Media groups Sony and Zee have voluntarily agreed to sell three Hindi channels — Big Magic, Zee Action and Zee Classic — to address possible anti-competition concerns arising out of their proposed mega-merger deal.

They submitted their proposal to the Competition Commission of India (CCI), which cleared the deal, subject to certain modifications on October 4.

More than three weeks after giving its nod for the transaction, the regulator on Wednesday made public its detailed 58-page order, a Reuters report stated.

The two groups have agreed to divest Big Magic, which is a Hindi general entertainment channel, as well as Zee Action and Zee Classic, which are Hindi film channels, according to the order.

They voluntarily agreed to the modification to the proposed deal after CCI’s prima-facie opinion that the deal was likely to cause an appreciable adverse effect on competition.

When contacted, a Zee Entertainment Enterprises Limited (ZEEL) spokesperson declined to comment. There was no immediate comment from Sony, the Reuters report clarified.

The channels have to be divested within a stipulated time or the “first divesture period”. However, CCI has not disclosed the period in the version of the order that has been made public.

Deals beyond a certain threshold compulsorily require the approval of CCI, which seeks to ensure fair competition in the marketplace.

On October 4, CCI said it has cleared the proposed Zee-Sony merger deal, which was announced in September last year.

To ensure fair competition in the relevant markets, the regulator has also mandated various requirements to be fulfilled by the purchaser concerned before buying the three channels.

One of the conditions is that the purchaser should not be “Star India Private Limited or Viacom18 Media Private Limited (including their respective affiliates)”.

The purchaser should be independent of and with no connection whatsoever with the resultant entity and its affiliates. Also, it should not be either a past or present employee or director (or spouse or child of such employee or director), as per the order.

Among other conditions, the purchaser should have the financial resources, expertise and incentive to maintain and develop the divestment business as a viable and active competitor to the parties and/or the resultant entity in the relevant market.

The purchaser “neither be likely to create any prima facie competition concerns, nor give rise to a risk that the implementation of the Order will be delayed, and must, in particular, reasonably be expected to obtain all necessary approvals from the relevant regulatory authorities for the acquisition and operation of the divestment business,” the order said.

The divestment business refers to the sale of the three channels. The regulator said that in case the channels are not sold in the first divestiture period, then a divestiture agency would be mandated to sell them.

“The parties and/or the resultant entity (as the case may be) shall, for a period of 5 years from the date of sale of divestment business, not acquire any stake or the possibility of exercising any influence (by way of shareholding, change in the charter documents, or by exercising affirmative rights or right to appoint a director on the board of the approved purchaser who acquires the divestment business or otherwise) over the whole or part of the divestment business,” the order said.

CCI also noted that in case the parties fail to comply with the voluntary modifications submitted, the proposed combination would be deemed to have caused an appreciable adverse effect on competition in India.

Karan Taurani, media industry analyst and Senior Vice President at Elara Capital, said the three channels are very small in terms of overall revenue.

“As per our assessment the ad revenue contribution from these channels put together would be much below 5 per cent and hence the overall impact would be minimal on revenue… further, these channels are a part of the GEC (including urban GEC) and movie genres, which contribute approximately 24 per cent and 5 per cent of advertisement (ad) spends for the TV industry,” he said.

ZEEL, in September 2021, said it has entered into a non-binding term sheet with SPNI to bring together their linear networks, digital assets, production operations and programme libraries.