tinitnt ~terrs ~cnatr WASHINGTON. DC 20510 392 June24,2019 The Honorable Ajit V. Pai Chair Federal Communications Commission 445 121h Street, S.W. Washington, D.C. 20554 The Honorable Makan Delrahim Assistant Attorney General U.S. Department of Justice Antitrust Division 950 Pennsylvania Avenue, N.W. Washington, D.C. 205301-0001 Dear Mr. Delrahim and Mr. Pai: We write today to raise concerns about Sinclair Broadcast Group, Inc.'s (Sinclair) acquisition of21 Regional Sports Networks and Fox College Sp011s (RSNs) from the Walt Disney Company (Disney). 1 Given Sinclair's market power in the local television broadcasting industry and its continued push "to inject conservative-tinged coverage into local markets,"2 this acquisition raises serious questions about the effects such a deal would have on competition in the industry, prices for consumers, and the diversity of perspectives in local media and sports content. We are particularly concerned that adding ownership of these RSNs to its existing local television stations could allow Sinclair to increase fees on consumers and be used by the company as leverage to allow it to force its partisan political messaging on a larger swath of the American population. ln June 2018, the Department of Justice (DOJ) forced Disney to divest 22 RSNs it acquired as part of a $71.3 billion deal to purchase certain 2!51 Century Fox, Inc. assets, since the proposed acquisition "likely would substantially lessen competition" and "result in higher subscription fees for customers."3 One year later, it appears Disney has agreed to sell these RSNs to a subsidiary of Sinclair in a deal valued at $10.6 billion - allowing a different media behemoth, intent on "spread[ing] a conservative message enforced by mandates on local news 1 Securities and Exchange Commission, "Sinclair Broadcast Group, Inc. Form I 0-Q For the Quarter Ended March 31,2019," May 10, 2019, https://www.sec.gov/ix?doc=/ Archives/edgar/data/9 12752/000091275219000025/a20I9q110-q.htm. 2 Washington Post, "Trump said Sinclair ' is far superior to CNN.' What we know about the conservative media giant.," Eli Rosenberg, Apri l 3, 2018, https://www.washingtonpost.com/news/style/wp/2018/04/02/get-to-know­ sinclair-broadcast-group-the-conservative-local-news-giant-with-a-growing-reach/. 3 Depa11ment of Justice, ·'United States of America, Plaintiff v. The Walt Disney Company, and Twenty-First Century Fox, Inc., Defendants," June 27, 2018, https://www.justice.gov/opa/press-release/file/ I 075081 /download. anchors, it1cluding requirements that tl1ey air partisan commentaries,"4 to capture audiences in an already shrinking local media n1arl<et. Sinclair cun·ently O\\'TIS and/or provides services to 1,91 televisio11 stations t11at broadcast 605 cha11nels in 89 tnarkets5 -111aking it one of the largesrlocal television station operators in the country.6 Its local stations reach 39 percent o·f American Television 11ouseholds, the maximtun allowed by Federal Comn1u11ications Commission (l:;-CC) broadcast ovmership rules.7 'fbis cap­ established by the FCC to preser" .rc decentralized media markets and discourage anticompetitive bel1avior - did not deter Sinclair fron1 atten1pting to double its current reach. 111 May 2017, Sinclair a1Tanged a $3.9 billion deal to acqtLire 'fribune Media Company (Tribune)1 a rival nledia and entertainment business with 42 local stations in 19 media 111arkcts; which would have allowed it to reach 72 percent of U.S. households.8 However, in order obtait1 FCC approval and to "skirt tl1e Commission's broadcast ownership rttles," Sinclair purported to sell off certain local stations by arranging '"shmn' transactions.'' The 1)0J ideritified_o11e transactio11 in which Sinclair attempted to transfer a station to an individual who "serves as CEO of a company in which Sinclair's executi\1e chairrnan has a controlling interest ... ·at a price that appeared to be significm1tly below n1arket valtle.'' Moreover, the deal allowed Sinclair to keep many of its operational responsibilities for the station, and provided it vrith "an option to buy back the station in the futt1re." 9 As a result, tl1e r~c:c unanin1ously decided 11ot to approve the merger. 