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TMI Blog2018 (11) TMI 1043X X X X Extracts X X X X X X X X Extracts X X X X ..... of TV channels, for reasons already discussed above it is noted that there is no likelihood of AAEC in this business segment as well as in its various sub-segments. Further, for the downstream segment, the Commission notes that though 21CF holds certain equity shares of Tata Sky but the proposed combination is not likely to foreclose the market for other competitors as TRAI has issued various regulations, tariff orders and directions, etc. to generate competition and ensure fair play in the industry. Further, there are competitors of the Parties such as Tata Sky, Dish TV, Airtel DTH, Sun Direct etc. that would continue to provide competitive constraint to the Parties, post-combination. Therefore, the abovesaid vertical relationship is not likely to result in any vertical foreclosure. Considering facts on record, details provided in the notice given under sub-section (2) of Section 6 of the Act and assessment on the basis of factors stated in sub-section (4) of Section 20 of the Act, the Commission is of the opinion that the Proposed Combination is not likely to have an appreciable adverse effect on competition in India. This order shall stand revoked if, at any time, the informa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d 21CF will become wholly owned subsidiaries of Holdco. Further, current shareholders of 21CF will get shares of Holdco equivalent to approx. 19 percent stake in TWDC on a pro forma basis, remaining shares would be held by current shareholders of TWDC. 4. In terms of the provisions of Regulation 14 of the Competition Commission of India (Procedure in regard to the transaction of business relating to combinations) Regulations, 2011, vide letter dated 25th July, 2018, the Acquirers were required to provide certain information. The Acquirers filed their response on 1st August, 2018, after seeking extension of time. The Acquirers also made certain additional submissions on 7th August, 2018 and 8th August, 2018. 5. TWDC, incorporated in Delaware, U.S., is listed on the New York Stock Exchange. At global level and in India, the TWDC is primarily active in the following business segments, inter alia, theatrical distribution of films, supply/licensing of audio-visual and interactive content, operation and wholesale supply of TV channels etc . It also offers travel packages and provides cruises through the Disney Cruise Line. TWDC is present in India through its subsidiary UTV So ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in this business sub-segment, the Commission also notes that there are other global players (market share for 2017, based on gross box office receipt, indicated along with) such as Warner Brothers (20 25 percent), Universal (15 20 percent), Sony Pictures (15 20 percent), Viacom 18 (Paramount) (10 15 percent), which would continue to provide competitive constraint to the Parties, post-combination. iii. Further, on analysis of the top 5 grossing films across 15 years, the combined market share of the Parties, for English films is approximately 20 25 percent, which is almost equal to the number of top 5 grossing films produced by Warner Bros for the same period. iv. With respect to presence of the Parties in the production and supply of Bollywood films in India, it has been submitted by the Acquirers that the combined market share of the Parties for Bollywood films have come down to around 15 20 percent in 2017 from 35 40 percent in 2016. Further, the Acquirers submitted that this business sub-segment is characterized by presence of other players (market share for 2017, based on gross box office receipt, indicated along with) such as Yash Raj Films (10 15 perce ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the Acquirers, the Commission notes that the Parties produce a small proportion of films in comparison to the total number of films licensed for broadcast in India and accordingly, there is no likelihood of AAEC in this business sub-segment. iii. In the business of licensing of sports-content rights, based on the submissions of the Acquirers, the Commission notes that whereas 21CF is present in this business sub-segment, TWDC is currently not active in this sub-segment as ESPN (entity of TWDC) has exclusively licensed its rights to Sony in India. It has been further submitted by the Acquirers that ESPN currently holds no TV rights for sports with mass appeal in India. Moreover, market share of ESPN in this business sub-segment is insignificant to raise any competition concern, if any. iv. Similarly for the reasons discussed in relation to licensing of film-contents, the Commission notes that there is no AAEC concern in the business segment relating to licensing of non-film, non-sports content. 7.3 Overlap in the business of operation and wholesale supply of TV channels i. Whereas TWDC is active in the business of operation and wholesale supply of TV channels in India ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... three channels and market share of 20 25 percent, Sony Picture having one channel and market share of 0 5 percent and Sun TV Network having four channels and market share of 5 10 percent. In view of the above, the Commission notes that there is no AAEC in the operation and wholesale supply of Kids channels in India. v. Hindi GEC: In 2017, market share of TWDC (with one channel) was 0 5 percent, while, market share of 21CF (with seven channels) was 25 30 percent, and combined market share of the Parties was 25 30 percent. It may be noted that the Parties face competition from other players in the market such as Zee Entertainment having seven channels and market share of 25 30 percent, Sony Pictures having five channels and market share of 20 25 percent, TV18 Broadcast Ltd. having four channels and market share of 15 20 percent and Discovery Networks Asia Pacific having one channel and market share of 0 5 percent. In view of the above, the Commission notes that there is no AAEC in the operation and wholesale supply of Hindi GEC in India. vi. English GEC: In 2017, market share of TWDC was 0 5 percent with one channel, while, market share for 21CF was 1 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ccount of TWDC. The Commission observes that this sector is characterized by presence of various OTT players offering premium ( i.e. paid) and non-premium ( i.e. free) services. Major competitors of the Parties includes Netflix, Amazon Prime, Youtube, ErosNow, Sony Liv, Voot etc. which would continue to provide competitive constraint to the Parties post-combination. ii. The Commission also notes that because of certain shareholding of 21CF in Tata Sky (present in DTH business), as aforementioned, 21CF is present in retail supply of audio-visual content in India through DTH business. However, there is no overlap between the Parties in this business segment. 7.5 Supply of advertising airtime on TV channels in India i. The Commission observes that both the Parties are present in the business of supply of advertising airtime on television channels. In this regard, it has been submitted that advertisement on television does not always confine itself to a specific genre. Further, the Acquirers submit that targets of advertisement, i.e. viewers, are largely genre agnostic. Accordingly, the Commission notes that whereas the market share of 21CF in this business segment is 20 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... content and intellectual property to provide value added services to their subscribers. Accordingly, the Commission observes that the activities of the Parties overlap in the interactive media business. In this regard, the Commission, based on the submission of the Acquirers, notes that the market share of the Parties is insignificant and therefore, there is no likelihood of AAEC in this business segment. 8. In view of the foregoing, the Commission is of the view that horizontal overlaps resulting from the proposed combination are not likely to result in any appreciable adverse effect on competition in any of the business segments, as discussed above. B. Vertically related markets 9. As already stated, both the Parties are large media and entertainment companies and the Parties are present in different stages of production chain and accordingly, the following vertically related markets have been identified for competition analysis: i. Upstream segment of licensing of audio-visual content rights and downstream segment of (a) wholesale supply of TV channels, and (b) retail supply of audio-visual content; ii. Upstream segment of advertising on TV channels and ..... 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