The $14.7 billion acquisition between video conferencing giant Zoom and cloud call center company Five9 is being investigated by a US government body that analyzes foreign telecom investment.
The Justice Department, which chairs the group, said it would analyze the agreement “to determine whether this application constitutes a risk to the national security or law enforcement interests of the United States” in an August filing with the Federal Communications Commission. “The foreign participation (including foreign ties and ownership) involved with the application,” according to the Justice Department, “may raise such risk.” The investigation was initially reported by the Wall Street Journal.
The Justice Department did not specify the foreign ties that were of concern in its brief, and spokesperson Wyn Hornbuckle declined to comment on Tuesday.
Allison Wilson, a representative for Five9, declined to comment. In an emailed statement, Zoom stated that it expects to receive the necessary regulatory clearances and close the Five9 purchase in the first half of 2022. CJ Lin, a Zoom spokeswoman, did not respond to any questions.
Zoom is headquartered in San Jose, California, and claims to employ more than half of its workforce in the United States. However, it employs a “significant number” of R&D personnel in China, which the business claims have exposed it to government and media scrutiny. Eric Yuan, the CEO of Zoom, was born in China and immigrated to the United States in 2007.
In a late August regulatory statement, the company stated that it is working with ongoing investigations by prosecutors in New York and California, who had issued subpoenas last summer seeking information on, among other things, connections with the Chinese government.
At the request of the Chinese government, Zoom blocked online meetings connected to Beijing’s 1989 Tiananmen Square crackdown and temporarily suspended the accounts of three U.S. or Hong Kong-based activists last year. Following that, the business stated that it will no longer “allow requests from the Chinese government to have an influence on anyone outside of mainland China.”
Tensions between Washington and Beijing have risen in recent years, with disagreements over trade, technology, cybersecurity, and human rights. The US government has taken a harsher approach to Chinese investment, scrutinizing deals more closely.
Zoom claims that purchasing Five9, based in San Ramon, California, will help them grow faster and gain access to more commercial clients. Before the pandemic, Zoom Video Communications Inc. went public in early 2019, and the transition to online study and work gave the company a household name.
