India’s competition regulator has made an initial assessment that the $8.5 billion (about Rs 71,199 crore) merger of Reliance and Walt Disney Media Assets will harm competition because of their power over cricket broadcasting rights, four sources told Reuters on Tuesday.
In the biggest setback so far for their planned merger, the Competition Commission of India (CCI) has privately issued a notice of its position to Disney and Reliance, asking the companies to explain why an investigation should not be ordered, one of the sources said.
“Cricket is the biggest sore point for the CCI,” one of the sources said.
The merged company, majority-owned by Reliance, owned by Asia’s richest man Mukesh Ambani, would have billions of dollars in lucrative cricket broadcasting rights, raising concerns about the company’s pricing power and grip on advertisers.
Reliance, Disney and the CCI did not immediately respond to requests for comment. All sources declined to be named, as the CCI process is confidential.
Antitrust experts warned that the merger, announced in February, could face heavy criticism because it would create India’s largest entertainment company, competing with Sony, Zee Entertainment, Netflix and Amazon, with a total of 120 TV channels and two streaming services.
The CCI previously asked Reliance and Disney about 100 private questions about the merger. The companies have told the regulator they are willing to sell fewer than 10 television channels to address concerns about market power and get early approval, sources told Reuters.
However, they refused to budge on cricket. They informed the CCI that the broadcasting and streaming rights expire in 2027 and 2028 and cannot be sold at this time. Such a move would require the approval of the Cricket Board, which could delay the process.
According to a second source, the CCI’s notification could delay the approval process, but companies can allay concerns by offering more concessions.
“This is a harbinger of a situation that will become complicated… The announcement means that the CCI initially considers that the merger harms competition and that the concessions offered are not sufficient,” the source added.
A third source said CCI has given the companies 30 days to respond and explain their position. Concerns now revolve around how advertisers could face pricing issues if the entities were merged.
“The CCI is concerned that the entity may increase rates for advertisers during live events,” the third person said.
Jefferies has said Disney-Reliance will have a 40 percent share of the advertising market in the TV and streaming segments.
Cricket has a fervent following in India and matches are sought after by advertisers. Reliance-Disney will own digital and TV cricket rights to top competitions, including the world’s most valuable cricket tournament, the Indian Premier League.
According to KK Sharma, former head of mergers at the CCI, the merger could lead to “near absolute control over cricket.”
Zee and Sony were planning to set up a $10 billion (approximately Rs 83,764 crore) TV giant in India by 2022 and were given a similar warning.
They made some concessions by selling three TV channels, which earned them CCI approval. However, the merger ultimately failed.
© Thomson Reuters 2024
(This story has not been edited by NDTV staff and is auto-generated from a syndicated feed.)