10 Wl1ile Sinclair currently has a fi1m grip on the local television industry, tl1is recent acquisition is only the latest ino\1e in its separate and sin1ilarly rapid bid to become a major s1Jorts nen.vork provider. 1'J1e RSNs Sinclair purchased from Disney-- collectively ''the largest group of com1no11ly controlled RSNs" - reach approxi1nately 74 rnillio11 subscribers across the country 11 and l1ave the rights to telecast the gan1es of aln1ost half of all the professional sports tea1ns in three of tl1e four major American sports leagues. 12 In addition to tl1e 21 RSNs, Sinclair 1 "acquired 1'he ·rcnnis Channel, with national distribution (61 million homes) for $350 n1illio11 ' in 2016, h_as a stake h1 a strean1ing network tl1at offers live college sports coverage, and 11as an 4 Vox, "Sinclair, the pro-Trump, conservative company taking over local nevvs, explained," Dylan Matthe\vs, April 3, 20 l 8, https://\VW\v.vox.co1n/20 ! 8/4/3/17180020/sinc!air-broadcast-e:rou.n.:£.PDServative-trun1p-david-smith-local­ nc'vs-tv:?. ffil iate, 5 Securities and Exchange Comn1ission, "Sinclair Broadcast Group, Inc. Fonn 10-Q For the Qua1ier Ended March 31,2019,"May 10,20!9; https://\VW\v.sec.gov/ix?doc"'/Archives/edgar/data/912752/0000912752 l 9000025/a20 l 9g I J O-g.ht1n ~New York Times, "As Mo1nentu1n for Sinclair Deal Sta!ls, Tribune Considers Options," Edmund Lee_, July 19, 20 18, hnps://www.nyti1nes.co1n/2018/07 /19/busincss/mediaJsinclair-tribune-fcc.htrnl. 7 U.S. Federal Co1n1nunications Co1nrnission, "FCC Broadcast Ownership Rules," https ://www.fee.gov/ consu n1ers/ f!U ides/fccs-review-broadcast-o\vnersh ip-rules. 8 Vox., "Sinclair's takeover of local news, in one striking 1nap,·' Alvin Chang, April 6, 2018, https://\vww.vox.coin/20 l_8/4/6/l 7202824/sinclair-tribune-1naQ. 9 U.S. Federal Coinmunications Comn1ission, "MB Docket 17-179,'. July 19, 2018, !:t..!!J;l.;;://docs. fcc,.,ggv/puQlic/attachn1entsfFCC- l 8- I GOA ,l.pdf. I() Id. 1 l Securities and Exchange Connnission, "Sinclair Broadcast Group, Inc. Fonn 10-Q For the Quarter Ended March 31,2019,"May 10,2019, htt11s://ww\v,sec. oov/ix?doc""/ Archivcs/eQg_ar/data/912752/000091275219000025/a2019q 11 O-q.htn1 12 i)epa111ncnt of Justice. "United States of America, Plainl{ffv. The Walt Disney Co1npany, and Twenty-First Century Fox, Inc,, De_fendants," June 27, 20 ! 8, https:/lwww.justice.gov/opaJpress-rcleasc/fi!e/1075081/do\vnload. 2 exclusive partnership \Vith the Chicago Cubs to "televise Cubs ga1nes locally beginning in 2020."13 By delivering n1illions of additional customers to and broadening Sinclair's footprint, the acquisition oftl1ese sports networks is likely to result in increased prices for consumers. In an attempt to offset pay1nents 'RSNs are obligated to make to sports teams - many of whicl1 are "already-locked~in [for] ann11al increascs,"14 Sinclair and other statio11 o\vners pass those fees onto cable distrib11tors, which then i1npose multi~channel packages - or bw1dles - onto consu111ers, \Vhere 11igh and lo\V den1ru1d channels are packaged together, fOrcing consumers to pay for channels they don't want.15 Allowing Sinclair to increase its inarket po\ver will enhance tl1eir ability to force cl1annels onto cable distributors, resulti11g in even higher prices for co11su1ners. According to the FCC, "cable subscribers are pa;'ing for 111ore tl1an 85 channels t11at they do not want to watch in order to obtain the approximately 16 chan11els that they do," 16 because of bundling. Additionally, local broadcast stations - like those o\vncd b)' Si11clair- can enter into one of two agreements with distributors. l'l1ey can den1and cable distrib11tors broadcasttl1eir station under tl1e "mttst carry'' provision, 17 tl1rough which they cannot receive co1npensation or they can enter into a "retrans1nission consent"18 tl1rougl1 whicl1 tl1ey can negotiate to receive a retransn1ission fee or req11cst the distributor carry other channels in addition to the local station. Sinclair, wl1icl1 now owns nearly two dozen RSNs, could n1arket to distributors combinations of sports a11d local television channels that they have to offer to