The advertising industry is calling on the Competition Commission of India (CCI) to conduct a comprehensive market study before taking any regulatory action against alleged cartelization. Stakeholders are emphasizing the need for a fair and transparent investigation, ensuring that legitimate competitive practices are not undermined by sweeping enforcement measures.
As the CCI wraps up its two-day raids and seizures at the offices of major media agencies and industry bodies, concerns are mounting over the scope and fairness of the probe. Many industry players worry that regulatory overreach could disrupt standard business practices, unintentionally stifling competition rather than fostering it. With the CCI’s investigation ongoing, industry players are urging the regulator to adopt a balanced approach that preserves fair competition without unnecessarily disrupting the advertising ecosystem.
Rahul Vengalil, CEO and co-founder of tgthr, highlighted the natural dynamics of the industry. “The big agencies control a significant part of the AdEx in India. With such large volumes of trade, it is natural for them to secure highly competitive pricing. That’s how this industry—and any industry—operates, and everyone has accepted this reality. The larger the buy, the better the pricing.”
However, Vengalil cautioned against potential market manipulation. “Things get blurry if and only if these agencies dictate terms to publishers on what rates they should offer to other agencies. At the moment, everything is speculative, and nothing has been proven. If such practices exist, they would be detrimental to the industry, particularly for emerging agencies and smaller advertisers.”
Need for a Market Research Study
Market studies are a widely used tool for competition authorities to assess the competitive landscape within an industry. Such studies help regulators understand market dynamics, existing regulatory frameworks, and their implications for competition. A well-executed market study can inform competition advocacy efforts and lead to recommendations for governments, sector regulators, businesses, and industry associations.
A senior industry executive, speaking on condition of anonymity, stressed the importance of a structured study. “CCI should conduct a market research study on the advertising industry before any intervention. During their investigation, officials were asking basic questions about industry guidelines and regulatory norms. A thorough study would help them understand the perspectives of media agencies, broadcasters, and industry bodies, ensuring that their probe remains balanced and informed.”
While media agencies face scrutiny, broadcasters argue that any regulatory action should take into account the financial realities of operating premium television channels and marquee events.
A leading broadcaster stated, “Before implementing any regulatory changes, CCI should recognize the economic realities of running high-value television properties and major events. Premium advertising slots, such as those for the Indian Premier League (IPL), warrant premium pricing due to high demand. A forced reduction in ad rates could significantly impact broadcasters’ revenue streams, affecting content production quality and overall industry sustainability.”
Broadcasters contend that market-driven pricing strategies allow them to invest in quality content, ensuring that audiences receive high-standard programming. They fear that regulatory interventions could distort market dynamics, leading to unintended consequences such as reduced investments in content creation and innovation.
Neelambera Sandeepan, Partner at Lakshmikumaran & Sridharan Attorneys, provided insights into the current market landscape. “The broadcasting market in recent times has been significantly consolidated, especially following the CCI’s approval of the Reliance-Disney merger. Further, digital advertising platforms now account for the largest ad spends, as per recent CCI orders. While collaboration between advertising agencies and broadcasters may not necessarily be problematic, the CCI may scrutinize them under ‘vertical agreements’ in competition law parlance. Such agreements are tested for their market effects and are not automatically deemed illegal.”
Sandeepan further said, “In case the collaboration is found to have caused harm to the market, penalty up to 10% of the average of the turnover for the last three preceding financial years may be imposed on the broadcaster and the advertising agency. Further, office bearers are also at risk of penalties up to 10% of the average of their income for the last three financial years.”
As the debate continues, the CCI faces the challenging task of distinguishing between legitimate business practices and potential anti-competitive behavior. However, the CCI investigations reflects a growing concern about fair market practices and the need for transparency in advertising rate settings and commissions.