Sen. Lee

Several key Republicans are backing a corporate-friendly measure that would hurry the Federal Trade Commission, the Department of Justice, and the Federal Communications Commission through merger reviews, likely leading to less scrutiny of multi-billion dollar merger and acquisition deals that could ultimately cost consumers billions.

Retiring Sen. Orrin Hatch (R-Utah), Mike Lee (R-Utah), Thom Tillis (R-N.C.) and Chuck Grassley (R-Iowa) are the key backers of the “Standard Merger and Acquisition Reviews Through Equal Rules (SMARTER) Act,” a bill that would amend the Clayton Act and Federal Trade Commission Act to align the standards and processes for the Federal Trade Commission’s (FTC) and Department of Justice’s (DOJ) review of proposed mergers and acquisitions.  The SMARTER Act claims it will eliminate bottlenecks that sometimes hold up merger reviews at the DOJ and FTC, and require agencies like the FCC to speed up merger reviews.

Sen. Hatch

Republicans claim corporations are being unfairly treated by excessive regulator scrutiny and delays of merger and acquisition transactions. Because different agencies have their own procedures about reviewing such deals, and federal agencies like the FCC are likely to put deals on hold when companies stonewall the Commission over document requests, Republicans are complaining about bureaucratic holdups. Supporters also claim that current delays associated with merger reviews “fuel politicization” of deals by politicians, consumer groups and media personalities, giving them time to organize public opposition and mount coordinated challenges.

Without a fully enforced shot clock, the FCC “creates uncertainty for transacting parties and effectively enables the FCC to evade judicial review,” bill supporters add.

The FCC already has a limit on open-ended merger reviews — its 180-day “shot clock” that requires mergers be approved or denied within six months. The FCC’s shot clock carried some built-in protection for its integrity, however, by including the power to pause the clock if companies attempted to “run out the clock” by slow-walking requested documents or stonewalling the Commission on other requests. The SMARTER Act would make it easier for companies facing a difficult review to wear down regulators by stripping away the agency’s power to put its shot clock on hold. Instead officials at the FCC would be required to make frequent trips to court to win permission from a judge to stop the clock while waiting for receipt of documents or reviewing merger objections. If the merger is ultimately turned down, the Republican bill also offers corporations the opportunity to streamline any court challenge by eliminating the step of first holding a FCC administrative law judge hearing.

Republicans have overwhelmingly favored The SMARTER Act, with Democrats almost universally opposed. In the previous Congress, House Republicans voted nearly unanimously for the bill. But the bill died after facing opposition in the then Democratic-held Senate. This term, Republicans control all branches of the federal government, giving the bill a better chance of becoming law.

Sen. Tillis

The SMARTER Act is heavily favored by the country’s top telecommunications companies, many that would directly benefit from its passage. No company would stand to benefit more than AT&T, which has seen several high-profile merger and acquisition cases fall apart before regulators. The bill strips away several layers of antitrust protection for consumers that were used to stop several multi-billion dollar telecom company mergers, and scared off others from trying.

The DOJ was instrumental in stopping AT&T’s acquisition of T-Mobile, and combined skepticism by the FCC and the DOJ forced Comcast to withdraw its proposed acquisition of Time Warner Cable. If the SMARTER Act becomes law, internal agency reviews of challenges to a merger will be eliminated. Merger opponents will have to file challenges to mergers in federal court instead. Such a law would have offered AT&T a dramatically better chance that its merger with Time Warner, Inc., would have been approved months ago without a court proceeding.

Two of the Republican FCC commissioners issued statements applauding the proposed legislation.

“Among other improvements, the bill includes two key reforms to the FCC’s merger review process that I have longed championed: setting a non-aspirational, 180-day shot clock for agency review of license transfers and addressing the abusive practice of designating an application for hearing to the Administrative Law Judge (ALJ), which effectively serves to kill a transaction,” wrote Commissioner Michael O’Rielly. “Applicants deserve a timely, complete, fact-based, and straightforward answer from the Commission – not one built on interminable delays or shady denials.”

