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Update

FDI in News on Digital Media

28 Oct 2020

The Government has clarified the scope of FDI restriction in relation to entities that upload or stream news and current affairs through digital media. The restriction covers within its ambit entities that create news content as well as those that provide access to news content created by third parties.

Background

The Government had released guidelines on foreign direct investment (FDI) in digital media through Press Note 4 of 2019 (Press Note 4) issued by Department for Promotion of Industry and Internal Trade (DPIIT), which was later formally notified under the Foreign Exchange Management (Non-Debt Instrument) Rules, 2019 (NDI Rules). As per this notification, the NDI Rules provide that FDI in a company engaged in the business of ‘uploading/ streaming of news & current affairs through digital media‘ is permitted up to 26%, with Government approval. Prior to this, FDI in digital media was unregulated, and the restriction on FDI in news was limited to 26% in print media and 49% in broadcasting content services. The rationale for the Government’s restriction on digital media appears to be to regulate foreign influence in all forms of news media, and to regulate digital media in the same manner as print media. Notably, this restriction was introduced in the section that governs FDI in broadcasting content services, and does not apply to broadcasting carriage services which is permitted up to a 100% under the automatic route.

However, certain aspects of Press Note 4 and the NDI Rules were ambiguous, leading to uncertainty amongst industry players on the scope of the restriction. For instance, the NDI Rules did not define the terms ‘uploading‘ or ‘streaming‘ and it was unclear whether news aggregators that hosted links to various news sources would also be covered, even if they were not involved in the creation of news content. There was also ambiguity as to what constituted ‘news and current affairs‘, and whether this would be restricted to information of a specific nature such as politics or the economy, or whether it would cover any and all information dissemination which could result in the restriction applying to a broad range of content.

On 16 October 2020, the Government issued a clarification in relation to the FDI restriction in digital media (Clarification), listing out the types of entities that would be subject to this FDI restriction.

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