The FCC’s unprecedented attempt to block diversity in media ownership

The Federal Communication Commission (FCC), by its own admission, oversees a severe lack of diversity in broadcast television ownership — and claims to want to counter this status quo.  Yet recently, the FCC took an unprecedented action to thwart a transaction that would create the largest minority-owned, woman-led media group in American history.

The issue is investment firm Standard General’s potential acquisition of media company TEGNA. While it is normal for acquisitions of this kind to undergo a regulatory review period, the process is now completely off the rails. After nearly a year of review, and three different comment periods, the FCC’s Media Bureau designated this transaction for a hearing before an administrative law judge, the first time that the FCC has used this maneuver in an apparent attempt to block an acquisition. 

The FCC’s move to delay the transaction could effectively kill it, since the financing deadline for the deal is on May 22.

While there is broad bipartisan support for the merger, the opposition primarily comes from the labor union NewsGuild-Communication Workers of America (CWA), which urged the FCC to reject the acquisition. The CWA’s opposition comments cited the race and gender, respectively, of Standard General’s Managing Partner Soo Kim and Standard Media CEO Deb McDermott, disparaging both:

“The Commission should not conflate the identity of one or two business leaders regarding a transaction that would further consolidate the marketplace with advancing its goals to promote ownership diversity. Conflating the identity of one or two business leaders with the achievement of civil rights objectives is a serious error.”

Got that? Kim and McDermott must not be the right kind of minority or women leaders. Evidently, in CWA’s eyes, a business purchase that would increase the number of minority-owned or -controlled commercial television stations by 300 percent — as the proposed acquisition would do — does not actually promote ownership diversity. 

It gets worse. The NewsGuild and its lawyers described Kim’s proposed investment as an “anonymous foreign investment in American newsrooms,” and said the deal should be especially scrutinized because of “China[’s] increased tensions in the Taiwan Strait.”

To be clear, Soo Kim is an American, a naturalized U.S. citizen of Korean birth. 

FCC leaders have claimed a desire to address disparities that have existed for too long in broadcasting, and to give minorities a chance to pursue media ownership opportunities. Just a few weeks ago, the commission hosted a symposium,“Expanding Digital and Media Ownership Opportunities for Women and Minorities.” 

For an agency that claims it wants to increase diversity in media, the FCC appears to be willfully ignoring the fact that approving the Standard General-TEGNA merger could significantly advance that goal.

What is more, the Department of Justice, whose antitrust regulators have a role in large mergers across all industries, allowed its review period to expire without taking action in this case.

Although the FCC cannot legally stop mergers, it can block transfers of station licenses. Tellingly, there is not one claim that the Standard General-TEGNA deal violates any FCC rule. 

Standard General responded to concerns expressed by some with specific commitments — two of which are to keep current newsroom staffing for a minimum of two years and maintain current retransmission consent agreement rates. But the FCC apparently is ignoring these commitments that addressed its stated concerns.

The Wall Street Journal’s editorial board raised an important point: that FCC Chair Jessica Rosenworcel’s treatment of this transaction review raises crucial questions and concerns about fairness at the commission. The FCC’s backdoor maneuvering on the deal “sets a precedent that the chairman can pocket veto any deal for any reason. Why have a bipartisan commission if the chair can unilaterally dictate policy?” the newspaper asked.

The FCC’s apparent attempt to manipulate the outcome of this business deal could potentially affect other economic activity as well. In the future, lenders might be more cautious about financing minority-owned businesses who aspire to make similar transactions if they have legitimate concerns about FCC approval.

A fair process would result in a straight up-or-down vote by the full FCC, as is standard commission practice. All commissioners would vote their conscience, based on the law and the facts. But, as the situation currently stands, the FCC seems committed to stacking the deck to make a more diverse media industry harder to achieve, in order to serve political ends.

Mario H. Lopez is president of the Hispanic Leadership Fund, a public policy advocacy organization that promotes liberty, opportunity and prosperity for all Americans. Follow him on Twitter @MarioHLopez.