Needlessly Killing A Media Transaction

Last year Standard General announced that it would acquire the TV station operator TEGNA Inc. What should have been a routine transaction has instead been delayed and possibly killed because some politicians want to help their allies and supporters.

TEGNA–formerly the media division of Gannett
GCI
(which sold its publishing arm in 2017)–currently operates 64 stations in 51 markets. The deal is structured in a way that will make the new TEGNA smaller by spinning off some stations, yet the transaction drew much opposition from members of Congress who profess concern about the proposed merger’s impact on jobs and consumers’ access to local news. Then-Speaker Nancy Pelosi and House Energy and Commerce Chair Frank Pallone sent a letter to FCC chair Jessica Rosenworcel, asking that she verify the transaction follows the agency’s values of “localism, competition, and diversity on the airwaves.” Senator Elizabeth Warren also opposed the transaction because of her purported desire to stop media consolidation.

Various unions that represent workers at stations have also registered opposition to the merger, fearing that it would lead to fewer jobs for its members. However, these objections are without merit and stand in stark contrast to numerous other lawmakers, civil rights organizations, business groups, and labor unions that have strongly endorsed the deal and touted the record of Standard General’s Soo Kim regarding labor relations.

The FCC’s decision to refer the deal to an administrative hearing will result in a lengthy delay that will likely scuttle the transaction. Further, its demise would not do a thing to help those affected by the transaction.

For starters, the within-market consolidation that would result from this acquisition would be dealt with by Standard General spinning off stations in markets where there is duplication. What’s more, the implication that a general media consolidation would somehow affect the provision and access to local news makes no sense at all.

In a mid-sized regional market there will be at most a handful of TV stations, two or three radio stations, and a newspaper covering local news. Who owns those outlets, and whether their owners own outlets in ten or 100 different additional markets is completely irrelevant to how that outlet competes in its own regional market.

In fact, having a station owner who has pledged to make significant investments into local newsrooms will help preserve local news in this challenging environment for media companies and allow newsrooms to modernize their operations to both service their traditional audiences and also find news ways to serve content in new ways to meet the expectations of younger viewers.

Standard General also agreed that it would not lay off any workers the first three years of the merger, which should obviate any of the concerns of unions, but the FCC continues to refuse to hold a vote on the merits of the deal. The delay is baffling.

Besides the Democratic party’s now-reflexive opposition to mergers regardless of their economic benefits, it may be that some of its politicians oppose this transaction because one of its big financial backers–media titan Byron Allen–made significant political contributions to Mrs. Pelosi and Democrats and he wants to acquire TEGNA, for which he recently made an offer. Allen needs this acquisition to be killed in order for his own bid to be considered.

And right now it looks like that is precisely what will happen, as the FCC’s insistence on an administrative hearing will effectively delay the merger beyond the expiration of its financing. It is telling that although the FCC has no authority to stop a transaction, the Justice Department does, and after reviewing the deal choose not to object.

In a recent letter to the FCC, House Energy and Commerce Committee Chair Cathy McMorris Rodgers (R-WA) and U.S. Senate Commerce Committee Ranking Member Sen. Ted Cruz (R-TX) outlined the review process abuses and declared that the FCC’s “decision to send the transaction to an ALJ hearing violates historical Commission rules and precedents in several ways.”

The FCC’s actions will have a long-lasting and chilling effect on media investments. The Commission’s handling of the Standard General-TEGNA review is a case study in how special interests leverage their power in Washington for their own personal agendas. The FCC continues to refuse to talk about why it won’t vote and hide behind false claims around hypothetical job cuts that won’t occur in any U.S. media market. Politicians need a patina of legitimacy when they use their raw political power to do favors for their contributors.