Media Mega-Merger: Reliance-Disney Deal Raises Competition and Privacy
Concerns in India
-by Ms. Rootika Srivastava
4th year B.A., LL.B. (Hons.) student at Tamil Nadu National Law University,
Tiruchirappalli
Reliance Industries has reportedly sealed a significant cash and stock deal in London, favoring
the conglomerate with a 51% stake in a newly formed step-down subsidiary. This subsidiary is
set to be established through the absorption of Star India, following a stock swap arrangement
with Disney, which will retain a 49% ownership stake. The proposed merger, if finalized, would
mark the largest consolidation in the media and entertainment sector, creating an entity boasting
over 100 channels and two prominent OTT platforms. This strategic move positions Reliance
Industries to intensify its presence in the media domain, diversifying its business portfolio that
spans across refinery, telecom, and retail.
The proposed cash and stock deal between Reliance Industries and Disney, culminating in the
creation of a significant media and entertainment conglomerate, raises pertinent competition and
privacy concerns in the industry. The consolidation of over 100 channels and two major OTT
platforms under a single entity is likely to have a substantial impact on market dynamics,
potentially limiting competition and choice in the media landscape.
Firstly, the collaboration between Reliance and Disney could result in an immense user base and
powerful network effects. Network effects encompass the benefits derived from a substantial
user base, comprising both consumers and sellers. This situation grants corporations exclusive
access to numerous data sources, offering them unparalleled business opportunities. With the
amalgamation of Star India's extensive linear network and Disney+ Hotstar's OTT platform, the
merged entity would wield a substantial audience reach. This could create challenges for other
players in the market, potentially stifling competition as the conglomerate leverages its large user
base and network effects to dominate content distribution. Moreover, the allure of significant
investor backing adds another dimension, diverting crucial financial support from smaller
players. The 2019 draft e-Commerce Policy in India emphasized the importance of considering
network effects in the evaluation of mergers and acquisitions. The draft e-Commerce Policy
categorizes data as either a public good or a national asset.
Moreover, the deal's implications for user data and privacy are noteworthy. The combined entity
would have access to a vast amount of user data, encompassing viewing preferences,
demographic information, and behavioral patterns. The consolidation of such data raises
concerns about user privacy, as the merger may have the ability to wield significant influence
over advertising, content recommendation algorithms, and targeted marketing. In 2017, a
unanimous decision by a nine-judge bench of the Supreme Court of India affirmed that ‘right to
privacy’ is a fundamental right, considering it an integral aspect of the freedoms guaranteed
under Part III of the Constitution. Privacy advocates and regulatory bodies may scrutinize the
deal's potential impact on user data protection, necessitating robust safeguards and compliance
measures. The UNCTAD Digital Economy Report 2021 states how the trend of harnessing value
from expansive digital datasets through strategic monetization has accelerated during COVID-19
and will continue to grow. The stories surrounding the alluring possibilities of data in the realm
of competitive commerce empower BigTech's relentless pursuit to acquire maximum individual
data, optimizing its utilization for market opportunities.
Effort to Establish Monopoly
In the latter part of 2018, the Government established a Committee for the Review of
Competition Law (CLRC) with the mandate to examine and propose amendments to the
Competition Act. In the conclusive report presented in 2019, the CLRC deliberated on the
potential inclusion of a provision that would penalize attempts to establish a monopoly within the
pertinent market where a specific product or service is traded.
The current considerations by the Competition Law Review Committee on penalizing attempts to
monopolize underscore the significance of competition regulation. The rapid entry and
substantial market dominance achieved by Reliance Industries in the media & entertainment
sector serve as a concrete example of potential anticompetitive effects. Close to a decade ago,
Mukesh Ambani and his conglomerate ventured into the media industry by approaching the
leading player in the field—Network18 Media & Investments Limited, also known as
Network18 Group. In 2012, Reliance Industries Limited introduced a complex agreement aimed
at raising funds to assist Network18 in reducing its debts and expanding its operations.
