shares of Cunningham by Michael Anderson, a Sinclair associate, for a $400,000 sales price that is far below market value; the fact that the children of Sinclair's controlling shareholders are beneficiaries of trusts controlling the non-voting shares of Cunningham with the parents holding options to buy the voting shares in the future; and Sinclair's apparent guarantee of $53.6 million of Cunningham's debt.

4. Under section 309(d) of the Act, 47 U.S.C. 309(d), “[i]f a substantial and material question of fact is presented or if the Commission for any reason is unable to find that grant of the application would be inconsistent [with the public interest, convenience, and necessity],” it must formally designate the application for hearing in accordance with section 309(e) of the Act, 47 U.S.C. 309(e). Courts have stated that, in reviewing the record, the Commission must designate an application for hearing if “the totality of the evidence arouses a sufficient doubt” as to whether grant of the application would serve the public interest, Serafyn v. FCC, 149 F.3d 1213, 1216 (D.C. Cir. 1998) (quoting Citizens for Jazz on WRVR, Inc. v. FCC, 775 F.2d 392, 395 (D.C. Cir. 1985)). Section 310(d) of the Act, 47 U.S.C. 310(d), prohibits the transfer of control of a license, either de jure or de facto, without prior Commission consent.

5. Commission assignment and transfer applications require disclosure of and certifications from the “real party in interest” purchasing the stations at issue. The phrase “real party-in-interest” is used in connection with pending applications, while “de facto control” is used in connection with a licensed station, In re Brasher, Order to Show Cause, Hearing Designation Order and Notice of Opportunity for Hearing, 15 FCC Rcd 16326 (2000). The pertinent concern is whether someone other than the named applicant or licensee is or would be in control, s ee Arnold L. Chase, Memorandum Opinion and Order, 5 FCC Rcd 1642, 1648 n.5 (1990). As the Commission has explained, “a real party in interest issue, by its very nature, is a basic qualifying issue in which the element of deception is necessarily subsumed,” see In the Matter of Maritime Communications/Land Mobile, LLC, Order to Show Cause, Hearing Designation Order, and Notice of Opportunity for Hearing, 26 FCC Rcd 6520, 6534-6535 par. 36 (2011) (citing Fenwick Island Broadcast Corp. & Leonard P. Berger, Decision, 7 FCC Rcd 2978, 2979 (Rev. Bd. 1992) (citation omitted)). The test for determining whether an entity is a real-party-in-interest in an application is whether that entity “has an ownership interest or is or will be in a position to actually or potentially control the operation of the station and/or applicant,” High Sierra Broadcasting, Inc., Order, 96 FCC.2d 423, 435 (Rev. Bd. 1983). In the related context of determining de facto control of an applicant or a licensee, we have traditionally looked beyond legal title and financial interests to determine who holds operational control of the station and/or applicant, see WHDH, Inc., 17 FCC.2d 856, 863 (1969), aff'd sub nom., Greater Boston Television Corp. v. FCC, 444 F.2d 841 (D.C. Cir. 1970). In particular, the Commission examines the policies governing station programming, personnel, and finances. The Commission has long held that a licensee may delegate day-to-day operations without surrendering de facto control, so long as the licensee continues to set the policies governing these three indicia of control, WGPR, Inc., 10 FCC Rcd 8140, 8142 (1995); Choctaw Broadcasting Corp., 12 FCC Rcd 8534, 8539 (1997); Southwest Texas Broadcasting Council, 85 FCC.2d 713, 715 (1981).

6. The Commission's rule-based attribution benchmarks, which are set forth in Note 2 to § 73.3555 of the Commission's rules, 47 CFR 73.3555, note 2, and related precedent, have a different purpose in that they seek to identify those ownership interests that subject the holders to compliance with the multiple and cross-ownership rules because they confer a degree “of influence or control such that the holders have a realistic potential to affect the programming decisions of licensees or other core operating functions,” Review of The Commission's Regulations Governing Attribution of Broadcast and Cable/MDS Interests, Report and Order, 14 FCC Rcd 12559, 12560 (1999), subsequent hist. omitted (“1999 Attribution Order”). The national television multiple ownership rule prohibits a single entity from owning television stations that, in the aggregate, reach more than 39 percent of the total television households in the United States, see 47 CFR 73.3555(e)(1), (e)(2)(i), and (e)(2)(ii).

