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 harm to competition, particularly due to the merged entity’s control over cricket broadcasting rights. This development marks a major setback in the merger process, as the CCI has communicated its preliminary findings to both companies and has requested explanations to justify why a full-scale investigation should not be initiated, according to sources familiar with the matter.
Cricket Rights: A Major Sticking Point
“Cricket is the biggest pain point for the CCI,” one of the sources revealed, highlighting the antitrust body’s apprehensions. The merger, if approved, would result in a media giant predominantly owned by Mukesh Ambani’s Reliance Industries, with control over valuable cricket broadcasting rights, worth billions of dollars. This has raised fears about the potential for increased pricing power and a tightening grip on advertisers.
The concern stems from the possibility that the merged entity could leverage its dominant position in cricket broadcasting to impose higher rates on advertisers, particularly during live events, where viewer engagement is at its peak. Given cricket’s enormous popularity in India, such a scenario could lead to significant market distortions, impacting not only advertisers but also consumers.
CCI’s Scrutiny and Potential Investigation
The CCI’s initial assessment has prompted the regulatory body to engage with Reliance and Disney, asking them to clarify why an investigation into the merger should not be conducted. This private communication, which was made public through sources, indicates that the antitrust watchdog is taking a cautious approach, mindful of the potential monopolistic implications of the merger.
Must Read: WhatsApp Business Introduces AI Assistant and Meta Verified Badge for Enhanced User Experience
Reliance, Disney, and the CCI have not yet publicly commented on the matter, and all sources have chosen to remain anonymous due to the confidentiality of the CCI’s process.
Intense Scrutiny Expected for India’s Largest Entertainment Merger
The merger, announced in February 2024, has been under intense scrutiny from the outset. Antitrust experts had predicted that the deal would face significant regulatory hurdles, given its potential to create India’s largest entertainment conglomerate. The combined entity would control over 120 television channels and two major streaming platforms, positioning it as a formidable competitor to established players like Sony, Zee Entertainment, Netflix, and Amazon.
Earlier, the CCI had posed around 100 questions to Reliance and Disney regarding the merger, reflecting the regulator’s thorough approach. In response, the companies reportedly offered to sell fewer than 10 television channels to alleviate concerns about market dominance and expedite the approval process. However, they have resisted selling off their cricket broadcasting rights, arguing that these rights are contracted until 2027 and 2028 and cannot be transferred without the approval of the cricket board, which could further complicate the merger process.
Potential Delays and Complexities Ahead
The CCI’s recent notice is likely to delay the merger approval process, as the companies must now address the regulator’s 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 a second source, indicating the possibility of prolonged negotiations.
The CCI has given Reliance and Disney 30 days to respond and present their case. The regulator’s current concerns revolve around how the merged entity could potentially hike rates for advertisers during high-demand live cricket events, further solidifying its market dominance.
Implications for the Indian Media Landscape
The merger, if it proceeds, would significantly reshape India’s media landscape. Jefferies, a financial services company, has projected that the combined Reliance-Disney entity would command a 40% share of the advertising market across television and streaming platforms. Such a dominant position could stifle competition and limit options for advertisers, leading to higher costs that could ultimately be passed on to consumers.
Cricket, often described as a religion in India, is a major driver of television viewership and advertising revenue. The merged entity’s control over digital and TV rights for premier cricket leagues, including the Indian Premier League (IPL), would give it unparalleled influence in the industry.
Historical Precedents and Future Outlook
The concerns raised by the CCI are not unprecedented. In 2022, a similar warning notice was issued to Zee and Sony during their attempt to create a $10 billion television conglomerate in India. Although they managed to secure CCI approval by offering concessions, including the sale of three television channels, their merger ultimately fell apart.
Former CCI mergers head, K.K. Sharma, has cautioned that the Reliance-Disney merger could lead to “almost absolute control over cricket,” echoing the regulator’s current concerns.
Also Read: Nokia To Merge With Infinera To Boost Optical Network Business And Tech Capabilities