“I applaud Senator Lee for working to ensure that good government is the law of the land,” said FCC Commissioner Brendan Carr. “With the SMARTER Act, Senator Lee would put the Federal Communications Commission on a shot clock and thus codify the agency’s commitment to open, transparent, and timely decision making.”

Although supporters of the measure claim it will eliminate disparate treatment of mergers and speed their review, critics contend the bill is a “solution in search of a problem.”

The American Antitrust Institute slammed the bill as lacking any foundation to prove its case. AAI conducted an exhaustive review of merger deals that came before the DOJ or FTC and found very few companies ever ran into opposition of their merger deals in the first place. From 2001-2014, businesses enjoyed a 97.5% chance their deals would be approved without challenge and a 96.7% chance their mergers or acquisitions would be approved without a second request.

Sen. Grassley

“The enforcement data suggest many things, but one of them is definitely not what the SMARTER Act purports to cure: an ‘unfairness’ caused by differences in standards and procedures at the FTC and DOJ,” wrote Diana Moss, president of AAI. “On the contrary, the SMARTER Act would create uncertainty and new litigation to solve a problem that, empirically, does not exist.”

Critics of the measure suspect the Republicans have a larger agenda in mind – curtailing government and regulatory oversight of public interest antitrust enforcement. AAI summarized their concerns:

First, the FTC’s use of administrative powers should be carefully safeguarded, because it has contributed critically to the effective shaping of U.S. merger policy without detracting from the speed or effectiveness of merger review.

Second, any difference in the preliminary injunction standard is more theoretical than real, and if a uniform standard is to be adopted, it should be the FTC’s standard, which allows the agency to obtain a preliminary injunction “[u]pon a proper showing that, weighing the equities and considering the Commission’s likelihood of ultimate success, such action would be in the public interest.”

Third, any change in the law may have harmful unintended consequences, including unnecessarily burdening the federal judiciary with new litigation over the meaning and value of the body of legal precedent involving merger cases brought by the FTC in federal court under the existing standard.

SMARTER Act by Senator Mike Lee on Scribd

T-Mobile USA and Sprint have agreed to a $26.5 billion all-stock merger, creating the second largest wireless company in the country with 70 million customers, rivaled only by larger Verizon Wireless with 111 million customers and potentially-third-place AT&T with 78 million.

The merged company will keep the T-Mobile name and its maverick CEO, John Legere. The board will include SoftBank CEO Masayoshi Son, who took control of Sprint several years ago but failed to change its status as the fourth largest carrier in the country.

“This combination will create a fierce competitor with the network scale to deliver more for consumers and businesses in the form of lower prices, more innovation, and a second-to-none network experience – and do it all so much faster than either company could on its own,” Legere said in the statement.

T-Mobile’s owner, Deutsche Telekom, will control 42% of the company, with SoftBank retaining a 27% ownership stake.

This is the third time Masayoshi has attempted a merger of Sprint and T-Mobile, first failing over regulators’ antitrust/anti-competition objections during the Obama Administration, and a second time over arguments about which company would ultimately control the merged operation.

Wall Street is likely to applaud the deal because of the major cost savings the merger would bring. Tens of thousands of job losses are likely at both companies, delivering significant savings.  Sprint has already slashed its workforce from 40,000 in 2011 to fewer than 28,000 today in a series of cost cutting moves. T-Mobile is bloated by comparison, with 50,000 employees as of 2017, leaving much room for layoffs. Overlapping coverage areas could also be consolidated to reduce equipment and cell tower expenses.

Investors are also concerned about the future rollout costs of 5G wireless technology. Reducing the number of competitors offering the service would allow for higher prices and faster return on investment. But company officials are promoting the merger with claims it will accelerate the deployment of 5G networks and attract new investment. Both companies have complained about profit-draining competition, so removing one competitor to leave just three national choices for wireless service will allow carriers to boost prices and ease price wars. Executives have also worried that as the wireless marketplace gets saturated with smartphones for everyone, growing the business in the future has become a major challenge.

Legere

Consumer groups are reading between the lines of the business case for the merger and argue the reduced competition that will result will lead to higher prices, less aggressive competition and upgrades, and big layoffs. Most observers expect activists will seek to block the merger on anti-competition grounds.

