FCC’s Gomez calls for rigorous FCC review of foreign investment in Paramount-WBD merger

Federal Communications Commission Commissioner Anna Gomez has called on the agency to conduct what she described as a full, independent and rigorous review of the foreign ownership interests embedded in the proposed Paramount-Warner Bros. Discovery merger, citing national security concerns and the involvement of sovereign wealth funds from Saudi Arabia, the United Arab Emirates and Qatar.

The statement, released by Gomez’s office, focuses on a Petition for Declaratory Ruling filed by Paramount that seeks FCC approval for foreign investors to hold equity and voting interests in the combined company beyond the levels typically permitted under federal communications law. Paramount owns CBS, which holds broadcast licenses regulated by the FCC.

Under U.S. law, direct foreign ownership of broadcast licensees is generally capped at 25 percent. The FCC can approve indirect foreign ownership of up to 100 percent if it finds that doing so is in the public interest.

Paramount’s petition asks the commission to permit existing and prospective foreign investors to indirectly hold more than 25 percent of the company’s equity and voting interests in the aggregate. It also asks for specific and advanced approval for certain non-U.S. entities to indirectly hold equity and deemed voting interests of greater than 5 percent through newly issued non-voting Class B shares.

According to the filing, foreign investors would indirectly hold slightly less than 50 percent of Paramount’s equity interests after the merger closes.

The petition nonetheless seeks approval for foreign investors in the aggregate to hold up to 100 percent of equity or voting interests, which Paramount said would account for routine fluctuations in publicly held equity and potential future investments.

Paramount said the proposed investment would not result in a transfer of control. The Ellison family will retain a majority of the voting interests and 100 percent of the voting shares, according to the filing.

Per Paramount’s filing, foreign ownership of the combined company at closing would total approximately 49.5 percent, with Middle Eastern investors accounting for 38.5 percent of equity.

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The named Middle Eastern investors include Saudi Arabia’s Public Investment Fund, with a 15.1 percent equity stake; the UAE’s sovereign wealth fund, with 12.8 percent; and the Qatar Investment Authority, with 10.6 percent.

The statement also raised questions about Tencent, a Chinese company designated by the U.S. as a Chinese military company. According to Gomez, Tencent withdrew from the transaction last year after its participation threatened to trigger a national security review by the Committee on Foreign Investment in the United States. The statement said Tencent has resurfaced in reported discussions about a potential investment, with the scope and level of any participation unclear.

Gomez’s requested process

“The American public deserves to know who owns the airwaves that carry their news,” said Gomez, commissioner at the FCC.

Gomez asked the commission to take three steps before acting on Paramount’s petition. She called for all foreign investment agreements to be made publicly available, for the proceeding to be opened to public comment and for the FCC to coordinate with national security agencies, including CFIUS and the Department of Justice National Security Division, before drawing conclusions about the risks the deal poses to national security.

“I am alarmed by what appears to be an effort to rubber stamp a financial structure that places nearly half of one of America’s largest broadcast and media companies into the hands of foreign governments with documented records of press suppression and a troubling willingness to silence journalists,” Gomez said.

Gomez used the term “Billionaire Buddy Bypass” to describe what she characterized as preferential treatment for wealthy investors associated with the current administration.

Her statement noted that her requests align with calls from Sens. Cory Booker, Chuck Schumer and Elizabeth Warren, and Rep. Sam Liccardo, who have urged the commission to conduct an independent review before taking action.

Warner Bros. Discovery shareholders have approved the merger with Paramount, and the FCC has approved the underlying transaction. The pending petition addresses the foreign ownership structure of the combined company, Paramount Skydance Corporation, which would control CBS broadcast stations and major cable news operations including CNN.

The commission has not yet acted on the Petition for Declaratory Ruling. Paramount and the FCC have characterized the filing as a routine procedural step, according to Gomez’s statement.

“The public airwaves belong to every American, not just billionaire buddies of this Administration and the foreign governments that fund them,” Gomez said.

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