Standard/Tegna Designated for Hearing
The FCC Media Bureau designated the $8.6 billion proposed Standard General/Tegna deal for hearing, said a release Friday. “The Hearing Designation Order [HDO] focuses specifically on material concerns in the record related to how the proposed transaction could artificially raise prices for consumers and result in job losses,” said the release. Designating a deal for hearing has been historically perceived as dooming the transaction because hearing proceedings take months or years and have uncertain outcomes. “As part of the FCC’s mission, we are responsible for determining whether grant of the applications constituting this transaction serves the public interest," said Chairwoman Jessica Rosenworcel in the release. “That’s why we’re asking for closer review to ensure that this transaction does not anti-competitively raise prices or put jobs in local newsrooms at risk,” she said. Tegna's stock price dropped after hours by 25.6%
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Designating the transaction for hearing was repeatedly requested by deal opponents NewsGuild and the National Association of Broadcast Engineers and Technicians.
The HDO raises concerns about the possibility of job losses, whether it's in the public interest for a privately held hedge fund to own a local broadcaster, and rising retransmission consent rates. “Particularly during a period of high inflation and rising costs, the prospect of increased rates for pay television as a result of machinations or manipulation, rather than market forces, would be extremely problematic,” said the HDO.
The HDO’s focus on retransmission consent rates as a consequence of a deal is “new and disturbing,” said broadcast attorney Jack Goodman. He said the HDO could potentially open the door to more broadcast deals being challenged based on after-acquired clauses in retrans contracts. Although Standard offered concessions on retrans consent, the Media Bureau is “unable to find that the commitments offered by the Applicants would adequately mitigate” rising retrans rates, said the HDO. “Accordingly, we designate the Applications for a hearing to determine: whether the sequencing of the Transactions was intended primarily to increase retransmission fees.”
The bureau reversed its position on the matter of hedge funds owning stations, said the HDO. When Apollo Global Media bought Cox Media Group under the previous FCC, the bureau “gave no weight” to concerns that the cost-cutting operating model of private equity funds is unsuited to the public interest aspects of owning a local broadcaster, but “the centrality of the issue as a claimed public interest benefit combined with real-world experience since then leads us to revisit that conclusion,” the HDO said. The order highlights unresolved “deficiencies” in Standard’s arguments that it won’t reduce jobs, it said.
Being designated for hearing likely means the deal will be withdrawn, attorneys and broadcast industry officials told us. The FCC’s HDO for Sinclair’s proposed buy of Tribune in 2018 led to that deal’s dissolution shortly after. Standard didn't immediately comment Friday, but the companies earlier in the week (see 2302220064) said they expected the deal to close within two months, and in recent filings stressed the need for the transaction to be completed expeditiously. “The additional review will allow us to make a more informed assessment on whether proposed safeguards are sufficient to protect the public interest, and we will take the time needed to address these critical questions,” Rosenworcel said Friday.