This article has been written by Tanmaya Purohit.
Indeed, post the implementation of the changes that were brought about in the Competition Act, 2002 in the year 2011, the assessment of the mergers and acquisitions and the combinations happening in different markets have become rather influenced by the jurisprudence that has been developed by the Competition Commission in this regard. The period is witnessing a remarkable number of mergers and acquisitions, especially in the area of media and broadcasting. There has been plenty of instances in the recent times where the CCI (Competition Commission of India) has had the opportunity to assess the combinations that have been taking place in the media and broadcasting sector in India, especially since the provisions for control of mergers were enforced in 2011 as a part of the Competition Act, 2002. If an assessment were to be made based on the judgement that had been provided by the CCI in these cases, one can trace and carve out a trend, where the CCI can be seen as following an individual assessment in all these cases, rather than following a set path, irrespective of the varying circumstances in different cases.
In general, the Competition Commission of India adopts the AAEC Test i.e., whether any merger or a combination tends to have an “appreciably adverse effect on competition” (AAEC). However, in addition to that, a considerably flexible jurisprudence has been developed by the cases that have come before the CCI, and the assessment carried out by the CCI in those cases, concerning the assessment of the mergers or combinations, thereby, providing a set of parameters that can be referred to for the assessment of the combinations. These parameters can be broadly classified, and have been discussed in the following section.
Assessment of Mergers in Media and Entertainment Sector
While assessing the mergers in the media, entertainment and the broadcasting sector, the CCI has employed an acute understanding of the complexity involved in the mergers and the combinations, where the comprehension of the typical ingredients of this sector are adequately demonstrated. However, worthy of note are the parameters, on the basis of which the CCI has proceeded with the assessment, and thereafter, approval of these combinations. In this article, these parameters have been discussed in light of some recent judgements.
What nature does the Industry show in India
As is evident from the approach of the CCI, it is aware of the role played by the various stakeholders in the broadcasting industry, regardless of the level at which the role concerned is involved. At several points while assessing the combinations, this in-depth understanding of the value chain in the broadcasting industry has come of use to the CCI, so that it can assess how interchangeable the broadcasting services are, in the market, and the respective geographic reach they each have. This approach has helped the CCI to demarcate the markets between the broadcasting companies.
One such instance was the Sony Pictures/Aqua Holdings Investment combination, in which the CCI had to go through an in-depth analysis of the value chain involved in this combination. It was observed by the CCI that the content owners, the distribution platform operators (DPOs) and the broadcasters, at different levels, played a major part in the value chain involved. The content that is broadcasted, is created by the content owners, who own all rights related to the broadcast of such content. India has a variety of broadcasters, such as the Multi-System Operators (MSOs), the DTH providers, the Local Cable Operators (LCOs) etc. India also has the OTT (Over-the-top) services, which consist of the applications and the services that are available online for access by anyone. In relevance to the assessment of the presence of the competition in the industry, the CCI also took note of the presence of the only domestic service provider which was exclusively owned by the public sector broadcaster, Doordarshan, which was a division of the Prasar Bharti.
However, the assessment does not simply end there. The CCI also takes note of whether there are other DPOs which can act as a substitute or interchangeable option and does this comparison as per the provisions of the Act. This approach of the CCI became evident with the decision in the combination between Dish TV India Limited (DishTV) and Videocon D2h Limited (Videocon D2h).
How competitive the market is
When the AT&T Inc. merged with Times Warner Inc., the merger faced no objections from the CCI. Rather, it was approved without much hassle. There are several markets, where the existing number of competitors are fairly large, to the extent that the merger does not have any form of appreciable adverse effect on the competition in the respective market.
In markets where there are still competitors which can exercise restraint on the companies entering into a merger, without being any detrimental to the competition in that market, the CCI tends to approach the matter at hand with a considerably liberal approach. This trend further reappeared in the approach of the CCI when the Prime Focus Limited was undergoing a combination with the Reliance MediaWorks Limited. When deliberating over this combination, the CCI conducted a survey in the market of post-production services, for information regarding the competitors that pre-existed in the market, and thereafter, concluded that due to their being abundant competitors, there weren’t any concerns for adverse effect on competition to look out for, and thus, the referred to combination was approved by the CCI.
Existence of a Regulator in any Given Sector
Whether or not there are any competitors present in the market within which any combination is being proposed is an important consideration for the CCI in order to grant approval to any combination. This approach became evident in the case of Sony Pictures India and Aqua Holding Investments, where the regulator in the given sector (the broadcasting rights for the sports channels) was the Telecom Regulatory Authority of India (TRAI). After this was noted, the approach of CCI included recognition of the existing regulatory orders which were issued by TRAI itself. This particular order mandatorily put a ceiling on the paid charges on several relationships, be it payment by subscribers to the LCOs, or the payment by LCOs to the MSOs and so on. This was a major consideration by the CCI in assessing the Sony Pictures India and Aqua Holding Investments acquisitions, chiefly because this regulatory order by TRAI, coupled with the fact that Sony India was not as prominent in Indian markets as its competitors, led the CCI to arrive at the conclusion that the proposed combination could not possibly have an appreciable adverse effect on the competition in the specific market.
This approach was reiterated by the CCI in the case which involved the combination between Walt Disney and Fox Entertainment. However, this particular combination was not only confined to the Indian Jurisdiction, rather, but this combination was also notified across several jurisdictions, such as the United States and the European Union. In the Indian jurisdiction, the resulting acquisition which was applied for made Walt Disney and Fox the subsidiaries of HoldCo., where HoldCo. wholly-owned these two companies following the combination coming into effect.