“Unlike good wine or a good movie, this long-rumored deal only gets worse with age and repeat viewings. No one but T-Mobile and Sprint executives and Wall Street brokers wants to see this merger go through. Greed and a desire to reach deeper into people’s wallets by taking away their choices are the only things motivating this deal,” said Free Press policy director Matt Wood. “What we know about the wireless market is that customers actually win when mergers are blocked. That market has been relatively competitive in recent years, but only because the FCC and DoJ signaled they would block AT&T’s attempted takeover of T-Mobile in 2011, along with T-Mobile and Sprint’s several previous attempts to combine.”

Wood notes that because of fierce competition from Sprint -and- T-Mobile, their larger rivals AT&T and Verizon have been forced to reintroduce popular unlimited data plans, cut prices, and get rid of onerous multi-year service contracts.

“The notion that this deal would produce better wireless services is a flat-out fiction. We’ve seen the results from the tax cuts and other destructive deregulation in the Trump era,” Wood added. “The combined entity here would just use this deal to line its own pockets, pay down the massive debt these companies carry, and reward shareholders with more stock buybacks. It would fund further acquisitions of content companies, too, as wireless carriers like Verizon and AT&T rush to join the race for targeted advertising revenues built on privacy abuses like those already built into Facebook’s and Google’s ad models.”

So far, the Trump Administration’s record on mergers is mixed. The Justice Department has shown surprising resistance to blockbuster corporate telecom mergers, and is currently suing AT&T and Time Warner, Inc. to unwind their merger proposal. But Trump’s FCC has bent over backwards in favor of mergers involving the administration’s political allies, notably Sinclair Broadcast Group’s local station acquisitions which have received favorable treatment from FCC Chairman Ajit Pai.

“The legal standard for approving giant horizontal mergers like this is not whether Wall Street or President Trump and his cronies likes it. Communications mergers must enhance competition and serve the public interest,” said Wood. “This deal would do just the opposite: It would destroy competition, eliminate jobs and harm the public in numerous irreversible ways. So unless Ajit Pai wants wants to add yet another blemish to his already disastrous tenure at the helm of the FCC, the chairman should speak out and show us he’s willing to do more than rubber stamp any harmful deal that crosses his desk.”

The merger is expected to get significant regulatory scrutiny.

AT&T successfully bribed a Oklahoma telecom regulator to allow the phone company to keep at least $30 million annually in excess revenue. Despite the fact two key players in the bribery scandal were eventually sent to federal prison, Oklahoma’s state government has done all it can to protect AT&T. At issue is up to $16 billion in refunds and damages payable by AT&T — approximately $15,000 per customer, that the state claims would not be in the public interest. Now a consumer group — Oklahomans Against Bribery — is taking its case for refunds to the U.S. Supreme Court.

Remarkably, AT&T has remained so confident of its case and close relationship with Oklahoma state officials, the company drew gasps in a 2015 hearing after its attorney argued even bribed votes count at the Oklahoma Corporation Commission (OCC), the state’s telecommunications regulator, and the Commission has no jurisdiction to tell AT&T to make things right with Oklahoma ratepayers.

The Oklahoma Corporation Commission: “Perjury Palace”

The notorious scandal began with the passage of the Tax Reform Act of 1986 during the Reagan Administration. Echoing recent tax changes passed during the Trump Administration, Republicans argued that reduced taxes would cut the burden on corporations by changing the way those taxes were calculated, with savings trickling down to individual taxpayers. Under Oklahoma law, when a regulated utility wins a tax break, so should ratepayers in the form of lower rates. In June, 1987 the OCC ordered utilities including Southwestern Bell Telephone Company (today doing business as AT&T) to be prepared to refund the excess revenue that came as a result of the tax cut.

Only AT&T had no serious intention of refunding the money to its customers. Investigators claimed the company’s senior Oklahoma executives conspired with at least one of their attorneys to bribe Corporation Commissioner Bob Hopkins with a $10,000 payment in return for his vote allowing AT&T to “invest” the excess money in network upgrades. AT&T got its wish in a 2-1 vote. For almost 30 years, the lone dissenter in that vote, Corporation Commissioner Bob Anthony, has led the charge to reopen the case and get consumers a long overdue refund.

