FCC Chair Supports Paramount-WBD Merger, Citing Simplicity Over Netflix's Failed Bid

The Federal Communications Commission (FCC) Chairman Brendan Carr has expressed support for Paramount Skydance's $111 billion acquisition of Warner Bros. Discovery (WBD), describing it as "a lot cleaner" than the previously proposed Netflix deal. Carr noted that the Netflix-WBD merger would have faced significant regulatory challenges due to the potential scale of the combined streaming services, particularly with HBO Max. Concerns in Washington, D.C., about Netflix's acquisition led to the streaming giant withdrawing its offer, allowing Paramount to proceed with its plans.

Paramount Skydance, led by CEO David Ellison, is backed by a $40 billion commitment from Larry Ellison, David's father. The merger has reportedly gained the support of President Trump. While the FCC typically reviews mergers involving broadcast license transfers, this deal does not involve such transfers since WBD does not own TV broadcast licenses. However, Paramount Skydance must adhere to FCC foreign ownership rules due to its existing ownership of 28 local CBS stations.

Paramount has secured $24 billion in commitments from sovereign wealth funds in Saudi Arabia, Abu Dhabi, and Qatar. These funds have agreed to forgo governance rights, including board representation. Carr indicated that the FCC's review of foreign debt would likely be a formality, as the debt qualifies as "bona fide," meaning it does not confer ownership or voting rights to the creditor.

The Justice Department is also reviewing the merger, but it is not expected to block the deal, reflecting a more lenient stance on merger enforcement under the Trump administration. The merger will still undergo scrutiny from individual U.S. states and international regulators. Paramount has been in talks with the European Commission regarding the deal.

Questions have arisen about the involvement of sovereign wealth funds, with Paramount stating that the Ellisons and RedBird Capital Partners have pledged $47 billion toward the acquisition, with the remainder financed through debt. However, details about the exact contributions from these entities remain unclear.

Under Section 310 of the Communications Act, foreign ownership in U.S.-based licensees is limited to 20 or 25 percent, depending on the structure. If the merger results in foreign entities gaining "attributable interest," a waiver from the FCC would be required. However, if the foreign investment remains passive, the FCC is likely to approve it without extensive review.

Senator Elizabeth Warren and other Democratic lawmakers have raised concerns about potential corruption in the merger process, alleging that Trump administration officials may have discouraged Netflix's bid to favor Paramount Skydance. Despite these allegations, Paramount claims it has made significant regulatory progress and faces no statutory barriers to completing the merger in the U.S.

As Warner Bros. properties like HBO Max and CNN have international reach, the merger could face challenges from foreign regulators. Paramount has initiated discussions with the European Commission to address these concerns. The company's compliance with FCC and international regulations will be crucial in determining the merger's success.