Anti-trust regulator Competition Commission of India (CCI) has found prima facie evidence that the deal could impact competition in the television content distribution industry, which is pegged at around R20,000 crore annually. This is also the first time the CCI has decided to probe the formation of a joint venture.
CCI sources said the JV could command market share as high as 70%. Several cable TV operators fear Media Pros financial clout and dominant position could hit smaller players as they will be forced to carry popular channel bouquets from Star and Zee Group at terms dictated by Media Pro. Accordingly, the CCI probe will focus on primarily two aspects: The combined market share of the two players once the JV is commissioned and its possible impact on competition.
Media Pro was formed as a 50:50 joint venture between Zee Turner and Star DEN in May. Star DEN Media is an existing 50:50 JV between Star India and Den Networks, which distributes the channel bouquets from Star India. Zee Turner is another existing 74:26 JV between Zee and Turner International India, which distributes the channel bouquets of the Zee Group.
As Media Pro gets rolling, channel bouquets from Star and Zee will be distributed by this entity, assuming considerable leverage in its business transactions with small and medium-size cable distributors, industry sources said. As a result, it will be difficult for cable operators to refuse content from both Zee and Star as their channels are among the most-watched, especially in the north, west, central and eastern parts of the country.
Zee and Star, on their part, have maintained that Media Pro has been formed to create efficiencies in the distribution sector and to incentivise digitisation, which would then address piracy issues and bring about a content revolution in the country.
The competition watchdog has ordered the investigation under Section 3 of the Competition Act, 2002. CCI has already issued notices to all parties involved in Media Pro under Section 36(2) and Section 41(2) of the Competition Act, 2002.
While the companies involved had to file their reply to the notice by October 31, sources said both Zee and Star sought two weeks extension as the relevant information and market share data are being compiled.
The response will be filed within two weeks. All parties involved will have to file their individual replies to the notice, said a source in Zee-Turner. Star-DEN insiders gave a similar response.
This is the first time we are investigating a JV. The investigation process has started and notices have been sent across, a CCI official said. As per the initial notice, CCI's director-general had sent a questionnaire to Zee and Star seeking information on various parameters of the JV.
As CCI looks into the JV, some competition law experts cited possible grey areas in the parent legislation. Experts said as per Europe's competition laws, JVs are investigated under the merger regulations; however in India, they fall under Section 3 which deals with anti-competitive agreements. However, the issue is only technical which is unlikely to impact the progress in the investigations, CCI officials said.
A similar deal (involving two big media giants) was struck down by the competition regulator in Europe. This case seems similar; hence, we took a prima facie view to get the matter investigated, a senior CCI official said. He said that if the commission found the deal to be breaching the competition law, the CCI had few options up its sleeve: it could either strike down the deal completely or order minor or major (as the case maybe) modifications in the deal.
Former director general of CCI and later advisor (law) KK Sharma who was part of the Commission when the matter first attracted its attention said: There is strong likelihood that the deal may be viewed as anti-competitive. However, there is no certainty as to what the final investigations would reveal. He said the cable TV market has a high entry barrier which impedes entry of new players.