In 1988, when he was running for a seat on the Corporation Commission, Anthony said he was warned he would not be a good fit.

“A friend and Crowe and Dunlevy attorney advised me that someone like me should not run for election to the Oklahoma Corporation Commission, calling it the ‘perjury palace,'” Anthony wrote in a 2016 dissent opinion of the rate case.

Even before Anthony won his seat on the Commission, the bribery attempts began, often involving a high-powered utility lawyer named William Anderson, hired by SBC/AT&T:

“My first introduction to this entire episode was in about the last six weeks of my campaign….I was sent word that some people wanted to meet me. Well, I was running a campaign so I was happy to meet people interested.

“So, I went over to Mr. [William] Anderson’s office, and we had a nice chat. He’s…an authority on utility regulation. We had a nice little chat, and he handed me an envelope, and I put it in my pocket. And I remember driving home, not at the first stop light, but at the second stop light, I opened up the envelope and there were 10 $100 dollar bills in it, with a little slip of paper in one person’s handwriting that had five names written on it. Now, I was supposed to assume that that was five people [who] contributed $200 apiece, and that I didn’t have to report it by name.

“I told this story to a high school friend of mine who just happened to be the U.S. Attorney at the time. And before I told him the name of the person, he said, ‘Was that Bill Anderson?’ And I said, ‘Yeah, that’s who that was.’ And he said, ‘Well, Bob, we’ve been interested in his activities for a long period of time, but it’s awfully difficult to get inside information.’ And I said, ‘If he continues to have dealings with me, I’ll keep you posted.'”

It wasn’t long before Anthony associated Anderson’s presence with pocketfuls of cash waiting to fall on the table:

“I remember the time he had 50 $100 dollar bills. And I said, ‘You know I grew up in the business world, and we counted money when it came in.’ And so he’d chuckle, and then I’d start counting it out, 1-2-3-4, and then it would get up to 45-46-47-48-49-50! And, uh, he had a funny little thing he’d like to say,…’Well, if there was one extra, I’d a’ jumped up there and grabbed it.’ And we’d chuckle about that.

“Then he’d go on and explain about what was expected for the money. The definition of bribery, out of Black’s Law Dictionary, includes a quid pro quo. If he just gives me a gift that’s not necessarily a bribe. But, if he does, like he did, say, ‘You know, these companies I represent, they expect to make a profit. They expect to be in business a long time. And we’re not going to bother you every day, but someday there will be some officer of one of the companies I represent, and we’ll need an appointment, and we’d expect for you to give us an appointment.’

“Well, a certain amount of this is a wink and a nod, too. But, there was no doubt in our minds what was going on. Very clearly what was happening was people were giving me a large number of hundred dollar bills because they were buying access, and they were buying influence. And those words were even used in conversations that I had with utility executives.

“So my high school friend arranged for me to meet him in his US Attorney’s office, and there were two top FBI agents from the city who were there. And I agreed to keep them informed if activities continued.

“And Mr. Anderson called, and he called again, and he wanted to establish a relationship. And eventually they got recording equipment put in my office, and he continued his activity.”

Anthony recounted how utility lobbyists and lawyers introduced themselves, almost always around the issue of money.

“You know, sometimes I get money for the commissioners,” one lawyer told Anthony, adding some lawyers and lobbyists frequently offer $300 or $400 in “walking around money.” Those lobbying Anthony also reminded him they were aware of his campaign deficit, and despite being illegal, one offered to bundle a $10,000 contribution to help retire his debt.

The SBC/AT&T Bribery Case

FBI Director Louis J. Freeh (right) presenting Commissioner Anthony (left) with the Louis E. Peters Memorial Service Award in 1995. (Image courtesy: Bob Anthony)

The prospect of AT&T getting to keep at least $30 million in excess revenue a year (later revised upwards in an independent audit to $120 million annually) meant going the extra mile with commissioners to assure a vote in AT&T’s favor. By this time, Anthony had volunteered to serve as a FBI informant and had turned over any money he received improperly to the government. Federal investigators also obtained wiretap warrants, which caught telephone company executives discussing the bribe they didn’t want to know about.