7. Applying these principles to the transaction at issue, the Commission designates for hearing the applications in Attachment 1 because there exists a substantial and material question of fact as to whether Sinclair was the real party-in-interest to the WGN-TV, KDAF, and KIAH applications and if so, whether Sinclair engaged in misrepresentation and/or lack of candor in its applications with the Commission. Accordingly, based upon the record, the Commission is unable to find that grant of this transaction would be consistent with the public interest. Specifically, in view of the longstanding and intertwined relationships between and among Sinclair, Fader, and Cunningham, along with sales terms that are atypically favorable to the buyers (specifically, purchase price, financing, and contractual agreements), substantial and material questions of fact exist as to whether: (1) Sinclair was the real party in interest to the sale of WGN-TV, KDAF(TV), and KIAH(TV); (2) Sinclair engaged in misrepresentation and/or lack of candor in its applications with the Commission; and (3) whether consummation of the overall transaction would be in the public interest, including whether it would comply with § 73.3555 of the Commission's rules, 47 CFR 73.3555.

8. Accordingly, it is ordered, that, pursuant to sections 309(e) of the Act, 47 U.S.C. 309(e), and section 1.254 of the Commission's rules, 47 CFR 1.254, the above-captioned applications are designated for hearing to be held at a time and location specified in a subsequent Order by the Administrative Law Judge, upon the following questions: (a) Whether, in light of the issues presented above, Sinclair was the real party-in-interest to the WGN-TV, KDAF, and KIAH applications, and, if so, whether Sinclair engaged in misrepresentation and/or lack of candor in its applications with the Commission; (b) whether consummation of the overall transaction would violate § 73.3555 of the Commission's rules, the broadcast ownership rules; (c) whether, in light of the evidence adduced on the issues presented, grant of the above-captioned applications would serve the public interest, convenience, and/or necessity, as required by sections 309(a) and 310(d) of the Act; and (d) whether, in light of the evidence adduced on the issues presented, the above-captioned applications should be granted or denied.

9. It is further ordered, that, pursuant to section 309(e) of the Act, 47 U.S.C. 309(e), and § 1.254 of the Commission's rules, 47 CFR 1.254, both the burden of proceeding with the introduction of evidence and the burden of proof with respect to issues specified above shall be upon Sinclair and Tribune. We are assigning the burdens in this manner because Sinclair and Tribune have the particular knowledge of the specific facts at issue in this proceeding.

10. It is further ordered, that to avail themselves of the opportunity to be heard, Sinclair and Tribune pursuant to §§ 1.221(c) and 1.221(e) of the Commission's rules, 47 CFR 1.221(c) and 1.221(e), in person or by their respective attorneys, shall file a written appearance, stating an intention to appear on the date fixed for the hearing and present evidence on the issues specified in the Order. Such written appearance shall be filed within 20 days of the mailing of this Order pursuant to Paragraph 17 below. Pursuant to § 1.221(c) of the Commission's rules, 47 CFR 1.221(c), if the applicants fail to file an appearance within the specified time period, or have not filed prior to the expiration of that time a petition to dismiss without prejudice, or a petition to accept, for good cause shown, such written appearance beyond expiration of said 20 days, the assignment applications will be dismissed with prejudice for failure to prosecute.

