The Competition Commission of India (CCI) is preparing to issue notices to the country’s top advertisers, requesting details of their financial transactions with media agencies. This move is part of a broader investigation into media buying patterns for major events and prime-time shows, according to sources familiar with the matter.
Read more: CCI raids: Did Dentsu blow the whistle on India’s alleged media cartel?
The probe falls under Section 36 of the Competition Act, 2002, which grants the Commission extensive regulatory powers. These include summoning individuals, enforcing document production, examining witnesses, and requisitioning records from various offices. The objective is to scrutinize potential irregularities in the advertising sector and determine whether anti-competitive practices have influenced media transactions.
Legal expert Gowree Gokhale commented on the matter, stating, “Under Section 36(2), the Commission has the authority to request relevant documents and information from advertisers if it seeks to assess the complete flow of these transactions.”
The Competition Commission of India (CCI) has investigated 35 cartel cases in the last five years, minister of finance and corporate affairs Nirmala Sitharaman told the Lok Sabha on Monday.
The minister said that a new mechanism, known as “lesser penalty plus” (LPP), was introduced last year that incentivises the disclosures of cartels. “The LPP mechanism was introduced to incentivise an existing lesser penalty applicant in respect of a cartel to give full, true, and vital disclosures about another cartel, hitherto not in the knowledge of the CCI,” she said.
To further strengthen cartel investigations, the Hub-and-Spoke mechanism was incorporated into Section 3(3) of the Competition Act, 2002, through the Amendment Act of 2023.
This provision states that an enterprise, an association of enterprises, or a person not engaged in an identical or similar trade may still be presumed to be part of an anti-competitive agreement if they participate in or intend to further such an agreement.
Storyboard18 was the first to report on the CCI’s use of its leniency program to crack down on alleged cartelization and price-fixing in the media advertising sector. The leniency program is designed to incentivize whistleblowers within collusive groups to come forward in exchange for potential penalty waivers.
Dentsu’s Alleged Whistleblower Role
Sources suggest that Dentsu, one of the world’s leading advertising firms, may have exposed the media cartelization case. The media agency could have filed a leniency petition with the CCI, which provides penalty reductions for firms that disclose insider details on anti-competitive agreements.
Akshayy S. Nanda, Partner at Saraf and Partners, elaborated on the leniency program, stating, “Authorities ensure that the applicant blowing the whistle on the cartel is adequately incentivized through nil or low penalties. By maintaining the confidentiality of applicants and delivering fair and timely orders, these authorities create an environment where cartel members are encouraged to come forward, ultimately enhancing the effectiveness of leniency programs in combating anti-competitive practices.”
Expanding probe
This development comes as the CCI expands its inquiry into alleged cartelization and price-fixing in the advertising industry. Investigators are also examining a possible Big Tech connection to media-buying deals, following recent raids at major media agencies. Sources claim that CCI officials have retrieved digital evidence suggesting the involvement of large technology firms in shaping digital media transactions.
While the exact nature of the evidence remains undisclosed, officials suspect that certain Big Tech firms may have influenced ad pricing, digital media spending, and long-term media-buying contracts. If proven, such actions could indicate anti-competitive behavior, including restricting fair market competition, setting predetermined advertising rates, or manipulating bidding processes in favor of select companies.
A source close to the investigation revealed that the CCI is heavily relying on data cloned from two leading media agencies. “The evidence suggests that Big Tech firms may have played a role in influencing digital media spending and long-term agreements. If confirmed, the CCI may formally bring these companies into the case to further investigate potential cartelization in media advertising,” the source added.
CCI officials have remained tight-lipped about specific details from the digital records retrieved during the raids. However, indications of possible interference from major technology firms have heightened scrutiny on the digital advertising sector, where concerns over monopolistic practices have been growing globally.
CCI’s Crackdown on Digital Monopolies
Under its current leadership, the CCI has intensified efforts to curb anti-competitive practices in the digital landscape, particularly those linked to Big Tech companies. Several antitrust cases against tech giants remain pending with the watchdog, signaling an ongoing regulatory push to ensure a fair and transparent digital advertising ecosystem.
As the investigation unfolds, industry stakeholders are closely monitoring the potential ramifications for both traditional media agencies and digital advertising players. If the CCI’s findings confirm widespread collusion, the case could lead to significant reforms in how advertising transactions are conducted in India.
In the coming weeks, more clarity is expected as the CCI delves deeper into the financial and contractual details of media buying operations, with the possibility of expanding its probe into the digital advertising strategies of Big Tech firms.