“Do it and don’t let me know how you do it,” Oklahoma SBC/AT&T division president Royce Caldwell is heard saying on one wiretap.

Anthony argues there is substantial evidence that AT&T’s bribery is only a part of a much broader conspiracy involving a variety of utilities who were routinely bribing regulators to win votes at the OCC. But the AT&T case was special because of the amount of money involved.

“Multiple executives and attorneys were involved,” he said. A judge that later reviewed the case called the money given to Anthony, “no more or no less than an effort to have him look with favor on their pending rate matters.”

Other executives named by Anthony in the case were David Miller, SBC’s vice president in Oklahoma for governmental and regulation affairs and SBC attorneys William Free and Glen Glass.

In a sworn affidavit, Anthony cited a FBI wiretapped conversation between Anderson and Free in which Anderson said, “[Glen] Glass knew the whole deal. We all knew. They all knew we were trying to work something.”

What they apparently knew is that their attorney, Mr. Anderson, had found OCC Commissioner Robert Hopkins, a grateful recipient of $10,000 in telephone company bribe money, and the critical second vote in favor of AT&T being allowed to keep its excess revenue.

In 1994, a federal grand jury indicted Anderson and Hopkins for illegal bribery and conspiracy charges. Both were found guilty in late 1994 and sentenced to federal prison.

The Bribery Worked: AT&T Still Benefits Today from Rigged Vote That Was Never Overturned

Pruitt

Despite convictions, jail time, and clear and convincing evidence of a corrupted regulatory process, the order granting AT&T permission to keep the money was never overturned, despite repeated efforts by Anthony to throw out the tainted vote.

Since the late 1980s, AT&T has collected an estimated $16 billion in excess charges from Oklahoma ratepayers, including interest. But every effort to see that money returned to Oklahoma consumers and businesses has met a roadblock of resistance from AT&T, the Oklahoma state government, and regulatory agencies who call the case “ancient history” and “closed for further debate.”

The most serious effort to overturn the OCC’s original vote came in 2015-2016, when a coalition of consumers, business leaders, and philanthropists teamed up to convince the OCC and the courts they should toss out the tainted vote. They ran head-on into then Oklahoma Attorney General Scott Pruitt (today the head of the Environmental Protection Agency in the Trump Administration.)

Pruitt had been a staunch defender and supporter of AT&T in his role as Attorney General. In 2014, shortly after Pruitt dismissed another challenge about excess revenue in favor of AT&T, the phone company and its executives richly rewarded Pruitt’s campaign coffers with $43,500 — 44.5% of all donations for the summer and fall 2014 period. Pruitt ran unopposed in 2014.

Pruitt’s office renewed opposition to those challenging AT&T once again in 2015:

The Oklahoma Attorney General’s Office has maintained the position that the PUD 260 matter should not be reopened for nearly 20 years. As Attorney General Drew Edmondson stated to the Oklahoma Supreme Court in 1997, and again in 2010, “[t]he public interest would not be served by reopening an evidentiary hearing occurring nearly [two] decade[s] ago. The resources of the Commission and of the parties could be better utilized than by rehashing ‘ancient history.’ Accordingly, a rehearing of this cause is not in the best interests of [Southwestern Bell Telephone]’s customers and is not advocated by the Attorney General.”

Independent news site NonDoc took issue with Pruitt’s premise:

How can Pruitt expect his position on PUD 260 to ring true with the public considering his lengthy and documented history of defending major corporate interests in Oklahoma?

For a politician so well-versed in the art of pandering — whose campaign website asks voters to “Help Scott protect the citizens of Oklahoma” — how does the potential reimbursement of an estimated $15,000 for every qualifying AT&T customer in the state not serve their “best interests?”

Whose best interest is really protected by refusing to re-examine a corrupt moment in Oklahoma’s political history?

The answer likely lies somewhere in the political realities of our time. When corporations are considered people, it’s corporate dollars that count, especially when most actual people can’t be bothered to get out and vote.

