In July 2023, the Wall Street Journal reported that Walt Disney was exploring strategic options for its Star India business, including a joint venture or sale. In February 2024, Reliance Industries announced a strategic joint venture (JV) between Reliance, Viacom18, and Disney, combining their digital streaming and TV assets in India. This deal will be executed through a court-approved scheme of arrangement under Sections 230 to 232 of the Companies Act 2013.

Notification and Exemptions under the Competition Act

Under Section 6(2) of the Competition Act 2002 (the Act), any person or enterprise planning a combination must notify the Competition Commission of India (CCI) upon executing an agreement. On 7 March 2024, the Central Government issued a notification exempting acquisitions, mergers, or amalgamations from Section 5 of the Competition Act, 2002, if the enterprise's assets do not exceed INR 450 crore or its turnover does not exceed INR 1250 crore in India.

A penalty may be imposed for failing to notify the CCI, as shown in the Proceedings against Investcorp India Asset Managers Private Limited under Section 43A of the Act. The CCI held that the acquisition constituted a combination under Section 5, but the acquirer did not submit the required notification as mandated by Section 6(2). Consequently, the CCI levied a penalty of Rs 20,00,000 on the acquirer.

The Act and the Combination Regulations do not explicitly address joint ventures, Section 5 of the Act covers acquisitions, mergers, and amalgamations, but not joint ventures. However, the CCI has clarified that transferring assets to a joint venture company is a notifiable combination if the financial thresholds are met.

Given that the JV between Disney and Reliance is valued at Rs 70,352 crores which exceeds the threshold limit of 7 March Notification, it is mandatory to file the necessary documentation with the CCI. Parties involved in a combination can choose to file a notice using either Form I or Form II as per the Combination Regulations. However, Form II is preferable if:

1. The parties are involved in similar or substitutable goods or services, and their combined market share exceeds 15% in the relevant market.
2. The parties are at different stages of the production chain, and their combined market share exceeds 25% in the relevant market.

Structured Approach for Combination Reviews by CCI

In India, the CCI follows a structured approach for combination reviews, consisting of Phase I and Phase II investigations.

Phase I
Under Regulation 19(1) of the Combination Regulations, the CCI must form an initial opinion within 30 days of receiving a notice from the parties involved in a combination. This Phase I investigation assesses whether the combination might cause an appreciable adverse effect on competition (AAEC). During Phase I, the CCI can request additional information from the parties, and if the notice is incomplete, the parties may be asked to rectify deficiencies under Regulation 14(3).

According to Amended 31(3) of the Competition Amendment Act, 2023, if the CCI believes a combination might cause AAEC, it can require modifications proposed by the parties or by the CCI itself. The combination may then be approved with these modifications.

If the parties' response is unsatisfactory, the CCI can initiate a more detailed Phase II investigation.

Phase II
In a Phase II review, the CCI conducts a detailed investigation, including seeking third-party views and public comments. The amended Act mandates that the CCI issue a 'Statement of Objections' at the start, outlining concerns about the combination.

If the parties' response to the Section 29(1) show cause notice is unsatisfactory and the CCI has a prima facie opinion that the combination may cause an AAEC, the CCI will, within seven working days, direct the parties to publish the combination details within ten working days. This informs the public and affected parties.

Under Section 29(3), the CCI invites written objections from additional affected parties within 15 working days of publication. Additional parties must provide requested information within 15 days as per Section 29(5). After receiving all necessary information, the CCI has 45 working days to resolve the case as per Section 31.

It is assumed that Disney-Reliance JV will have leadership position in i) Linear TV and ii) Video Streaming Services

Market Share Analysis and Potential AAEC in the Disney-Viacom JV

The CCI will examine the market share and power of the combined entity to check for any AAEC. In the Zee-Sony case, the CCI defined the market of TV channel supply in 10 segments and analyzed each player's market share. This allows us to infer the combined power of Disney and Viacom. Below is the table highlighting the market shares of parties to 'JV' in the operation and wholesale supply of TV channels in India according to Zee-Sony deal.

