Reliance, Disney merger will hurt competition, CCI warns

In a major setback for the planned merger, the CCI has privately informed Disney and Reliance of its concerns and requested that the companies explain why a full investigation should not be launched, one of the sources revealed.

"Cricket is the biggest concern for the CCI," the source added.

The merged entity, which would be majority-owned by Mukesh Ambani's Reliance, would hold lucrative cricket broadcast rights worth billions of dollars, raising fears about pricing power and dominance over advertisers.

Neither Reliance, Disney, nor the CCI immediately responded to requests for comment. All sources requested anonymity as the CCI’s proceedings are confidential.

Antitrust experts had previously warned that the merger, announced in February, would face intense scrutiny as it would create India’s largest entertainment company, competing with Sony, Zee Entertainment, Netflix, and Amazon, with a combined 120 TV channels and two streaming services.

Earlier, the CCI had privately sent around 100 questions to Reliance and Disney regarding the merger.

The companies indicated their willingness to sell fewer than 10 television channels to ease concerns about market dominance and secure early approval, sources told Reuters.

However, they refused to compromise on cricket, arguing that broadcast and streaming rights, which expire in 2027 and 2028, cannot be sold at this time without the cricket board’s approval, which could delay the process.

The CCI's notice might delay the approval process, but the companies could still address the concerns by offering additional concessions, according to a second source.

"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," added the person.

A third source mentioned that the CCI has given the companies 30 days to respond and clarify their position, with current concerns focused on the potential pricing challenges advertisers could face if the merger proceeds.

"The CCI is concerned the entity can increase rates for advertisers during live events," said the third person.

Jefferies has noted that the Disney-Reliance merger would control 40% of the advertising market in the TV and streaming sectors. Cricket, which has a massive following in India, is highly sought after by advertisers.

The merged entity would own digital and TV rights for top cricket leagues, including the Indian Premier League, the world’s most valuable cricket tournament.

K.K. Sharma, the former head of mergers at the CCI, has stated that the merger could result in "almost absolute control over cricket."

In a related case, Zee and Sony, who planned to create a $10 billion TV giant in India, received a similar warning from the CCI in 2022. They offered concessions by selling three TV channels, which helped them secure CCI approval, but the merger eventually fell apart.