Chennai Super Kings players celebrate the trophy after defeating Gujarat Titans in the Indian Premier League (IPL) Twenty20 cricket final.
Sajjad Hussain | AFP | Getty Images
India’s antitrust agency has reached a preliminary assessment of the $8.5 billion merger of Reliance and Telecom walt disney Four sources told Reuters on Tuesday that the media property was harming competition due to its impact on cricket broadcast rights.
It is the biggest setback yet for the planned merger of Disney and Reliance, which is aimed at creating India’s largest entertainment company that will compete with Sony, Zee Entertainment, Netflix and Amazon with 120 TV channels and two streaming services.
The Competition Commission of India (CCI) privately warned Disney and Reliance through a notice expressing concerns over their rights to broadcast the world’s most populous country’s most popular sporting event, a source said.
The CCI has asked the companies to explain within 30 days why an investigation should not be ordered.
“Cricket is the biggest sore point for the CCI,” another source said.
The combined company, which will be majority-owned by Asia’s richest man Mukesh Ambani’s Reliance, will own billions of dollars worth of cricket broadcast on television and streaming platforms. Lucrative rights have raised concerns about its pricing power and its control over advertisers.
Reliance, Disney and CCI did not 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 was likely to face intense scrutiny, particularly over sports rights.
CCI had earlier asked Reliance and Disney privately about 100 questions related to the merger. The companies have told regulators they are willing to sell fewer than 10 TV channels to allay concerns about market power and win early approval, sources told Reuters.
But they refused to budge on cricket issues and told the CCI that broadcast and streaming rights, which expire in 2027 and 2028, are currently unsaleable and any such move would require approval from the Cricket Board, which This process may be delayed.
One of the top positions at the Board of Control for Cricket in India is secretary Jay Shah, the son of Prime Minister Narendra Modi’s home minister Amit Shah.
“Getting complicated”
Reliance Disney will own the digital and television cricket rights for top leagues, including the Indian Premier League, the world’s most valuable cricket tournament.
The CCI notification may delay the approval process, but the companies can still resolve the issues by offering more concessions, the first source said.
“This is a harbinger of things getting complicated… The notice means that the CCI initially believed that the merger harmed competition and that any concessions offered would not be enough,” the person added.
Another source said the CCI has given both companies 30 days to respond and explain their stance, with concerns now centered on how advertisers will face pricing challenges if the entities merge.
“CCI is concerned that the entity may increase advertisers’ rates during live events,” the person said.
Jefferies said the Disney-Reliance entity will capture 40% of the advertising market in television and streaming.
Cricket has a cult following in India, the world’s most populous country with an estimated 1.4 billion people, and the game is popular with advertisers.
Media agency GroupM estimates that sports industry-related sponsorship, endorsement and media spending will total close to $2 billion by 2023.
Former CCI merger chief KK Sharma said the merger could lead to “almost absolute control of cricket”.
Zee and Sony, which plan to create a $10 billion TV giant in India by 2022, have received similar warning notices. They made some concessions by selling three TV channels, which helped them win CCI’s approval, but the merger ultimately failed.
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