FCC Puts New Hurdle On Standard General-Tegna Merger, Sends Proposed Transaction To Administrative Hearing

Standard General’s proposed acquisition of Tegna faces new doubts as the FCC sent the merger to an administrative law judge, as the agency took issue with the transaction’s potential to raise consumer prices and result in job losses.

The FCC move has effectively killed past proposed mergers, as it adds delay and uncertainty to whether the deal will get a regulatory greenlight.

In a statement, FCC Chairwoman Jessica Rosenworcel said, “As part of the FCC’s mission, we are responsible for determining whether grant of the applications constituting this transaction serves the public interest.  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.”

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Rosenworcel said that “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.”

Under the terms of the transaction, an affiliate of Standard General would purchase Tegna, which has 64 stations in 51 markets. Apollo Global Management, owner of Cox Media Group, is involved in financing the deal. Following the close of the transaction, Cox will acquire Tegna stations in Austin (KVUE), Dallas (WFAA and KMPX) and Houston (KHOU and KTBU) from Standard General. 

The decision to send the merger to an administrative law judge reflects a more robust posture by Biden-era regulators toward media consolidation. The FCC is split 2-2 between the parties, as the nominee for a fifth seat, Gigi Sohn, has been delayed in the Senate for more than a year. Mergers need an affirmative majority vote to get the regulatory greenlight.

Earlier this week, Standard General said that the Justice Department, which also reviewed the proposed merger, had not challenged the transaction, according to Reuters. But the companies had a higher bar to clear with the FCC, which reviews proposed mergers to determine if they are in the public interest.

The chief of the FCC’s media bureau wrote in the order designating the hearing that there were “significant concerns that warrant further investigation. In particular, substantial and material questions remain as to both the potential impact, and possible harm, to consumers through higher retransmission consent fees, and the effect on localism through potential reductions in local jobs.”

A spokesperson for Standard General did not immediately return a request for comment.

Last fall, then-House Speaker Nancy Pelosi weighed in on the deal, joining with Rep. Frank Pallone (D-NJ) in a letter to the commission that warned of the transaction’s potential impact on jobs, local news and consumer prices. They claimed that the company “have described piping in news produced in Washington, D.C., to fill time on local newscasts as a public interest benefit, potentially leading to fewer local journalists and less local news.” The proposed merger is opposed by a number of public interest groups as well as NewsGuild CWA.

Standard General had argued that the company, led by Soo Kim and Deb McDermott, will be the largest minority-owned and female-led broadcast station group in history, as broadcast diversity remains a primary FCC concern.

The company had said that it has “made it clear” in the record that it will not replace local news content with generalized D.C. content, and that it had “made a commitment” in the FCC record that it “was not planning” to cut station jobs. It also said that it actually protested Tegna’s furlough of employees during the pandemic, and that the transaction involved the sale of free, over-the-air stations, pointing to cable operators as the ones responsible for price decisions.

The FCC announced its decision after the market close. Shares in Tegna plunged 25% in after-hours trading. When the acquisition, valued at $8.6 billion, was first announced in February 2022, the companies said they expected regulatory approval in the second half of last year. At the close of today’s regular trading, Tegna stock finished at $21.84, about where it was when the deal was initially revealed.

In 2018, Sinclair Broadcast Group’s proposed merger with Tribune Media was sidelined when the FCC sent the proposed transaction to an administrative judge. Tribune backed out of the transaction the next month.

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