However, although it may not seem so, CCI did take several other factors into consideration when considering the combination, so as to decide whether or not this combination would cause an adverse effect on the competition prevalent in the market. These factors were assessed so as to get an idea of the market share of the parties, as well as that of the competitors which were in the market aside the parties which were involved in this transaction (Walt Disney, Fox Entertainment and HoldCo.). However, the observations of the CCI did bring up around nine overlaps in the horizontal markets in the assessment of the markets of these involved parties in the proposed combination. In addition, three vertical overlaps were also discovered by CCI in relevance to the parties involved in the combination, but the CCI still decided that the same was not a threat to the competitors prevalent in the market, and would not have an AAEC.
IN light of that, CCI once again took into consideration the regulatory regime put in force by TRAI wherein the regulations were in force so as to let competition be fair and maintained. These regulations which were already there to ensure that AAEC was avoided, helped the CCI arrive at the conclusion that similar to the case in Sony Pictures India and Aqua Holding Investments combination, the combination was not enough so as to be degenerate to the competition in the market.
Diversity in the Market shares
There is no way a fixed metric for the assessment of the market shares of any participant in the market, and the CCI recognizes this as well. That much can be seen from a few decisions of CCI, wherein the CCI created a unique approach, based on the unique characteristics of each market segment. Two remarkable decisions by the CCI, namely the decision given in the combination of Walt Disney Company with Twenty First Century Fox, as well the decision of the Sony Pictures Networks India Private Limited, with Aqua Holding Investments (Pvt.) Ltd., the sector specific peculiarities were greatly taken into consideration by the CCI.
Notably, in the combination between the Walt Disney Company with Twenty-First Century Fox, the CCI resorted to the calculation of the total market share of the two companies who were involved in the combination, in the markets which were for the production and the supply of films in India. The criteria CCI used was based off on the total ‘box office’ receipt made by the parties so as to get an estimate of the cumulative market share. At the same time, in the assessment of the markets which were for the operation and the wholesale supply of the content on televisions in India, the CCI resorted to the calculation of the market share of the parties and their competitors in India. The criteria used by CCI in the calculation of the market share here in this context was based on the number of channels being broadcasted and the other relevant data related to the viewership on these channels.
However, the things were not the same in the case of the combination between Sony Pictures India and Aqua Holding Investment when the CCI assessed the validity of this combination. While in the previous assessment for Walt Disney Company, the assessment was based off of the total viewership or the box office receipts of the companies, the criteria were a little different in the case of a merger between Sony Pictures India and Aqua Holding investment. In this scenario, the CCI took note of the fact that the target market in this scenario was majorly the sports broadcasting business. What prompted a change in the approach of the CCI was the fact that the rights for broadcasting sports events in India were distributed with the help of a bidding process, where the tenders for the rights were awarded. So in order to use criteria suited to the process in this market, CCI assessed the data of the bidding history in this market for the preceding five years. During the assessment of the bidding data, CCI resorted to assessment of the market share by the number of contracts of the relevant parties, as well as the value that the contracts have. The other factors that were also taken into consideration were the Gross Rating Points (GRPs), as well as the revenue collected by the transacting parties through advertising. Gross Rating Points (GRPs) are generally used as a measure so as to assess the media which is being broadcasted before any given audience. In short, if the GRP is 1, it signifies that a total of one per cent of the total potential audience has been reached by way of a single advertising message. GRP plays a considerable role in the assessment of the total audience that can be reached by any broadcaster. The main reason behind assessing this data by the CCI was to assess whether the concerned combination would cause an appreciable adverse effect on competition. Subsequent to the assessment of the data, the CCI concluded that though the combination would be a change in the market of the broadcasting sports events, the same would still not make Sony Pictures India a competitor to Ten Sports in the market, and at the same time, Star India would also prevail in the market as a close competitor, even after the acquisition would be approved by the CCI. Keeping this in mind, the CCI approved this combination.
This radical difference in approaches to assess the validity and consequences of combinations or acquisitions by the CCI is indicative of the flexible and accommodation nature of the CCI in terms of the specific markets. CCI has resolved to impart a decision which is case specific depending upon the situation the CCI is presented with in terms of the markets for which a combination has been proposed.
The CCI has made it evident through this assortment of decisions that it is indeed adept in including into its assessment the various peculiarities of the varying sectors when it comes to the assessment of combinations in the Media, Entertainment and Broadcasting Sector. It becomes increasingly evident with the advent of the excessive investigation during the assessment, that not only the submissions made by the parties concerned but as well as the participants in the market and other affected parties are also a part of the consideration while CCI ponders over the approval of the combination.
However, this approach is in all likelihood going to be propagated into something much more advanced, but the approach over which these practices shall be developed will be the history preceding these decisions in the last few years. CCI will have to indeed take into account the fact that the evolving pace at which digitization in these sectors is growing, the international norms in the assessment of these combinations will need to be imbibed into the practices for the CCI, so as to impart a sector-specific and just decision while the assessment of any merger or combination in this sector.
 Combination Registration No. C-2016/09/436.
 Combination Registration No. C-2016/12/463.
 Combination Registration No. C-2016/11/456
 Combination Registration No. C-2014/08/198.
 Combination Registration No. C-2018/07/583.
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