CCI raises concerns over $8.5 billion Reliance-Disney merger, cites potential competitive harm
- In Reports
- 01:26 PM, Aug 21, 2024
- Myind Staff
The Competition Commission of India (CCI) has raised significant concerns about the proposed $8.5 billion merger between Reliance and Walt Disney's media assets in India, citing potential adverse effects on competition. According to sources who spoke to Reuters, the CCI’s primary concern revolves around the merged entity’s potential dominance in cricket broadcasting rights, which are highly lucrative in India.
This marks a major obstacle for the Disney-Reliance merger, which aims to create the largest entertainment company in India. The combined entity would compete with major players like Sony, Zee Entertainment, Netflix, and Amazon, boasting a portfolio of 120 TV channels and two streaming platforms.
Sources revealed that the CCI has privately issued a notice to both Disney and Reliance, expressing apprehension about the merged entity's control over cricket broadcasting rights. The CCI fears that this control could give the new entity significant pricing power and influence over advertisers during live cricket events, which are immensely popular in India. The CCI has asked the companies to explain within 30 days why an in-depth investigation into the merger should not be launched.
The proposed merger, if approved, would be primarily controlled by Mukesh Ambani, Asia’s richest man and head of Reliance. The deal would include valuable broadcasting rights for cricket matches on both television and streaming services. These rights, estimated to be worth billions of dollars, are central to the CCI's concerns.
When contacted by Reuters, representatives from Reliance, Disney, and the CCI did not respond to requests for comment. The individuals who provided this information to Reuters requested anonymity due to the confidential nature of the CCI's proceedings.
Before the merger was announced in February, antitrust experts had warned that it could face rigorous scrutiny, particularly over the allocation of sports broadcasting rights. In response to earlier queries from the CCI, Reliance and Disney have expressed their willingness to divest a small number of television channels to alleviate market power concerns and expedite the approval process.
According to sources, the companies have offered to sell fewer than 10 channels. However, they have remained firm on retaining the cricket broadcasting rights, which are set to expire in 2027 and 2028.
The companies have informed the CCI that selling these cricket rights is not currently possible, as it would require the approval of the cricket board, which could delay the entire merger process. The merger would grant the combined entity the digital and television broadcasting rights for major cricket leagues, including the Indian Premier League (IPL), the world’s wealthiest cricket tournament.
The CCI’s notice could delay the approval process, though the involved companies could propose additional concessions to address the concerns. "This is a precursor of things getting complicated ... The notice means that initially the CCI thinks the merger harms competition and whatever concessions offered are not enough," said one source.
Jefferies, a financial services firm, has predicted that the Disney-Reliance joint venture would capture a significant 40% share of India’s advertising market across television and streaming platforms. Cricket, which enjoys unparalleled popularity in India, accounts for a massive share of this market.
According to GroupM, a media agency, spending on sports-related sponsorship, endorsement, and media in India reached nearly $2 billion in 2023, with cricket alone making up 87% of this total.
K.K. Sharma, the former head of mergers at the CCI, expressed concerns that the merger could result in "almost an absolute control over cricket."
The situation is reminiscent of a similar warning issued by the CCI in 2022 during the planned $10 billion merger of Zee and Sony. To address the CCI's concerns, Zee and Sony offered to divest three TV channels, eventually securing approval, though the merger ultimately did not go through.
Image source: ToI
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