InvestorQ : Why is the CCI objecting to the merger of Zee and Sony TV?
Sam Eswaran made post

Why is the CCI objecting to the merger of Zee and Sony TV?

Moii Chavate answered.
1 month ago

All is not well with the Zee – Sony TV merger, at least the Competition Commission of India (CCI) is far from happy. Even as Zee and Sony have been pushing aggressively to consummate the $10 billion media merger, the anti-trust watchdog has objected to the proposed merger between Zee and Sony on account of unparalleled bargaining power that the deal would give to the merged entity. CCI feels that such industry dominance by one single entity could be unhealthy for a more competitive environment of business.

The CCI has sent a notice to both Zee and Sony, explicitly stating its view that further investigation was merited in the case. What this means is that, the CCI would be delving deeper into the deal and looking at multiple data points and also talking to stakeholders to understand if such a move would stifle competition. In a sense, the merger had been a virtual lifeline to the beleaguered Zee group, especially the Subhash Chandra family which faced the risk of losing control, apart from the business risk that OTT posed.

For now the first step is that both the companies have one month to respond to the notice. Post the response, the final call will be taken by the CCI. However, it is clear that there would be delay in the process. There several possibilities. For instance, CCI may force the two companies to propose changes to its structure or to some of the specific clauses of the merger that trigger dominance. Eventually, if CCI is still not satisfied then the companies will have to go through rather prolonged approval and investigation process, delaying the deal.

Why does CCI worry about the deal? CCI is going by numbers and market share of the combined entity. The combined entity will control 92 channels. CCI is also apprehensive that SONY with its $86 billion worldwide revenues can use size to browbeat the market. Apart from the perils of dominance, such a position could lead to a spike in the price of channel packages. After all, between them they would control most of the entertainment and sports properties in India. CCI considers it an appreciable adverse effect on competition.

Of course, for both the parties, the essence is time and that would be the key issue in the success and relevance of the merger.