11. It is further ordered, that Dallas (KDAF-TV) Licensee (Cunningham), Houston (KIAH-TV) Licensee (Cunningham), and WGN TV, LLC (Fader) and the following petitioners to deny in Exhibit 1 are made parties to the proceeding pursuant to § 1.221(d) of the Commission's rules, 47 CFR 1.221(d). To avail themselves of the opportunity to be heard, pursuant to § 1.221(e) of the Commission's rules, 47 CFR 1.122(e), each of these parties, in person or by its attorneys, shall file a written appearance, stating its intention to appear on the date fixed for the hearing and present evidence on the issues specified in this Order. Such written appearance shall be filed within 20 days of the mailing of this Order pursuant to Paragraph 17 below. If any of these parties fails to file an appearance within the time specified, it shall, unless good cause for such failure is shown, forfeit its hearing rights.

12. It is further ordered, that the Chief, Enforcement Bureau, shall be made a party to this proceeding without the need to file a written appearance.

13. It is further ordered, that a copy of each document filed in this proceeding subsequent to the date of adoption of this document shall be served on the counsel of record appearing on behalf of the Chief, Enforcement Bureau. Parties may inquire as to the identity of such counsel by calling the Investigations & Hearings Division of the Enforcement Bureau at (202) 418-1420. Such service copy shall be addressed to the named counsel of record, Investigations & Hearings Division, Enforcement Bureau, Federal Communications Commission, 445 12th Street SW, Washington, DC 20554.

14. It is further ordered, that Sinclair and Tribune, pursuant to section 311(a)(2) of the Act, 47 U.S.C. 311(a)(2), and Section 73.3594 of the Commission's rules, 47 CFR 73.3594, shall give notice of the hearing within the time and in the manner prescribed in such Rules, and shall advise the Commission of the publication of such notice as required by § 73.3594(g) of the Rules, 47 CFR 73.3594(g).

15. It is further ordered, that a copy of this document, or a summary thereof, shall be published in the Federal Register.

16. It is further ordered, that, within fifteen (15) days of the date that written appearances are due, the Administrative Law Judge shall issue a Scheduling Order that includes a set date for resolution.

17. It is further ordered, that the Commission's Consumer and Governmental Affairs Bureau, Reference Information Center shall send a copy of this Order by certified mail/return receipt requested to:

Dallas (KDAF-TV) Licensee, Inc., Houston (KIAH-TV) Licensee, Inc., 2000 W. 41st Street, Baltimore, MD 21211

Sinclair Broadcast Group, Inc., c/o Miles Mason, Esq., Pillsbury Winthrop Shaw Pittman LLP, 1200 17th Street NW, Washington, DC 20036

WGN TV, LLC, 1 Olympic Place, Suite 1200, Towson, MD 21204.

Tribune Media Company, c/o Mace Rosenstein, Esq., Covington & Burling LLP, One CityCenter, 850 10th Street NW, Washington, DC 20001

American Cable Association

Matthew M. Polka, President and CEO, American Cable Association, 875 Greentree Road, Seven Parkway Center, Suite 755, Pittsburgh, Pennsylvania 15220, (412) 922-8300

Ross J. Lieberman, Senior Vice President of Government Affairs, American Cable Association, 2415 39th Place NW, Washington, DC 20007, (202) 494-5661

DISH Network LLC

Pantelis Michalopoulos, Stephanie A. Roy, Christopher Bjornson, Steptoe & Johnson LLP, 1330 Connecticut Ave NW, Washington, DC 20036, (202) 429-3000

Jeffrey H. Blum, Senior Vice President & Deputy General Counsel, Alison Minea, Director and Senior Counsel, Regulatory Affairs, Hadass Kogan, Corporate Counsel, DISH Network L.L.C., 1110 Vermont Avenue NW, Suite 750, Washington, DC 20005, (202) 293-0981

Free Press

Dana J. Floberg, Matthew F. Wood, Free Press, 1025 Connecticut Ave NW, Suite 1110, Washington DC, 20036, 202-265-1490

Competitive Carriers Association

Steven K. Berry, President & CEO, Rebecca Murphy Thompson, EVP & General Counsel, Courtney Neville, Policy Counsel, Competitive Carriers Association, 805 15th Street NW, Suite 401, Washington, DC 20005, (202) 449-9866