consun1ers as a bundle package. Distributors understand the value of live sports and the limited nun1ber ofun~bundled live sport streaming options available to consumers leave ''sports fans ... tethered to their cable bundle."19 Therefore, the agreement \Vith Disney offers Sinclair an opportunity to cl1arge consumers more by packagi11g their cable and broadcast progran1s. 1'his bundling is especially dangero11s because over the last several years, Sinclair has circulated several concerning tnztst-run progra1nming directives to its \ocal 11ews stations. For instance, it12018, Sinclair forced its local stations to 1un a "two-minute commentary defending tl1e use of tear gas on 111igrants at tl1e border"' in \Vl1ich a fOrmer Trun1p official clai111s ·'American a11thorities 'had to use teru· gas' on 11undreds of n1igrants at a border crossing near San Diego ... 13 Forbes, "4 ·rakcaways Fro1n Sinclair's Acquisition ()f Fox !{egional'Sports Net\vorks Froin Disney," Brad Adgate, May 3, 20 l 9, ht1ps:f/w\vw.forbes.con1/sites/bradadgatc/20J 9/05/03/somc-takeawavs-fron1-sinclairs-acguisition-of~ fox-regional-sports-networks/#7c9dca062596. 14 Washington Post, "A bet on live sports: Why Sinclair is scooping up regional sports networks," Ben Strauss, May 6, 20 ! 9, https://www.washingtonpost.com/sports/20 19/05/06/bet-live-sports-sinclair-ceo-chris-ripley-talks­ acquiring-re gional-sports-net\vorks/?utm tern1= .bd71 bc240b3 8. 15 See Free Press, ''Cord C-utting and the Cable Cabal," S. Derek l'umer, May 23, 2013, https://\vww.freepress.net/our-response/expert-ana!ysis/insights-opinibns/cord-cutting-and-cablc-cabal. 1'-' Federal Communications Co1nmissio11, "Moving Forward: Driving Investment and Innovation \\'hile Protecting Consumers," January 15, 2009, https://transition. fcc.gov/fcc-1nov,ing-for\yard-1·eport.pdC 17 47 U.S.C. § 534. ia 47 U.S.C. ~ 325. 19 LA Times, "The rise of sports TV costs and \vhy your cable bill keeps going up," Meg James, Dece1nber 5, 2016, https://www Jatilnes. coin/business/ho 1lywood/la- fi-ct-sports-channe ls~ 20 I 6 1 128-story .ht1nl. 3 to guard against an 'attempted invasion' of the United States."20 In addition, in 2016, Donald Trump's campaign reportedly entered into a secret agreement with Sinclair "to try and secure better media coverage."21 It is clear that Sinclair has an explicit interest in, and commitment to, relaying partisan political messages to its viewers - making its recent anti-competitive expansion attempts into millions of additional households all the more concerning. Given Sinclair's history of attempting to skirt FCC rules, its current dominance over local television broadcasting, and its power in sports broadcasting, the recently announced acquisition of the Fox RSNs raise significant questions about the effects the deal is likely to have on consumers. For these reasons, we urge you to review Sinclair's recent acquisition of2l RSNs from Disney and the effects it would have on consumers. We also ask that you provide us with written answers to the following questions no later than July 8, 2019. 1. Have Sinclair Broadcast Corp. and/or the Walt Disney Company filed applications seeking your Department's consent to transfer control of Disney's 21 Regional Sports Networks and Fox College Sports to Sinclair? If so, when did they file these applications? 2. Does your Department plan to issue a Public Notice that the application has been accepted for filing? Does your Department plan to issue a Public Notice setting a schedule for the public to submit comments on the application? Thank you for your attention to this matter. Sincerely, l?d/</~ Bernard Sanders United States Senator Cory A. Booker United States Senator 20 New York Times, "Sinclair TV Segment Defense Use of Tear Gas on Migrants at Border," Niraj Chokshi, November 28, 2018, https://www.nytimes.com/2018/ 11 /28/business/media/sinclair-broadcast-segment-trump­ migrants.html?module=inline. 21 Politico, "Kushner: We Struck deal with Sinclair for straighter coverage," Josh Dawsey and Hadas Gold, December 16, 20 16, https://www.politico.com/story/2016/l 2/trump-campaign-sinclair-broadcasting-jared-kushner- 232764. 4