Zee is in talks with CCI to get approval for merger with Sony

Zee Entertainment Enterprises has written to the Competition Commission of India (CCI) in order to get the latter’s permission to merge its operations with Sony Entertainment. The firm is citing the latest TV viewership data which shows that the merged entity would have lower market share and will not lead to any concentration of power.

Zee has submitted the TV viewership market share data for the financial year ending March 2022 and year-to-date data of the ongoing financial year (FY23). The data shows that the shares of four channels of the merged entity in has come down compared to the financial year ending March 2021 – the data used by the CCI to scrutinise the Zee-Sony merger.

According to data by Broadcast Audience Research Council (BARC) for the ongoing FY23, the merged entity has a 36 per cent market share in the Hindi GEC segment, and 33 per cent in the Hindi movies channels. In the Bangla GEC, the combined TV viewership market share is 38 percent and 26 percent in the Marathi GEC, as per an industry official.

In the entire fiscal year ending March 2022, the merged entity had a market share of 39 per cent in the Hindi general entertainment channel (GEC) segment and 38 per cent in Hindi films. In Bangla, the combined entity had a market share of 38 per cent and in Marathi, the combined entity had a market share of 31 per cent, according to BARC.

“There is no 40-per cent (market share) rule. It’s an indicative benchmark adopted by the CCI when assessing combinations. However, even where the combined market share is over 40 per cent, the CCI may ultimately decide to approve the transaction without remedies,” said Abdullah Hussain, Partner, DSK Legal.

Some independent lawyers said if the merger is causing a concentration of over 40 per cent in the merged entity, then it becomes fit for scrutiny. The CCI approval for the Zee-Sony merger can go through if there are certain adjustments made to the transaction, including selling majority stake in the four channels by either Zee or Sony to get the approval, they said.

“The CCI will examine if the combined entity would reduce competition or if the other competitors could maintain sufficient pressure on the combined entity. If the combined market shares are very high and other competitors are not able to exert sufficient competitive pressure, the CCI may ask parties to give certain remedies (including divestitures) as a condition for approving the transaction. The CCI has asked parties for remedies in the past where the combined market share was as low as 30 per cent,” said Vaibhav Choukse, Partner & Head of Practice, Competition Law at JSA.

The lawyers also said the combined entity will have over 75 channels of different genres. “The CCI could ask the proposed combine to sell a part of the channels in those genres to another company to ensure there is no concentration in that market. The deal could go through if these adjustments are made,” a Mumbai-based competition lawyer said.

Reuters reported on Wednesday that the CCI is probing the merger between Sony and Zee Entertainment saying it will potentially hurt competition by having “unparalleled bargaining power”. Business Standard