CCI Dismisses Petition Against Multiplexes Alleging Anti-Competitive Practices [Read Order]

Dismissing the allegations leveled by the Informant, Unilazer Ventures Private Limited, the Competition Commission of India (CCI) held that there was no prima facie case of anti-competitive practices against Multiplex Companies/Exhibitors.

Background

The Informant, a film content creator, alleged four multiplex houses of the country of having indulged in cartelization under the aegis of FICCI Multiplex Association of India in contravention of the provisions of Section 3 of the Competition Act, 2002. Five key allegations made by the Informant were:

1) The exhibitors charged hefty Virtual Print Fee (VPF) from the content creators. It was alleged that the exhibitors did not negotiate the fee individually, but colluded in charging the same, owing to an anti-competitive arrangement amongst them. Further, this fee was charged despite the lapse of 'sunset period'.

2) The exhibitors worked on a non-negotiable arrangement of revenue sharing which they said to be a standard industry practice. This was clearly a means to deceive the content creators, which points towards collusion on exhibitor's part.

3) The exhibitors held up the advance booking payments that were meant to be paid to content creators. This was done in order to obtain theatrical rights and releases. This indicates an arrangement amongst multiplexes and is anti-competitive.

4) The exhibitors attached long advertisements to a film during intervals owing to lack of transparency in their advertising policy. This, as per the Informant, sabotaged the effort of a producer to curtail the length of a film and was anti-competitive.

5) Consequently, these multiplexes were alleged to adhere to standard terms that were prescribed by FICCI Multiplex Association of India, on a non-negotiable basis, clearly showing designs of a cartel under its aegis.

The multiplexes however, denied all allegations leveled against them stating that:

1) The VPF was charged for recovering the cost of digitization equipments. The benefits of digitization were heavily tilted in favour of the content producer and the exhibitors could not be accused of anti-competitive trade practices for charging the same.

2) The allegation that the revenue share agreement was an outcome of collusion on exhibitor's part was denied since the same was a result of deliberations between content producers and the exhibitors in the backdrop of the boycott of the exhibitors by the producers/distributors in 2009.

3) The delay in sharing of collection by advance booking payments was purely operational in nature and was not a result of any collusion.

4) The allegation that the exhibitors were colluding to make advertisements and intervals longer to earn higher revenues was deficient of commercial prudence since the major revenue of exhibitors was sourced from sales of tickets, i.e., exhibition of cinema and as such it would be commercially imprudent to act in a manner that negatively impacts movie ticket traffic in lieu of marginal gains through advertisement.

5) FICCI Multiplex Association of India carries on legitimate and positive functions on behalf of the multiplex industry in India, such as regulatory and tax issues. It has never provided a platform to its members to enter into any unlawful arrangement or action in concert.

Findings

The bench comprising Chairman Ashok Kumar Gupta and members U. C. Nahta and Sangeeta Verma observed that in order to establish a prima facie case for contravention of Section 3 of the Act, it is important that the evidence on record demonstrates meeting of minds. Mere parallel behavior of exhibitors, by itself, does not amount to a concerted practice. The bench relied on the verdict of National Company Law Appellate Tribunal in Reprographic India, New Delhi v. Competition Commission of India and Ors., Competition Appeal (AT) No. 09 of 2019, wherein it was held that the Informant has to discharge the initial burden of proof to warrant an investigation by the Commission.

It was held that since there was no written agreement for charging VPF and it was a mere industry practice, the question of formal arrangement of 'Sunset-clause' does not exist. Further, the revenue sharing arrangement was put in place with the consent and due deliberations between producers and multiplex owners and the Informant and the same cannot be said to be anti-competitive. The allegations as regards delay in payments made to content creators were also discarded stating that there was nothing on record which could substantiate the claim that exhibitors acted in concert. Lastly, the allegations made, including lack of transparency in exhibition of trailers and promotions, did not fall within the ambit of the provisions of the Act and the Commission was not predisposed to address the same.

Resultantly, the CCI found the allegations put forth by the Informant devoid of any merits holding that there was no indication of any unlawful collusion between the multiplexes from the material placed on record. Further, cartelization between multiplexes had already been examined by the Commission in Film & Television Producers Guild of India v. Multiplex Association of India, Mumbai & Ors., Case No. 37 of 2011, wherein it was held that they did not have a common design or meeting of minds for entering into an unlawful arrangement. 

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