In mid-July, Zoom announced it was acquiring Five9 for $14.7 billion in order to diversify its offerings to respond to the move from remote to hybrid working.
Now the DOJ wants to dial up oversight of the deal because of concerns about national security.
This is linked to that fact that Zoom and Five9 both have operations in China and Russia.
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The US Department of Justice (DOJ)’s national security division has raised concerns about video conferencing giant Zoom’s planned $14.7 billion acquisition of cloud contact center software firm Five9.
The deal was first announced in July and is Zoom’s first billion-dollar-deal as the company prepares to diversify ahead of employees returning to the office and relying less on the video conferencing software to communicate internally.
In a letter, the division has asked the Federal Communications Commission (FCC) to allow further investigation by the DOJ’s committee for the Assessment of Foreign Participation in the United States Telecommunications Service Sector.
The committee plans to scrutinize the deal “to determine whether this application poses a risk to the national security or law enforcement interest of the United States”. It will then make a recommendation about how the FCC should act on approving the deal.
There is a particular concern about “foreign participation” and influence over the deal.
This is believed to be linked to the fact that Zoom’s use of Chinese developers and comes during a cooling of relations between the US and China. In addition, Five9 has operations in Russia.
In a recent earnings report filed with the US Securities and Exchange Commission, Zoom acknowledged the challenge of managing Five9’s “international operations” “including engineering personnel and operations in Russia, which may pose regulatory, economic and political risks.”
Additionally, the filing notes that there may be “additional challenges if the relationship between Russia and the United States worsens significantly, or if either Russia or the United States imposes or implements new or augmented economic sanctions, supply chain restrictions or other restrictions on doing business.”
The filing continued: “For example, in recent years, the US Government has expressed concerns with the security of information and communications technology and services sourced from providers in China, Russia, and other jurisdictions.”
In a statement about the DOJ investigation, Zoom said: “The Five9 acquisition is subject to certain telecom regulatory approvals.
“We have made filings with the various applicable regulatory agencies, and these approval processes are proceeding as expected.
“We continue to anticipate receiving the required regulatory approvals to close the transaction in the first half of 2022.”
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