In 2016, the OCC dismissed yet another attempt to revisit the issue, this time with prejudice, telling the group and consumers across Oklahoma the issue cannot be litigated ever again.

Headed for the U.S. Supreme Court

After being uniformly rejected by Oklahoma’s conservative politicians and judiciary, the group of citizens fighting to get the original late 1980s ruling overturned and force refunds for customers is taking their case to the U.S. Supreme Court this week.

Oklahomans Against Bribery continues to believe the law is on their side, despite arguments from AT&T’s attorneys that even bribery-tainted votes count.

“We took on this fight when the Attorney General stopped representing Oklahoma ratepayers and started defending AT&T,” said bribery refund applicant and Nichols Hills Mayor Sody Clements. “We hoped the Corporation Commission and the Oklahoma Supreme Court would finally do the right thing – declare once and for all that bribed votes don’t count in this state, and give the billions stolen by AT&T back to the ratepayers.  Unfortunately everyone has passed the buck and claimed it’s someone else’s problem to fix. We believe the buck will stop at the United States Supreme Court.”

Their petition for writ of certiorari, filed March 19, argues their “right to petition” under the First Amendment was violated when the OCC dismissed their bribery refund application “with prejudice,” prohibiting them from ever raising the issue again.

“Denying citizens the right to further petition their legislative bodies on legislative matters – especially matters involving proven public corruption – threatens and undermines our very republican form of government,” the petition argues. “The high importance of this case to the public interest, both from a monetary standpoint and from the standpoint of harm done – now and in the future – to ‘the good order of society,’ warrants review.”

The U.S. Supreme Court is expected to rule on the petition before the end of its term in early summer 2018.

Even bribed votes still count at the Oklahoma Corporation Commission, argues AT&T’s attorneys. This overview looks at the AT&T Bribery Case still on appeal. (5:46)

The Boston Globe has joined a parade of media outlets concerned about the future of local news that could be affected if Sinclair is successful in winning approval of its acquisition of Tribune Media’s 42 television stations, calling Sinclair a “behemoth” and the deal “a matter of urgent concern.”

Sinclair is already the largest owner of local television stations in the United States, and its proposed $3.9 billion purchase of Tribune would turn it into a behemoth, with access to more than 70 percent of American households.

An expansion of that size isn’t in the public interest, and federal regulators should move to block it. If they fail to act, state attorneys general should step up and attempt to stop the merger. Sinclair, which already has stations in Rhode Island and Maine and is looking to expand into Connecticut, has a history of slashing staff and requiring its stations to share content — reducing local news coverage in the process.

The network also requires its stations to air centrally produced, conservative-leaning segments. There are daily missives, for instance, from the “Terrorism Alert Desk” — including one piece on the French controversy over “burkinis,” apparently deemed a terrorism-related story simply because it involved Muslims. One election package suggested voters shouldn’t back Hillary Clinton, in part, because of the Democratic Party’s proslavery history. And Sinclair hired former Trump surrogate Boris Epshteyn as its chief political analyst.

[…] Sinclair’s expansion also raises classic anticompetitive concerns. A larger company will be able to demand bigger fees from cable providers retransmitting their broadcasts — costs that will eventually be passed on to consumers. […] There are other ways to prevent large cable companies from throwing their weight around. Unfortunately, the Trump administration’s Federal Communications Commission doesn’t seem interested in implementing them. Indeed, Trump’s FCC and Department of Justice don’t seem interested in much regulation at all.

The FCC docket asking for public comment on the transaction has attracted plenty of opposition to the deal from industry groups, lobbyists, competitors, consumer groups, and members of the public.

Copps (Image: Peretz Partensky)

“Sinclair has failed to explain how this multi-billion dollar merger could possibly be in the public interest,” said Computer & Communications Industry Association President Ed Black. “Even more, allowing this centrally controlled broadcast behemoth that has a history of cutting local news staff and adversely affect independent, local TV stations, would be detrimental. Anyone who values decentralized government control, states’ rights and independent voices should oppose this merger that would harm citizens and weaken our democracy. It’s a concern that a merger that would be so harmful to rural areas, independent news stations and citizens could even be considered. The FCC should reject this takeover proposal outright, and Congress needs to hold hearings to more thoroughly understand the media landscape and how critical independent local broadcast stations are in a democracy.”

