Three Democratic senators are calling on the FCC to bar the Paramount–Warner Bros. Discovery merger from closing until an agency review of foreign ownership is pending.
Sen. Cory Booker (D-NJ), Sen. Adam Schiff (D-CA) and Sen. Elizabeth Warren (D-MA) wrote in a letter to FCC Chairman Brendan Carr that the commission “has an obligation to honestly answer a fundamental question: whether placing 49.5 percent of the equity in the parent company of CBS, CNN, and 28 broadcast television stations into the hands of three foreign governments serves the American public. We are prepared to pursue every available avenue—legislative, oversight, and legal—to ensure that it does.”
Paramount has disclosed that total foreign ownership of the combined company would be 49.5%, including 38.5% from investment funds from Saudi Arabia, Qatar and Abu Dhabi. Paramount has petitioned the FCC to sign off on the foreign investment, as any foreign ownership stake above 25% requires agency approval.
As part of the FCC process, the transaction is being reviewed by the Committee for the Assessment of Foreign Participation in the United States Telecommunications Services Sector, which analyzes potential national security and law enforcement risks. On Tuesday, the committee started the clock on a 120-day review period, but there is some expectation that it will be completed before then.
Paramount has pledged to close the transaction by September 30, after which they would pay shareholders a “ticking fee” of several million dollars a day. The merger cleared a significant hurdle last week, when the Justice Department closed its antitrust investigation and declined to challenge it.
In their letter, the senators wrote that the FCC “must foreclose any attempt by Paramount to close this transaction before [the security] review is complete. That review must rigorously assess the national security threats posed by foreign government investment in one of the nation’s largest news media companies. The Commission must also incorporate the Committee’s recommendations—a process that, under the governing rules, could take seven months or more—before the Commission takes any final action on the petition.”
Carr has previously said that the FCC’s role in the merger would be minimal.
In their letter, the lawmakers also pointed to Paramount’s request to the FCC for approval “up to 100% indirect aggregate foreign equity and voting interests in the controlling U.S. parent, Paramount.” Paramount has said that, despite the foreign ownership stake, voting rights and decision making functions will be controlled by the Ellison family through their U.S. entities.
The senators wrote that the company “seeks far more than approval for the 49.5 percent aggregate foreign investment. The media conglomerate is requesting advance approval for each foreign investor to increase its individual stake up to 20 percent in the future, which, should each of the Sovereign Wealth Funds exercise that option, could result in up to 100 percent aggregate foreign ownership of one of the nation’s largest broadcast media companies.”
They also raised questions about the structure of the transaction, writing that to “our knowledge, no transaction previously reviewed by the FCC has involved foreign sovereign wealth fund investment of this kind. This layered entity structure, seemingly designed to fragment ownership across multiple vehicles, raises serious questions about the true nature and extent of foreign government control.”
In a filing with the FCC last week, Paramount’s legal team wrote that “ample precedent supports permitting foreign investment in Paramount of up to and including 100 percent.” They noted that the FCC has “emphasized that foreign investment has provided much-needed capital to U.S. broadcasters, allowing them to upgrade their facilities and technology, invest in programming, and maintain the quality of their service to the public.” Paramount’s team also noted a provision of the statute that “foreign ownership of broadcast licenses should be barred only ‘if the Commission finds that the public interest will be served by the refusal or revocation of such license.'”
Paramount’s team said that the company “has repeatedly committed” that “no foreign investor will have the ability to control Paramount or the Licensees; to the contrary, Paramount will ensure that there will be no interference with the editorial or decision-making policies of its broadcast stations (or CBS News or any other facets of Paramount’s news and entertainment programming).”
The transaction also is awaiting clearance from UK and European Union regulators. A group of state attorneys general also is reviewing the transaction.
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