Cricket rights monopoly: Will CCI stand in the way of RIL-Disney merger?

The landmark Reliance-Disney merger, which is set to transform the broadcast landscape by redefining how content is produced, distributed and consumed, is navigating the approval process and has already sparked considerable industry debate.

Since the Competition Commission of India (CCI) raised concerns about the Reliance-Disney merger potentially granting excessive control over cricketing rights for TV and streaming in India, speculation has surged that the deal could face setbacks if the entities do not divest some of these rights. This uncertainty has fuelled discussions about the merger's future and its possible impact on market competition and advertising dynamics.

Analysing the current scenario surrounding the merger, advocate Rohit Jain, Managing Partner, Singhania & Co, said that the CCI might not permit the merger if the two media stalwarts stay rigid on cricketing rights.

“The CCI may find that the merger would significantly reduce competition in the sports broadcasting market. CCI might not permit the merger as there are chances that the merged entity may gain too much control over essential cricketing rights, leading to monopolization of the market.

“The CCI might require sale of some cricketing rights as a condition for approving the merger. Since cricket rights are central to the Disney-Reliance deal, this requirement could complicate or even derail the merger if the parties are unable or unwilling to sell these assets,” Jain told exchange4media.

Last week, the CCI warned Disney and Reliance that their merger could dominate cricket rights for TV and streaming in India, potentially squeezing out advertisers.

Reliance and Disney are setting their sights on building India's largest entertainment powerhouse, poised to rival Sony, Netflix, and Amazon with 120 TV channels and two streaming platforms.

However, cricket is the cornerstone of their strategy.

Sharing his view, Himesh Thakur, Counsel, PSL Advocates & Solicitors, said that the proposed Disney-Reliance merger could face significant hurdles that could prevent its completion, one of which is antitrust issues raised by the CCI regarding the potential monopolization of cricket broadcasting rights that could adversely harm competition and advertisers.

“The reluctance of both companies to divest these lucrative rights or make substantial structural changes might further complicate the approval process. Additionally, concerns around content regulation and potential political ramifications of such a large merger might lead to delays or additional conditions imposed by the government,” he said.

Thakur added that the potential monopolistic control over cricket broadcasting rights could lead to higher advertising rates and reduced choices for consumers, advertisers, and competitors.

“Given the substantial market power both entities hold individually, their merger could significantly reduce competition, contrary to the objectives of the Competition Act, 2002, which seeks to prevent practices that have an appreciable adverse effect on competition in India,” Thakur said.

According to Section 6 of the Competition Act 2002, no enterprise shall enter into a combination which causes or is likely to cause an appreciable adverse effect on the competition within the relevant market in India and such a combination shall be void.

Under Section 31 of the Competition Act, the CCI is empowered to direct that such a merger which is likely to have an appreciable adverse effect on competition shall not take effect or may direct modification of the terms of such merger to eliminate the foreseeable adverse effects on the competition.

As per Advocate Rajiv Sharma, Partner, Singhania & Co, the deal will monopolise streaming of cricket matches which will eliminate competition, and so could break the merger deal.

“Disney Star has IPL’s broadcasting rights on its television channels Star Sports, whereas Reliance’s Viacom 18 has the digital streaming rights on its OTT platform JioCinema. Post merger, the merged entity will have both the OTTs and will monopolise broadcasting as well as digital streaming of cricket matches, which will result in complete elimination of competition, and can be a deal breaker,” Sharma said.

He said that CCI is entrusted to ensure that no merger/amalgamation takes place which has a likelihood of having an adverse effect on the competition in the market.

“So, as a guardian of healthy competition in the market, CCI may put several restrictions / modifications before the proposed merger is allowed,” he said.

The Board of Control for Cricket in India (BCCI), which is the principal national governing body of cricket in India, awarded the bid to Viacom 18 in 2023 for streaming of IPL on its OTT platform JioCinema, whereas Disney Star has the current television broadcasting rights.

According to Sharma, in case the terms and conditions on which such rights were awarded gets affected upon the proposed merger, “a prior nod from BCCI shall be required for the same which has the potential for further impacting / postponing the merger.”

As per advocate Ashutosh Srivastava of SKV Law Offices, the potential for an anti-trust investigation is a significant factor that could halt the Reliance and Disney merger and draws parallels with the Zee-Sony failed merger.

“Concerns primarily revolve around the changes to cricket broadcasting rights, with the Competition Commission of India (CCI) raising over 100 questions in July 2024. The CCI’s scrutiny is justified, as this merger could drastically impact competition, particularly in advertising and service pricing, which would violate competition laws.

“This situation echoes the 2021 Zee-Sony merger attempt, which faced similar warnings from the CCI and ultimately failed. The CCI’s consistent regulatory approach aims to prevent monopolies that could reshape entire sectors. Under Section 19 of the Competition Act, 2002, the CCI can initiate an investigation if the merger does not address these monopoly concerns, especially regarding cricket broadcasting rights,” Srivastava said.

If all necessary approvals are secured, the merger of RIL and Star India is likely to be completed by early 2025.

On February 28, 2024, Star India Private Limited (Star India) entered into a binding definitive agreement with Reliance Industries Limited (RIL) and Viacom 18 Media Private Limited (Viacom 18), which is majority owned and controlled by RIL, to form a joint venture that will combine the businesses of Viacom18 and Star India consisting of entertainment and sports pay TV and free-to-air networks, DTC services, film and television content library and certain production businesses (the Star India Transaction).

RIL will have an effective 56% controlling interest in the joint venture with 37% held by the Company, and 7% by Bodhi Tree Systems, a third-party investment company.

The Star India transaction is expected to close in the first half of 2025, subject to customary closing conditions, including regulatory approvals and government consents. If closing has not occurred by February 28, 2026, Star India or RIL may terminate the transaction.