“We believe this merger as proposed is unlawful, not in the public interest and should be rejected,” said Matthew Polka, CEO of the American Cable Association. The ACA represents over 700 small independent telecom companies, primarily serving suburban and rural communities.

“It would turn Sinclair into the nation’s largest broadcast conglomerate and lead to higher prices, more station blackouts, less choice, and less local news for millions of consumers,” said Dish Network in its petition to deny the merger.

Even a former FCC commissioner has spoken up against the deal.

Sinclair “comes with an ideology that is far more focused on conservative points of view than any sense of balance or any deep-dive journalism,” said Michael Copps, a former FCC commissioner and special adviser to Common Cause. “No one company should have such power over the news and information that citizens must have if they are going to cast intelligent votes and practice successfully the art of self-government.”

Sinclair’s deal with Tribune will make them by far the largest TV station ownership group in the country, owning 16% of the TV stations in the U.S. (Image: Mother Jones)

After a hard-hitting piece analyzing the close ties between President Donald J. Trump, FCC Chairman Ajit Pai, and Sinclair Broadcasting appeared in this morning’s New York Times, a group of leading House Democrats serving on the House Energy & Commerce Committee have written Mr. Pai asking for answers about his possible “favorable treatment” of Sinclair Broadcasting since becoming Chairman of the FCC.

These reports, according to the letter, raise two overarching questions:

• Whether actions taken by the FCC under your leadership show a pattern of preferential treatment for Sinclair, and
• Whether a series of interactions between your office, the Trump Campaign and Trump Administration, and Sinclair demonstrate inappropriate coordination.

The letter’s signers — all Democrats — are Rep. Frank Pallone, Jr. (ranking member of the full committee), Rep. Mike Doyle (ranking member of the Communications and Technology Subcommittee), and Rep. Diana DeGette (ranking member, Subcommittee on Oversight and Investigations).

The 12-page letter presents Pai with multiple examples of potential collusion and favorable treatment of a television station group that airs mandatory pro-Trump Administration commentaries on all of its local newscasts, employs a former Trump campaign aide, has sought private meetings with administration officials , and has made substantial campaign contributions.

The Times article appears to be the source for most of the concern expressed in the letter, which lays out multiple issues and seeks Mr. Pai’s comments and explanations.

At the beginning of the Trump Administration, the Democrats claim, Mr. Pai has undertaken a number of actions in his role as Chairman of the FCC that fall squarely in line with the corporate expansion agenda at Sinclair Broadcast Group. Among the most important was Mr. Pai’s sudden decision to bring a party-line vote to reinstate an archaic UHF Discount rule, which allows a company to downgrade the reach of its UHF stations for the purposes of determining if it is within the FCC’s limit of one station owner reaching no more than 39% of the country. This “discount” was established at a time when analog television signals on the UHF band (Channels 14+) were at a distinct coverage disadvantage over stations occupying the VHF (Channels 2-13) band. The discount was retired after the U.S. switched to digital television broadcasting, which largely eliminated this coverage disparity.

TV station owners saw a revival of the UHF Discount not as a way to deal with reception differences, but rather as a loophole to launch new acquisitions by discounting the coverage of their current stations. Only one company – Sinclair Broadcasting – stood to gain the most from the reinstatement of the UHF Discount. Almost on cue, two weeks after Pai brought this obscure rule up and reinstated it on a 2-1 vote, Sinclair announced a blockbuster merger with Tribune to acquire stations that will allow Sinclair to cover 70% of the United States, a number impossible to achieve without Pai’s support for the UHF Discount.

Democrats argue this was not what Congress intended, and it allows one station owner to own and control approximately double the number of stations the ownership cap would normally prohibit. They argue such a deal will reduce the diversity of media voices in communities across the country, especially in markets where Sinclair will own and operate more than one television station.

The New York Times provides this chart illustrating the vast expansion of stations if it wins control of Tribune Media.

