A merger between the Indian unit of Sony and Zee Entertainment to create a US$10 billion TV enterprise will potentially hurt competition by having "unparalleled bargaining power," the country's antitrust watchdog found in an initial review, according to an official notice seen by Reuters.
The Competition Commission of India's (CCI) notice to the two companies stated the watchdog is of the view that a further investigation is merited. Therefore, this will delay regulatory approval of the deal and could force the companies to propose changes to its structure, three Indian lawyers familiar with the process told Reuters. If that still fails to satisfy the CCI, it could lead to a prolonged approval and investigation process, they added.
In December 2021, Sony’s India unit finalized a deal with local rival Zee Entertainment to merge their television channels, film assets and streaming platforms, joining forces to take on the likes of Netflix and The Walt Disney Company in the country. According to the CCI, the proposed deal would place the combined entity in a "strong position" with around 92 channels in India.
"Such apparently humongous market position would enable the combined entity to enjoy an un-paralleled bargaining power," the CCI said in its notice, adding the combined entity could increase the price of channel packages. Moreover, the initial review showed the deal is likely to cause an "appreciable adverse effect on competition. Thus, it is considered appropriate to conduct further inquiry into the matter."
Furthremore, regarding advertising revenue, the CCI believes the merged entity is likely to use its strong market position to increase the price of some advertisements. "The combined strength of the parties is likely to be used to entrench their presence and earn higher profits. This merger is a classic case of the first or second largest player integrating with the third largest competitors to become the strong market leader," the CCI concluded.