Paramount and Warner Bros. — the Foreign State Problem

The decision of the Federal Communications Commission opens the way for Qatar, UAE, and Saudi Arabia to hold as much as 100 percent of the ownership equity of the enterprise after Paramount’s intended acquisition of Warner Brothers Discovery for $110 billion. There are significant conditions. The foreign investors would be barred from owning any voting equity in the merged company and from exercising any control over its operations.Count us as skeptical. The merger, which faces antitrust scrutiny in federal court, comes amid a gathering war in which the press is going to be one of the theaters in which the conflict will play out. So far two of the intended investors, Qatar and Saudi Arabia, refuse even to recognize our closest ally in the Middle East. Not one of the Middle East investors has managed to permit a free press on its own territory, but now could obtain ownership of American airwaves.Sovereign wealth funds of Qatar, Saudi Arabia, and the UAE would initially take 38.5 percent of the ownership equity in the merged enterprise, Paramount said in an FCC filing. Paramount emphasizes that the Mideast nations would hold “nonvoting, Class B shares” in the company. Yet a Democratic FCC commissioner, Anna Gomez, balked at Paramount’s request to “authorize up to 100 percent foreign equity ownership in its broadcast licensees.” Does this suggest that the foreign states could end up owning the entirety of the new firm? Paramount had framed the request for increased foreign ownership as a routine way to address “fluctuations in publicly held equity interests and to account for potential future investments.” In recent media mergers, involving, say, Univision in 2020, the FCC has granted similar requests by the companies involved. The FCC states, too, that Paramount would have to return to the commission to get “approval before giving the Foreign Investors additional rights, including but not limited to, any voting Rights.” In other words, they still could acquire voting rights, if the commission says okay. This also overlooks the risk of informal influence. Paramount says the foreign investment will help the firm “better compete, invest, innovate, and deliver premium content.”Paramount told the FCC that these benefits would arrive “without presenting any national security, law enforcement, or foreign or trade policy concerns.” Yet more skepticism’s in order, we say. The 25 percent limit on foreign ownership of our airwaves, after all, was, per the FCC, designed “to address homeland security interests during wartime.” These interests, the FCC has said, include a need to “thwart the airing of foreign propaganda on broadcast stations.” The FCC has authority to waive its 25 percent cap, though, if it deems it in the public interest. The potential downside of foreign influence over Americans’ consumption of news and culture would seem to outweigh the advantages cited by Paramount. This is a particular concern when it comes to the involvement of nations like Saudi Arabia and Qatar, both of whom are de facto authoritarian regimes with political and strategic agendas at odds with America’s. Feature, too, how Qatar’s ownership stake in Volkswagen led the automaker to scupper what the Jerusalem Post called a “proposed agreement” for the “Israeli defense company Rafael to manufacture Iron Dome components at a factory in Germany.” In Volkswagen’s case, to be sure, Qatar holds 17 percent of voting rights in the company, not just equity. The Iron Dome deal was revived under arrangements designed to placate Qatar, Bloomberg says.More’s the reason for Congress to take a dim view of giving foreign governments a stake in America’s airwaves, even absent any voting control. To those who might suggest a First Amendment right to foreign government ownership we’d argue that the amendment was calculated in part to protect Americans from interference by America’s own government. How could limiting foreign government ownership of our airways present a problem?

Paramount and Warner Bros. — the Foreign State Problem

Paramount and Warner Bros. — the Foreign State Problem

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