This Article is From Jan 09, 2013

CCI rules out cartelisation, abuse of dominance by multiplexes

CCI rules out cartelisation, abuse of dominance by multiplexes
New Delhi:

Fair trade regulator CCI today dismissed charges of cartelisation and abuse of dominance by the Multiplex Association of India, as it did not find any evidence to this effect pursuant to a probe into such charges levelled by the film producers.

The complaint was filed before the Competition Commission of India (CCI) by the producers through Film and Television Producers Guild of India (FTPGI), which alleged that MAI and its 14 members force the producers to accept their own terms with a threat of not exhibiting the film in their multiplexes.

The members of the the Multiplex Association of India (MAI) include PVR, DT Cinemas, Reliance MediaWorks, Inox Leisure, Cinemax and Satyam Cineplexes.

CCI said in an order passed today that it did not find any cartelisation among the multiplex operators, although a probe by its investigation arm had found indications of multiplex theatre operators "acting like a cartel under the banner of MAI."

As per the producers' complaint, the collective decision taken by the MAI and its member multiplex operators not to exhibit the films of the FTPGI members in order to determine the price of their services was an anti-competitive agreement.

Besides, it was alleged that their collective decision for not exhibiting the films produced or distributed by the FTPGI members, if they do not agree to their demand for higher revenue share, amounts to abuse of their dominant position.

The producers had consequently asked CCI to restrain the multiplexes from entering into such alleged anti-competitive agreement and from abusing their dominant position by refusing to exhibit the films.

After looking into the complaint, CCI had asked its investigation arm in August 2011 to probe into the matter and submit a report.

The probe report was submitted to CCI in January 2012, there was a long history of dispute over revenue sharing between the distributors/producers and multiplex operators.

The report further said that an earlier agreement of MAI in 2007, with regard to release of Aamir Khan-starred 'Fanaa', was found to be monopolistic in nature and the pact was withdrawn after an order passed by erstwhile MRTPC.

As per the DG’s report, although the agreement of MAI was withdrawn after the decision of the MRTP Commission but coordination between the members of MAI continued and the terms relating to revenue sharing for releasing a particular film on various multiplex theatres were decided after joint consultation of the multiplex theatre operators.

"However, the multiplex theatre operators being aware about the outcome of indulging in such anti-competitive activities avoided any trail of written evidence or documents like those of the agreement jointly entered between the MAI and its members in January 2007.

"However, the terms at which each multiplex theatre operators would accept to release a film after joint consultation with other such operators remained more or less identical to the agreement of 2007 which had been earlier declared to be restrictive by the MRTP Commission," it said.

"All the important decisions are being taken jointly after consultation with the leading multiplex theatre operators and the office bearers of MAI. The action of MAI establishes that the producers/distributors were forced to accept the decision of the MAI and its members on terms of revenue sharing arrangements as determined by such members jointly," the probe report said.

The probe report of CCI's directorate general went on to say that "the modus operandi of MAI is such that without issuing any formal direction or circular, it is able to implement its decisions."

The MAI and its members, however, rejected the findings of the DG probe and said that no cartel can be said to be formed among the multiplex operators that were heterogeneous and distinct in terms of facilities, geographical presence, ambiance etc. and their interest cannot be aligned to each other.

CCI said there were no sufficient circumstantial or economic evidence to suggest that the multiplexes were behaving in a coordinated manner to decide the terms and conditions for the release of the films in multiplexes and had formed a cartel under the auspices of MAI.

FTPGI has alleged that as Multiplexes contribute 60 per cent of total revenue from theatrical proceeds of a film and are in the dominant position.

As per the findings of DG, MAI is not engaged in the activity relating to exhibition of films in multiplexes or supply, distribution of films or control of the provisions of services relating to the exhibition of films and that MAI enjoys its position in the relevant market through the collective power of its members only.

The probe has further concluded that none of the multiplexes has been found to be in a dominant position in the relevant market of the "film exhibition in multiplexes" in India.

Therefore the CCI noted that as the MAI is itself not engaged in any activity relating to exhibition of films in multiplexes "it cannot be termed as an enterprise" and therefore, its  activities cannot be a subject matter of examination.

In addition, CCI said the none of the multiplex operators has been found by the DG to be in a dominant position in the relevant market due to lack of evidence.

"The Commission observes that no other issue emerges from the facts of the case and in the light of foregoing discussion the Commission comes to the conclusion that no case of violation of... the Act is established against the Opposite Parties," CCI said.

"The infringement of the Competition Act led to the denial of release of movies in some of the multiplex. Though there was a contravention, it is not an extreme one therefore a penalty of Rs 1 lakh on each of the 15 multiplex operators which are the opposite parties in this case is imposed," CCI member R Prasad said in a dissenting order.

He also noted that the "opposite parties multiplex operators should not indulge in such anti-competitive collusive behaviour. They should seize and desist from such action".