Newsmax Media, Inc., Jonathan D. Schiller, Boies Schiller Flexner LLP, 575 Lexington Ave, 7th Floor, New York, NY 10022, (212) 446-2300, Robert M. Cooper, Richard A. Feinstein, Boies Schiller Flexner LLP, 1401 New York Ave. NW, Washington, DC 20005, (202) 237-2727

NTCA—The Rural Broadband Association

Stephen Pastorkovich, Vice President, Technology & Business Development, Richard J. Schadelbauer, Manager, Economic Research and Analysis, Jill Canfield, Vice President, Legal & Industry, Assistant General Counsel, NTCA—The Rural Broadband Association, 121 Wilson Boulevard, Suite 1000, Arlington, VA 22203

Public Knowledge, Common Cause, and United Church of Christ, OC Inc.

Yosef Getachew, Phillip Berenbroick, Public Knowledge, 1818 N St. NW, Suite 410, Washington, DC 20005, (202) 861-0020

Todd O'Boyle, Common Cause, 805 15th Street NW, Suite 800, Washington, DC 20007, (202) 833-1200

Cheryl A. Leanza, United Church of Christ, OC Inc., 100 Maryland Ave. NE, Suite 330, Washington, DC 20002

Steinman Communications

Repp Law Firm, 1629 K Street NW, Suite 300, Washington, DC 20006-1631, (202) 656-1619

Attorneys General of the States of Illinois, California, Iowa, Oregon, Rhode Island, and the District of Columbia

Susan L. Satter, Public Utilities Policy Counsel, Public Utilities Bureau, Anna P. Crane, Counsel, Public Interest Division, Matthew J. Martin, Counsel, Public Interest Division, Office of the Illinois Attorney General, 100 West Randolph Street, Chicago, Illinois 60601, Telephone: (312) 814-3000

Cinemoi, Herndon-Reston Indivisible, International Cinematographers Guild, Latino Victory Project, National Association of Broadcast Employees and Technicians—CWA, NTCA, Public Knowledge, RIDE Television Network, and Sports Fan Coalition

Michael Fletcher, Chief Executive Officer, RIDE Television Network, 1025 S Jennings Ave., Fort Worth, TX 76104

Charlie Braico, President, National Association of Broadcast Employees and Technicians—CWA, 501 3rd Street NW, Washington, DC 20001

Dave Twedell, Business Representative, International Cinematographers Guild, 7755 Sunset Blvd., Los Angeles, CA 90046

Jill Canfield, Vice President, Legal & Industry Assistant General Counsel, NTCA—The Rural Broadband Association, 4121 Wilson Boulevard, Suite 1000, Arlington, VA 22203

Phillip Berenbroick, Senior Policy Counsel, Public Knowledge, 1818 N Street NW, Suite 410, Washington, DC 20036

David Goodfriend, Chairman, Sports Fans Coalition, 1300 19th Street NW, Suite 500, Washington, DC 20036

Daphna Edwards Ziman, President, Cinemoi, 6380 Wilshire Blvd., Suite 910, Los Angeles, CA 90048

Howard M. Weiss, Member, Herndon-Reston Indivisible, 3061 Mt. Vernon Ave., #N405, Alexandria, VA 22305

Jason Rieger, Director, Indivisible Chicago Alliance, Chicago, IL

Communications Workers of America, National Association of Broadcast Employees and Technicians—CWA, the NewsGuild—CWA

Brian Thorn, Debbie Goldman, 501 Third Street NW, Washington, DC 20001, (202) 434-1131 (phone), (202) 434-1201 (fax)

National Hispanic Media Coalition, Common Cause, and United Church of Christ, OC Inc.

Carmen Scurato, Esq., Francella Ochillo, Esq., National Hispanic Media Coalition, 65 South Grand Avenue, Suite 200, Pasadena, CA 91105, (626) 792-6462

Yosef Getachew, Common Cause, 805 15th Street NW, Washington, DC 20005, (202) 833-1200

Cheryl A. Leanza, United Church of Christ, OC Inc., 100 Maryland Ave. NE, Suite 330, Washington, DC 20002