Saturday, August 27, 2011

CCI Approves Acquisition of UTV by Walt Disney


(The following post has been contributed by Piyush Prasad, who is an alumnus (B.Sc. LL.B.) of the National Law University, Jodhpur)
The Competition Commission of India (“CCI”) on August 25, 2011 approved the proposed combination of Walt Disney Company (Southeast Asia) Pte. Limited (“the “Acquirer”) and UTV Software Communications Limited (“the “Acquired Enterprise”) under section 31 (1) of the Competition Act, 2002 (the “Act”).
Under the proposed combination, Walt Disney which already owns 50.44% stake in UTV, intends to take sole control of UTV by the following 2 step process-
a)     Acquisition of shares held by public sharholders through a delisting offer in terns of Securities and Exchange Board of India (Delisting of Equity Shares) Regulations, 2009; and
b)    Subject to a successful delisting offer, acquisition of the shares of the promoters.
The CCI while giving its nod to the proposed combination has stated the following:
Based on the facts on record and the notice of the proposed combination filed by the Acquirer under sub-section (2) of section 6 of the Act, and the examination of the businesses involved which are commonly characterized by the presence of a large number of players and prevalence of intense competition among them, availability of ample choice and variety of products to consumers, demand driven nature of the business, interchangeable and converging nature of the business involved, relative ease of entry and exit in these businesses, less likelihood of any co-ordinated or exclusionary behaviour, regulatory oversight in TV broadcasting and the future growth potential in addition to the fact that the Acquirer is already in joint control of the Acquired Enterprise, the Commission hereby approves the proposed combination under sub-section (1) of section 31 of the Act as it is not likely to have an appreciable adverse effect on competition.
Walt Disney and UTV are involved in the business of motion pictures, TV broadcasting and related activities and interactive media in India. In order to ascertain any appreciable adverse effect on competition in the relevant market, the CCI has taken into consideration the following factors, keeping in mind the types of business carried on by both the companies:
i)               Number of releases in the film industry-
Year
2009
2010
Total Indian Films
1288
1274
Total Hindi Films
235
215
Total English Films
283
298
Share of releases of Walt Disney and UTV in the film industry for the period 2008 to 2010-
Company
Walt Disney
UTV
Hindi Films
2
27
English Films
28
1
Regional Films
0
4
After referring to the above figures from the annual reports of Central Board of Film Certification (CBFC), the CCI observed that there are large numbers of market players in the business of motion pictures in India, big as well as small, with relatively low barriers to entry.
ii)             TV Broadcasting
After analysing the market for TV broadcasting based on the data of the Ministry of Information and Broadcasting, the CCI concluded that it is highly competitive, innovative and dynamic.
iii)            Interactive Media
The business of interactive media consists of gaming (online, computer, mobile and console) and digital media (music, video mobile and graphics etc.). In this business, the consumers prefer to access content across platforms on multiple devices which results in continuous growth and rapid innovation. The CCI has concluded that such is the nature of the business that, “it leads to intense competition amongst the content creators, distributors and retailers to cater to this market, characterised by ever increasing demand for new and innovative products.”
iv)            Character Merchandising
This business involves adaption of a character (real or fictional) in relation to goods or services, to create demand for acquiring those goods and services due to customers` affinity with that particular character. The CCI observed that although Disney is engaged in this business, UTV is not.
This notice was filed on August 1, 2011 and the order of the CCI was issued on the 25th day of the filing. In case of acquisition of shares of Bharti AXA Life Insurance Company Limited by Reliance Industries Limited from Bharti Enterprises Limited, the CCI had taken 18 days. Section 6 (2A) of the Act entitles the CCI to 210 days for passing its order. This duration has been a cause of concern for investors in the past during the drafting of the regulations on combinations, but these two recent orders seem to be a deliberate attempt on part of CCI to quell such an apprehension. Also, in both the orders, the CCI has followed the various factors enumerated in section 20(4) of the Act and substantiated the same with concrete figures.
- Piyush Prasad

2 comments:

Anonymous said...

Wow. That's a great article. Kudos to Piyush for posting it. He must be a complete stud.

Anonymous said...

Brilliant! I have now understood the basics of Competition Law!