Tribune sues Sinclair for $1B after spiking merger under FCC pressure

Media giants Sinclair and Tribune were all set to merge and create one of the country’s biggest broadcasters — and a complacent FCC seemed to be doing everything it could to help the deal along. But the regulator had a change of heart after evidence surfaced of duplicity too serious to be ignored, and the resultant red tape and bad PR provoked Tribune into spiking the deal and suing its would-be acquirer for $1 billion.

The FCC, which until recently had been accused of being overly chummy with broadcasters, Sinclair in particular, last month issued a “de facto merger death sentence” to the deal, citing mounds of evidence that the company was shirking the terms of the merger and lying about it. The legal process of working out these issues with a view to approving the merger might have taken years.

Tribune wasn’t having that, and moved quickly to throw Sinclair under the bus. In a statement posted to the company’s website, the company wrote that “Sinclair’s entire course of conduct has been in blatant violation of the Merger Agreement and, but for Sinclair’s actions, the transaction could have closed long ago.”

The legal complaint published simultaneously goes into further detail:

From virtually the moment the Merger Agreement was signed, Sinclair repeatedly and willfully breached 3 its contractual obligations in spectacular fashion… Sinclair fought, threatened, insulted, and misled regulators in a misguided and ultimately unsuccessful attempt to retain control over stations that it was obligated to sell.

The damage, it asserts, amounts to a round $1 billion.

This merger failing can hardly be considered as anything but good news to consumers; as former counsel at the FCC Gigi Sohn put it:

This transaction had but two supporters – Sinclair and Tribune. It was opposed by large and small cable companies, rural broadband providers, conservative cable channels and the public interest community. Chairman Pai and his colleagues did right by the American people and the entire broadcast industry by putting the brakes on this merger.

The ACLU’s Jacob Hutt was even less diplomatic:

This was a terrible idea to begin with. The merger would have trampled on First Amendment principles, crippled the future of journalism, and disproportionately harmed minority communities. We thank the thousands of activists that raised their voices to prevent the damage this deal would have done.

But the most erudite insult surely comes from Sinclair’s complaint.

Sinclair was impervious to appeals to its contractual obligations. It intended to pursue its own narrow self-interest regardless of its obligations until the FCC found its conduct so egregious as to merit administrative review. Tribune is now the victim of that outrageous obduracy.

Emphasis mine. I congratulate Tribune’s lawyers on their prose.