Congress of the nites States Pouse of Representatives ‘Washington, WE 20515-0520 ‘The Honorable Makan Delrahim Assistant Attomey General US. Department of Justice 950 Pennsylvania Avenue, NW ‘Washington, DC 20530-0001 March 22, 2018 Dear Mr. Delrahim, ‘We write to express our strong concerns with the proposed merger between Sinclair Broadcast Corporation and Tribune Media, We believe the merger should be rejected outright. IF the merger is approved, it will have substantial negative competitive consequences nationwide, resulting ia higher consumer prices and lower quality and less local content. In any cae, thorough and imparial anirust review by the Department of Justice is particularly important given the Significant questions that remain after Sinclair's latest filings with the Federal Communications Commission ("FCC"), as well as questionable actions by FCC Chairman Ajit Pai that prompted an investigation bythe FCC Inspector General. In adétion, according to the Department's own Policy Guide to Merger Remedies, steuctral remedies requir divestiture ofall assets necessary forthe purchaser to bean effective, long term-compeitor. Moreover, among its safeguards to protect divestiture remedies, the Department sats that: 1 the parties must take all steps necessary to ensure that the assets to be divested ae mainisined as separate, dstnt, and saleable, 2) the purchaser must hae the incentive {0 use the divestiture asses to compete inthe relevant markets), and 3) seller financing of divestment, whether in the form of debt or equity, “raises a numberof potential problems." We ‘urge the Deparment stand firm on any required station divestitures, given its prohibition ofthe use of “option and services agreements” to evade such divestitures in prior transactions. ‘The Sinclair-Tribune proposed transaction, as originally proposed, would create an industry behemoth, reaching 72% of US. households, operating 233 local broadcast stations (80 ¥ Applications and Compreensive Exhibit of Sharchoters of Tribune Media Compan, Trmsfere, 1 Sinlsir Broaicast Group, lnc, Fransteree, (une 26,2017), as amended on February 21, and March 7,208 2 See Match 2018 Amendment o Amendncat to Comyehensve Exbi (Siac Second Amendment” or “Second Amendment) US. Department of sce, Anis Division Antirast Dison Policy Guide to Merger Renee (Ie, 201), 6-12, 52, bps: wr use gov hr inerge-nforcemest a‘more than its nearest competitor), and broadcasting in 108 local markets (including key markets like New York, Los Angeles, Chicago, Philadelphia, and Dallas) Ina claimed attempt to avoid violations ofthe FCC’s national and local ownership rules, Sinclair recently filed a Second Amendment with the FCC seeking to place 18 stations in 10, ‘markets into a divestiture trust’. However, as detailed further below, the arrangement propose the Second Amendment isa sham. Not only does Sinclar state that it may not actually divest these stations, but Sinclae also makes plain that it aims to use “option and services agreements” to ‘manage and potentially repurchase some ofthese stations. If Sinclair is allowed to proceed with its plan, it will have succeeded in effectively holding on to stations in the original transaction ‘without remedying the fundamental competition concerns with the merger Sinclair has a storied history of skisting government rues through these types of sidecar arrangements. For example, just two years ago, Sinclair was fined almost $10 million for using ‘agreements to violate Congress" prohibition on joint retransmission consent negotiations.® This time, it is trying to evade the local and national ownership rules. In its Second Amendment, Sinclair sates that certain stations would be placed into a Aivesttre trust. However, a closer reading of the Second Amendment makes clear that Sinclar intends to continue managing most of these stations even afer they are “divested.” For example, {womajor Tribune stations Sinclair purportedly plans o sell tid parties - WGNTV in Chicago and WPIX-TV in New York ~ would be sol, according to reports to a Maryland exeeative whose ‘ar dealership is controlled by Sinclair Executive Chairman David Smith, and to Mr. Smith's ‘mother's estate, especively.” Futhermore, Sinclar explains that it would have the option to buy ‘ack these stations at ate date, considerably eroding the significance ofthis supposed divestiture proposal® Sinclair is aiming to pursue “option and services agreement” with stations in three duopoly markets ~ Seattle/Tacoma, Oklahoma City, and Greensboro --to skirt the local ownership rules.” ‘And in two markets ~ Indianapolis and Greensboro ~ Sinclair asks the Commission to allow it to ‘own two top-four ranked staions."