India's antitrust regulator has preliminarily concluded that the proposed $8.5 billion merger between Reliance and Walt Disney's media assets in India could harm competition, particularly due to their influence over cricket broadcasting rights, according to four sources who spoke to Reuters on Tuesday.
The Competition Commission of India (CCI) has privately communicated its concerns to both Disney and Reliance, asking them to justify why an investigation should not be launched, as reported by one of the sources. "Cricket is the primary concern for the CCI," one source noted. The merged entity, predominantly owned by Asia's wealthiest individual, Mukesh Ambani's Reliance, would control highly valuable broadcasting rights for cricket, potentially affecting pricing and advertising dominance. Neither Reliance, Disney, nor the CCI responded promptly to requests for comment, and all sources requested anonymity due to the confidential nature of the CCI's proceedings.
Antitrust experts had previously cautioned that the merger, announced in February, might face rigorous scrutiny as it would establish India's largest entertainment conglomerate, competing with entities like Sony, Zee Entertainment, Netflix, and Amazon, with a portfolio of 120 TV channels and two streaming services. The CCI had previously posed nearly 100 questions to Reliance and Disney regarding the merger. The companies indicated their willingness to divest fewer than 10 TV channels to alleviate concerns about market dominance and expedite approval, according to sources. However, they resisted relinquishing cricket rights, citing their expiration in 2027 and 2028 and the need for approval from the cricket board, which could delay the process.
The CCI's notice could potentially delay the approval process, but the companies might still mitigate concerns by offering additional concessions, according to a second source. "This notice signifies that the CCI initially perceives the merger as detrimental to competition, and the current concessions are insufficient," the source added. A third source revealed that the CCI has granted the companies 30 days to respond and clarify their position, with current concerns focusing on potential pricing challenges for advertisers if the merger proceeds. "The CCI is worried that the merged entity could hike rates for advertisers during live events," the third source explained. Jefferies estimates that the Disney-Reliance entity would command a 40% share of the advertising market in TV and streaming sectors. Cricket enjoys immense popularity in India, making matches highly attractive to advertisers. The Reliance-Disney partnership would hold digital and TV rights for major cricket leagues, including the prestigious Indian Premier League.
K.K Sharma, the former head of mergers at the CCI, has warned that the merger could result in "almost absolute control over cricket." Zee and Sony had also planned to merge into a $10 billion TV giant in India and received a similar warning notice in 2022. They managed to secure CCI approval by divesting three TV channels, but the merger ultimately failed.