Simultaneously, the network was set to provide content for the conglomerate's 4G
telecommunications business. Following rigorous negotiations, Reliance Industries declared the
strategic acquisition of Network18 in 2014 for approximately Rs 4,000 crore. This entity has
since evolved into the largest media company in the country, with Reliance Industries Limited
currently holding a 75% stake in Network18 & Investments. Through acquisition, Reliance
Industries essentially consolidated its control over a major player in the media industry. This
ownership level could raise concerns about stifling competition within the sector, as it gives
Reliance Industries substantial influence over Network18's operations and the broader media
landscape.
The magnitude and market influence of the combined entity's association should draw regulatory
attention, leading to the requirement of divesting certain assets to alleviate concerns. Industry
experts propose that TV channels could potentially be part of the assets earmarked for
divestiture. If the merger comes to fruition, it would mark the second significant reorganization
in India's TV and streaming industry, coming on the heels of Sony's disclosure of intentions to
align its operations with Zee Entertainment. This trend underscores a strategic adaptation to the
changing preferences of the Indian consumer base and the intensified competition in the media
and entertainment domain.
Streaming Platforms
The e-commerce market in India has been the subject of a recent market study conducted by the
Competition Commission of India (CCI). According to the findings, a significant number of e-
commerce entities in the country compromise the impartiality of their platforms by showing
preferential treatment in marketing and selling products from their subsidiaries, affiliated parties,
or other sources. The study reveals a lack of transparency concerning search rankings and user
reviews, allowing these e-commerce platforms to influence market outcomes, including sales,
pricing, and consumer traffic. This manipulation is attributed to the platforms' exclusive access
to extensive transaction data and their ability to control search rankings. This concern becomes
crucial when you realize how Network18 and all its subsidiaries are under the control of RIL.
Disney will be enabled to access all the resources of RIL which includes accessing the data of
Network18 and its subsidiaries and in the same way, RIL will gain to Disney India streaming
data.
The report also states the vulnerabilities of small businesses, emphasizing their lack of
countervailing power and increasing dependency on dominant e-commerce platforms. Despite
the absence of significant switching costs between platforms, the dearth of substitutes
compounds the challenges faced by small enterprises, forcing them to navigate exclusive
contracts and bundled services imposed by major players. In the context of the Reliance-Disney
merger, the study's insights gain relevance as Reliance Industries aims to acquire major stakes in
the media sector, where online platforms wield considerable influence. The study's observations
about the necessity for sellers to maintain visibility across all large platforms align with the
dynamics of the media and entertainment industry, where market survival often hinges on a
broad digital presence. The parallel between the e-commerce study and the media merger
extends to the control exerted by platforms. In the e-commerce realm, platforms leverage
exclusive contracts, bundled services, and seller-funded discounts to shape market dynamics.
Similarly, the Reliance-Disney merger could result in the formation of a media entity with
significant control over channels and OTT platforms, potentially influencing market practices.
Conclusion
The CLRC report noted that the definition of 'price' under section 2(o) of the Competition Act,
2002 encompasses non-monetary elements, including personal data and preferences shared with
digital market players. The CLRC also expanded the scope of section 19(4)(b) by considering it
broad enough to include control over data when assessing the dominance of firms. Furthermore,
it deemed section 19(4) inclusive enough to factor in 'network effects' for determining a firm's
dominance. To address concerns, the CLRC proposed the establishment of necessary thresholds,
ensuring that digital transactions involving asset-light businesses, with the potential for a
significant adverse impact on competition, undergo a comprehensive competition assessment. If
successful, the Reliance and Disney India merger holds the potential to reshape the industry,
creating a formidable entertainment powerhouse in India—a significant milestone in the
country’s media landscape evolution. Henceforth, these interpretations of the existing
Competition Act are pivotal especially when mergers such as the Reliance-Disney India are
happening. The Competition Commission of India (CCI) must take of such mergers and ensure
that such mergers won’t encourage anticompetitive behavior in the market.
