FCC Slaps Sinclair Broadcast Group With Record $48 Million Fine

May 7, 2020 by Dan McCue
FCC Slaps Sinclair Broadcast Group With Record $48 Million Fine

WASHINGTON – Sinclair Broadcast Group agreed on Wednesday to pay a record $48 million fine to the Federal Communications Commission to resolve allegations it failed to disclose the sponsor of paid content and misled the agency during its failed merger with Tribune Media.

The conservative-leaning broadcaster ran afoul of the commission with its plan for station divestitures tied to the proposed $3.9 billion acquisition of Tribune Media, a deal that would have extended Sinclair’s reach to more than 70% of U.S. TV homes.

The divestitures were needed to bring the company into compliance with the agency’s station ownership limits. Under the rules currently in place, Sinclair needed to sell at least one station in nine markets to stay below station-ownership limits.

But the plan included selling two of Tribune’s biggest stations — WPIX-TV New York and WGN Chicago — for below-market prices to entities with ties to Sinclair and the Smith family that controls the Baltimore-based broadcaster.

The agency also found that Sinclair aired paid programming 1,700 times without disclosing the identity of the sponsor.

A third investigation involved charges that Sinclair had failed to conduct good faith negotiations for retransmission consent agreements.

The commission proposed a $13.4 million fine for the alleged conduct related to unidentified sponsors in December 2017, finding Sinclair violated sponsorship identification rules that require paid programming be identified as such to provide a clear distinction for viewers between commercials and news coverage or editorial content.

The FCC said Sinclair created 60- and 90-second spots that promoted the Huntsman Cancer Institute in Utah and aired them on its local newscasts, or as free-standing half-hour programs.

But the company did not identify the spots as sponsored content paid for by the Huntsman Cancer Foundation. Other non-Sinclair stations supplied with the programs and segments also were not informed about the sponsorship, the FCC said in a statement.

At the time, Sinclair denied any wrongdoing and said it would contest the fine.

“Any absence of sponsorship identification in these public service segments was unintended and a result of simple human error,” Sinclair said in a statement.

Jessica Rosenworcel, a Democratic member of the FCC board, who long opposed the Sinclair-Tribune Media deal, objected to the $13.4 million fine, arguing not only was it far too small, but that it was an illustration of the Republican-led board extending “unreasonable and suspicious favor to a company with a clear record of difficulty complying with the law.”

Earlier, in an appearance before the House Communications Subcommittee, Rosenworcel said she was concerned the agency was determined to approve Sinclair’s acquisition of Tribune Media. 

“I’m also concerned that if you look at the series of media policy decisions that has been made by this commission, they all seem to serve Sinclair broadcasting’s business plan — from reinstating the UHF discount, to changing the 39% rule that was enacted by Congress, to possibly foisting on all of our households a new broadcast standard for which they own many, many patents,” she said in 2018, adding, “I think it has reached a point where all of our media policy decisions seem to be custom-built for this one company, and I think it is something that merits investigation.”

Sinclair unveiled its plan to divest itself of the Chicago and New York stations in an FCC filing in March 2018, saying WGN would be sold for $60 million and WPIX for $15 million.

The transaction immediately drew scrutiny, as the prospective buyers were a Maryland executive whose car dealership is controlled by Sinclair Executive Chairman David Smith, and a company controlled by Smith’s mother’s estate, respectively.

Critics examining March 1 FCC filings by the Maryland-based company pointed out that Sinclair was attempting to skirt the rules by continuing to operate each station and retaining buy-back options.

In a statement Wednesday, FCC Chairman Ajit Pai called Sinclair’s conduct “completely unacceptable” and said the record $48 million fine, “along with the failure of the Sinclair/Tribune transaction, should serve as a cautionary tale to other licensees seeking commission approval of a transaction in the future.”

However, in the same statement, Pai said he disagrees with those, “who, for transparently political reasons, demand that we revoke Sinclair’s licenses. 

“While they don’t like what they perceive to be the broadcaster’s viewpoints, the First Amendment still applies around here,” he said.

Sinclair’s CEO, Chris Ripley, said in a statement on Wednesday that the company was pleased with the resolution announced today by the FCC.

“We thank the FCC staff for their diligence in reaching this resolution,” Ripley said. “Sinclair is committed to continue to interact constructively with all of its regulators to ensure full compliance with applicable laws, rules and regulations.”

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