UPDATE 1-U.S. regulators confirm plans to fine Sinclair $13 million over ads

(Adds Sinclair reaction, comments from FCC commissioners, background)

WASHINGTON, Dec 21 (Reuters) - The Federal Communications Commission on Thursday confirmed that it plans to fine Sinclair Broadcast Group Inc $13.38 million after it failed to properly disclose that paid programming that aired on local TV stations was sponsored by a cancer institute.

The proposed fine - first reported by Reuters on Dec. 15, covers about 1,700 spots, including commercials that looked like news stories that aired during newscasts for the Utah-based Huntsman Cancer Institute over a six-month period in 2016 - could bolster critics of Sinclair’s proposed $3.9 billion acquisition of Tribune Media Co. This is the largest-ever fine the FCC has proposed for violating sponsorship rules, but significantly less than the statutory maximum of $82 million.

Sinclair said in a statement the mistakes were the result of “simple human error.” The Hunt Valley, Maryland-based company said the fine is “unreasonable, given the circumstances of our case and the absence of any viewer harm. We disagree with the FCC’s action and intend to contest this unwarranted fine.”

Sinclair, which owns more than 170 U.S. television stations and is the largest U.S. operator, announced plans in May to acquire Chicago-based Tribune’s 42 TV stations in 33 markets as well as cable network WGN America and digital multicast network Antenna TV, extending its reach to 72 percent of American households.

The FCC and Justice Department are reviewing Sinclair’s proposed acquisition of Tribune, taking antitrust and public interest considerations into account.

The commission voted 3-2 to approve the fine, with the two Democrats on the Republican-majority panel dissenting.

One of the Democratic commissioners, Jessica Rosenworcel said the fine should have been higher for “a company with a history of flouting statutory requirements. ... Instead of doing so, we offer unreasonable and suspicious favor to a company with a clear record of difficulty complying with the law.”

The other Democrat on the FCC, Mignon Clyburn, said the “punishment does not fit the crime against a company that grossed more than $2.7 billion in revenue last year.”

FCC Chairman Ajit Pai, a Republican, said Democratic commissioners’ demands for higher fines “deviates so wildly from our precedent that it will no doubt strike reasonable people as suspicious.”

Democrats have previously questioned whether Pai is biased in favor of Sinclair.

In November, Democratic Representatives Frank Pallone and Elijah Cummings asked the FCC inspector general to investigate, citing FCC decisions that benefited Sinclair and a news report last year that the election campaign of President Donald Trump struck a deal with Sinclair for favorable coverage.

Pai has denied the allegations.

Advocacy group Free Press said in an FCC filing in August that Sinclair forces its stations to “air pro-Trump propaganda and then seeks favors from the Trump administration.” (Reporting by David Shepardson; Editing by Jonathan Oatis)