S.no	Relevant Market (All Wholesale)	Market Shares for FY 2021(%) (based on GRP)
		Disney	Viacom	Combined
1	Hindi General Entertainment Channels (GECs)	25-30	10-15	35-45
2	Hindi Films	20-25	5-10	25-35
3	Marathi GEC	35-40	10-15	45-55
4	GECs in India	25-30	5-10	30-40
5	All films	20-25	5-10	25-35
6	Bengali GECs	35-40	5-10	40-50
7	TV channels in India	20-25	5-10	25-35
8	English films	20-25	NA	20-25
9	Regional GECs	25-30	5-10	30-40
10	Infotainment & lifestyle	NA	5-10	5-10

Experts indicate that if the combined entity's market share exceeds 40% in any market, the CCI will likely initiate a detailed Phase II investigation. Based on above data, it's probable that a Phase II investigation will be initiated in the sectors encompassing General Entertainment Channels (GECs), Marathi GECs, Bengali GECs, and Regional GECs. For example, GECs include Disney Star's 'Star Plus' and Viacom 18's 'Colors TV'; Marathi GECs include Viacom 18's 'Colors Marathi' and Disney Star's 'Star Pravah'; Bengali GECs include Disney Star's 'Star Jalsha' and Viacom 18's 'Colors Bangla'.

For the retail supply of Over the Top (OTT) Audio-Video (AV) content in India, ZEE-Sony was given the green light due to having less than a 10% market share. According to a Justwatch report, Disney+ Hotstar led the Indian OTT market with a 24% share in Q4 2023, while JioCinema held a 6% share. Together, the JV will command a 30% market share in the OTT sector. Therefore, it is unlikely to face a Phase II investigation as the OTT market is quite competitive, with Amazon Prime Video holding a 22% share and Netflix holding a 13% share.

Market Share in the Indian Sports Broadcasting Sector

The JV is anticipated to hold a significant share, approximately 75-80% in the Indian sports market. However, India's sports broadcasting sector is diverse, characterized by a multitude of sports, formats, production styles, and regional focuses. Competition among broadcasters is fierce, often involving bidding wars or auctions for broadcasting rights. Entry into the market is relatively unrestricted, with acquisition of broadcasting rights typically done through bidding, although regulations such as the Sports Broadcasting Signals (Mandatory Sharing with Prasar Bharati) Act, 2007 and oversight from regulatory bodies like the Telecom Regulatory Authority of India (TRAI) play a role.

Viacom18 has secured the global BCCI media rights for INR 5963 crore for 2023-28, encompassing digital and TV rights. They also hold digital rights for the IPL and both digital and TV rights for the Women's Premier League (WPL). Disney Star has acquired ICC media rights from 2024-27 for $3 billion.

While some sources may inaccurately depict the Disney-Reliance JV as a monopoly or sports behemoth, it's important to note that the acquisition of sports broadcasting rights by Viacom18 and Disney Hotstar predates the Joint Venture. Moreover, these rights have expiry dates, after which fair bidding processes will be reintroduced. Thus, the perceived monopoly is not permanent.

Conclusion
The CCI has never rejected a combination/amalgamation since its inception. However, if a combination is rejected or approved, concerned parties or affected third parties can appeal the decision to the National Company Law Appellate Tribunal (NCLAT), with the Supreme Court of India serving as the final appellate authority.

The Competition Commission of India (CCI) employs both behavioral and structural remedies to address anti-competitive concerns arising from combinations. Behavioral remedies consist of commitments or obligations imposed on merging parties to regulate their future conduct, ensuring that the merger does not harm competition.

These remedies offer flexibility and can be tailored to address specific anti-competitive concerns without necessitating significant changes to the combination's structure. Examples of behavioral remedies include commitments to maintain fair pricing, agreements not to bundle products, ensuring that certain business operations remain independent, and providing access to essential facilities or technologies to competitors.

Structural remedies involve changes to the market structure, typically through the sale of assets or businesses, to maintain or restore competition. Generally, these remedies are considered more effective in preserving competition, as they create or enhance competitors within the market. Structural remedies are one-time solutions, making them easier to implement and monitor compared to behavioral remedies. Examples of structural remedies include the divestiture of a part of the business, the sale of intellectual property rights, and the transfer of key staff or technology to a competitor.

In the Zee-Sony merger, the CCI raised concerns about the combined entity's market concentration of 40-50%. To address these concerns, Zee and Sony agreed to voluntary structural remedies, including divesting three TV channels: Big Magic, Zee Action, and Zee Classic (collectively, the Divestment Business). They also committed not to acquire any stake or exert influence over the Divestment Business for five years.

This sets a precedent for the upcoming Reliance-Disney joint venture. It'll be interesting to see which specific market segments (both broad and narrow) will face a more in-depth investigation (Phase II) by the CCI. It'll also be interesting to observe what remedies Reliance and Disney propose, or what the CCI might enforce, and how the final structure of the joint venture will look after the CCI's review.

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