Netflix Ruling: Redefining the Arm’s Length Principle in the Age of Digital Value Chains

𝗧𝗵𝗲 𝗡𝗲𝘁𝗳𝗹𝗶𝘅 𝗥𝘂𝗹𝗶𝗻𝗴: 𝗪𝗵𝗲𝗿𝗲 𝘁𝗵𝗲 𝗔𝗿𝗺’𝘀 𝗟𝗲𝗻𝗴𝘁𝗵 𝗣𝗿𝗶𝗻𝗰𝗶𝗽𝗹𝗲 𝗠𝗲𝘁 𝗕𝗲𝗵𝗮𝘃𝗶𝗼𝗿𝗮𝗹 𝗘𝗰𝗼𝗻𝗼𝗺𝗶𝗰𝘀

Recently, the Mumbai ITAT in the Netflix case held that the Indian entity’s routine distribution role was rightly benchmarked under TNMM, rejecting a royalty-based “Other Method.” 𝗧𝗵𝗲 𝗿𝘂𝗹𝗶𝗻𝗴 𝗿𝗲𝗮𝗳𝗳𝗶𝗿𝗺𝗲𝗱 𝘁𝗵𝗮𝘁 𝗽𝗿𝗼𝗳𝗶𝘁𝘀 𝗳𝗼𝗹𝗹𝗼𝘄 𝗰𝗼𝗻𝘁𝗿𝗼𝗹, 𝗰𝗮𝗽𝗮𝗯𝗶𝗹𝗶𝘁𝘆, 𝗮𝗻𝗱 𝗰𝗼𝗻𝘀𝗲𝗾𝘂𝗲𝗻𝗰𝗲 — 𝗻𝗼𝘁 𝗰𝗮𝗯𝗹𝗲𝘀 𝗮𝗻𝗱 𝗰𝗮𝗰𝗵𝗲 𝘀𝗲𝗿𝘃𝗲𝗿𝘀.

What’s striking is how the ruling echoes OECD’s deepest logic: the “options realistically available” test (silently) and the DEMPE principles.

𝗧𝗵𝗲 𝗰𝗮𝗿𝗼𝘂𝘀𝗲𝗹 𝘂𝗻𝗽𝗮𝗰𝗸𝘀 𝘁𝗵𝗶𝘀 𝗲𝗰𝗼𝗻𝗼𝗺𝗶𝗰 𝗿𝗲𝗮𝘀𝗼𝗻𝗶𝗻𝗴 — showing how OECD’s framework turns a courtroom debate into a valuation dialogue, shifting the lens from “what’s comparable” to “what’s economically inevitable.”

It’s a reminder that 𝘁𝗿𝗮𝗻𝘀𝗳𝗲𝗿 𝗽𝗿𝗶𝗰𝗶𝗻𝗴 𝗶𝘀𝗻’𝘁 𝗮𝗯𝗼𝘂𝘁 𝗱𝗶𝗴𝗶𝘁𝗮𝗹 𝗽𝗿𝗲𝘀𝗲𝗻𝗰𝗲 𝗼𝗿 𝗱𝗮𝘁𝗮𝘀𝗲𝘁 𝘀𝗶𝘇𝗲 — 𝗶𝘁’𝘀 𝗮𝗯𝗼𝘂𝘁 𝗱𝗲𝗰𝗶𝘀𝗶𝗼𝗻 𝗿𝗶𝗴𝗵𝘁𝘀, 𝘃𝗮𝗹𝘂𝗲 𝗰𝗼𝗻𝘁𝗿𝗼𝗹, 𝗮𝗻𝗱 𝘁𝗵𝗲 𝗯𝗼𝘂𝗻𝗱𝗮𝗿𝗶𝗲𝘀 𝗼𝗳 𝗿𝗮𝘁𝗶𝗼𝗻𝗮𝗹 𝗰𝗵𝗼𝗶𝗰𝗲.