° When the dust clears on these various arrangements, Sinclair ‘ill continue to own or manage a number of te stations included in its lst of divestiture stations. The Deparment has specifically bared these types of sham divestitures in a numberof recent consent decrees involving merging broadcast en ‘Second Amendment, Appendix 2 Fora summary of major ant concer with the Sigler Tribune merge, sce Lee lm Repesetative Cline to Attorney General Jlfey Sessions and FCC Chairman Ajit Pa inp: hows.covsestelcine hose ghlesinages Sela Lter pd {Se Sinclar rondo Grou, In, Onder, 31 FCC Red 8576 (MB 2018) 9 Sec Tedd Shield, Sinclair Staton Bugersin Tribune Deal ould Have Company Tier, Blomberg News, Ma. 2, 2018 4 See Second Amendment x 32 mn 8647 9 Seid a4 49 (plans fr KZIO ia Seale), 5.15 (plans for KOCB in Okahows Ci) & 6.17 (plans for WMYV is Greensboro), Seid 7-29, "Soe. eg ial Jaigment, U.S.» Nestor Broadcasting Group. Ine, No, 1: 16-0v01772JDB at 16 (0.D.C. Nov, 16,2016) Defense not (1) reacquire any part ofthe Dives Ase, (2) nie ay option to recaure nj prt of he DivestiteAstets ro asign th Divestiture Aces to anyother pero, (3) eterno an oc 2“The need forthe Department to take a strong stanes on station divestitures is particularly urgent given concers about the FCC's handling of Sinclar-eated matters to date. Notably, the FCC Inspector Generali curently invesigating a potentially improper relationship bebveen Chairman Pai and Sinclair As detailed inthe August 14,2017? and September 29, 2017" letters from Representatives Pallone, Doyle and DeGete, and the January 4, 2018 leter from Senator Klobuchar and several other Senators to Chairman Pai! the FCC's systematic undoing of media ‘ownership protections and the aforementioned investigation have raised questions as to whether the FCC is conducting an impartial review." ‘We urge the Department to remain firm in its review of the anticompetitive issues raised by this tansation. Once again, we believe the merger shouldbe rejected outright. Sincerely, ToAY CARDENAS. Member of Congress. ANNAG ESHOO —“Bemiber of Congress ‘makeing agreement ales agreement oer coopertive allingsrangement or shared services agreement ot endothe business negotiations oily with the Aegis with respect othe Divestitare Assets, o (3) provide ‘inncing or guranies of Enancing wih respect othe Divestiture Asst, uring te ter ofthis Final dimen"); Fal Jademen, US Gray Televison In, and Sure Communications, In, No 15-cy02252-RC at 15-16 (DDC. Mar 3 2016) (esing the xn language), Final udgment, US. and Commonselth of Pennelvanta ‘Snel Broad-ast Group, Ine. and Prptual Corpration, No, 114-20 011B6-TSC a 14 (DDC. Nov. 25,2014) (sing sobstavaly star language. 1 See Cz Kang, PCC. Watchdog Looks Into Changes Th Benefied Sinclar, New Yark Times, Fb, 18,2018 » ere re Repent Panta oF Cuan Aa, ua naa ma a20Bun 20a cOB op CAT Olea ‘eerie on Recent Palos eof ECE Caan Ai Pat bu democa Gc govses democrats ener gconmerce house go files FCC 201709 28 <20Sinelair<20F al eweaUeslbener 3G0CAT ed, 2 See Lets fom Senor Klbuchar to FCC Chaiman Ajit Pao a a char senaie gv 18 Aabachor darbi senor teBhi L. Engh EUOTT. ENGEL Member of Congres LUCILLE RDYBAL-ALLARt ‘Member of Congress RICHARD ML NOLAN Member of Congress wee BETTY MetoLLUM ‘Member of Congress Vk, Cou LLUIS CORREA Member of Congress Lo aly — ROBERT A. BRAD\ Member of Congress ‘Member of CongressMZ =D HUFF (STEVE COHEN ember of Codgress Member of Congress Aitkin PETER A. DEFAZIO ‘Member of Congress prada SUZAfNE BONAMICT Meme of Congress ICHAEL E. CAPUA} TA BROWNLEY Member of Congress Member of Congiess| (RLIE CRIST ETH ELLISO! ber of Congress Member of Congress HEARY C. "HANK Member of Congress RO KRANKA BILL PASCRELL IR. Member of Congress Member of CongressCoe Shan Ga ae ‘Member of Congress ‘VARGAS ‘of Congress (ALD S. BEYER ‘Member of Congress