The Democrats are also upset the FCC, under Pai’s leadership, appears to be in a hurry to get this deal reviewed and likely approved. It set a review window of just 30 days for public comment, considerably shorter than earlier, less controversial acquisition deals. Critics of the deal contend that the FCC is giving inadequate consideration of the deal’s lack of public interest benefits, and Sinclair’s application is vague and its claims are difficult to validate. Pai seems unconcerned, leading some to believe he intends to rubber stamp his approval with minimal conditions.

Ajit Pai, Chairman of U.S Federal Communications Commission. REUTERS/Eric Gaillard

Under Pai’s watch, the Democrats charge, Sinclair has already benefited from a ‘rush to approval’ mentality at the FCC. Sinclair’s earlier deal to acquire stations owned by the Bonten Media Group was also convenient, coming shortly after the FCC under Mr. Pai revoked guidance that would have required the FCC to closely scrutinize the transaction. The FCC granted the deal, despite the fact several of Bonten’s stations are in areas where Sinclair now holds operating agreements to manage other local stations. Large station groups have used these agreements as loopholes to effectively gain day-to-day control of stations without actually transferring their ownership.

The Democrats also argue that Sinclair is well positioned to be in the lead of Next Gen TV, ATSC 3.0 technology that will replace the current digital TV standard in the United States in the next few years. Sinclair is the biggest cheerleader of the new technology, and Mr. Pai coincidentally has put a rush on getting ATSC 3.0 approved and into the marketplace. ONE Media 3.0, a wholly owned subsidiary of Sinclair, just happens to own six critical patents essential for using the Next Gen TV standard. That means every station in the country moving to the next broadcast platform will have to pay royalties to Sinclair estimated in the billions.

As the Times reports, whenever Sinclair sought something from Washington as part of its corporate agenda, the FCC’s Mr. Pai quickly aligned himself and the FCC’s Republican majority to fulfill Sinclair’s wishes.

Rep. Frank Pallone, Jr. (D-N.J.) is ranking member of the House Energy & Commerce Committee.

The Democrats also question whether there is direct coordination between the Administration, Sinclair, and the FCC:

• After the election, President Trump reportedly met with the Executive Chairman and former CEO of Sinclair and discussed changing FCC rules to help Sinclair. A news account stated that after the election, President Trump met with David Smith, Sinclair’s Executive Chairman and former CEO. According to this report, “potential FCC rule changes were discussed” after President Trump asked Mr. Smith, “What do you need to happen in your business?”

• Before you became Chairman of the FCC, you reportedly met with then President-elect Trump in New York. Reports indicate that on January 16 of this year, you met with then-President-elect Trump in New York in a meeting that did not appear on your official calendar.

• In March, shortly after you became Chairman of the FCC, you met with President Trump in the Oval Office. An FCC spokesperson confirmed that the meeting occurred, but did not indicate what was discussed during the meeting. When asked directly about your meetings with President Trump, you declined to disclose what you discussed, saying “I am not at liberty to say.”

• The week after the election, you reportedly attended a company conference for Sinclair’s general managers, during which you met with Sinclair’s CEO. According to a Politico report, in January of this year, you met with Sinclair’s former CEO, David Smith, as well as the newly named Sinclair CEO, Chris Ripley.

• The President’s campaign reportedly “struck a deal” with Sinclair to “secure better media coverage.” This arrangement came to light after the election, when Jared Kushner reportedly revealed that in exchange for access to then-candidate Trump and his campaign, “Sinclair would broadcast Trump interviews across the country without commentary.” Sinclair representatives have defended this arrangement by claiming that the Clinton campaign was offered the option for extended interviews with local anchors as well, but did not accept.

• In April, Boris Epshteyn, who was “most recently Special Assistant to The President and Assistant Communications Director for Surrogate Operations for the Executive Office of President Trump,” and formerly a “senior advisor to the Trump campaign,” joined Sinclair to provide on-air political commentary. Epshteyn’s segments are “must-run” programming for Sinclair stations, with nine segments airing per week. One report has criticized the segments as “propaganda” and reporting on Sinclair’s selection of “must-run” programming has raised “suggestions that Sinclair pushed right-leaning views.”

The Democrats are requesting Mr. Pai answer their letter and provide additional information no later than Aug. 28.