India: CCI asks Film Employee groupings to desist from unfair ways

March 5, 2018

The Competition Commission of India in its order dated October 31, 2017, found the act of All India Film Employee Confederation and its affiliates violative of Section 3 of the Competition Act, 2002. It stated that the associations have used their position to disrupt competition and fair-play in the market through their anti-competitive conduct.

Brief Background

  • A complaint was filed by Vipul Shah (hereinafter referred to as the ‘Complainant’), an independent film director and producer alleging that a Memorandum of Understanding (hereinafter referred to as ‘MoU’) was signed on October 01, 2010, by and between the Federation of Western India Cine Employees (hereinafter referred to as ‘Opposite Party 2’) and its affiliates (OPs-6 to 25 on one hand, and OPs-26 to 28 representing film and television content producer members on the other). The said MoU was alleged to be anti-competitive in nature and therefore violative of Section 3 of the Competition Act, 2002.
  • The Complainant detailed out the clauses of the MoU that were alleged to be anti-competitive. But the two major clauses pointed out were:

    1. The exclusivity clause: providing for member to member working which stipulates that producers engage only the members of OP-2 and its affiliates, prohibiting the engagement of non-members and mandatory prior intimation to the respective affiliate for hiring non-members
    2. Clauses for determination of sale price of the services of various categories of workers and constitution of a vigilance committee for inspection and detection of infringement of the provisions of MoU.
  • The complainant stated that though the associations were supposedly made for the benefit of its members, the complainant is still unsure as to how much payment for the work done actually reaches its members as the payment is received by the associations only.
  • The Complainant also stated that All India Film Employee Confederation (OP-1) had passed a resolution dated March 07, 2013, making it binding upon OPs-2 to 25 that:

    1. For the films shot in Mumbai the producer would have to engage 70% dancers/ fighters from Mumbai and rest 30% of his choice
    2. For the films shot outside Mumbai the producer would have to engage 50% dancers/ fighters from Mumbai, 25% from the local association where the film is being shot, and the remaining 25% again of his choice
  • It was also alleged that another resolution was passed by OPs-1 to 25 deciding that the film and television content producers should pay 1.5 times the shift charges to all the craftsmen engaged by them, if shooting is being done outside the Mumbai Municipal limits. Further, another resolution passed/practice followed by OP-2 to charge extra payment from the film and television content producers for hiring models was also alleged to be abusive.
  • Thus, aggrieved by the anti-competitive MoU and the conduct of the OPs and the resolutions the Complainant had prayed before the Commission that action be taken against such contravening parties.

Issues Raised

  1. Whether the OPs fall under the definition of ‘enterprise’ mentioned in the Act & is there an exemption for trade unions and their activities from the application of the provisions of the Act?
  2. Whether the terms of the MoU signed between OP-2 and OPs-26 to 28 were violative of the provisions of Section 3 (3) (a), 3 (3) (b) and 3 (3) (c) of the Act?; and
  3. Whether the conduct of the OPs was violative of Section 3 (3) (a), 3 (3) (b) and 3 (3) (c) of the Act or any other provision of the Act?

Respondent’s (OPs) Submission

  • Respondent’s claimed that they are registered trade unions according to the Trade Union Act, 1926. They stated that the current case is actually an industrial dispute between workmen and their employers, having no competition concern. They challenged the jurisdiction of the Competition Commission of India and contended that the rights of and restrictions upon trade unions are well defined under the existing labor laws.
  • On the topic of the MoU, the OPs stated that it is a beneficial arrangement intended to bring about cordial relations between the individuals operating in the Western India Film and Television Industry and ensure smooth functioning of the film industry. Also, the terms and conditions were mutually agreed by both the parties, which was overlooked by the Director General (hereinafter referred to as the ‘DG’)
  • The OPs contended that the MOU has been misinterpreted to be a horizontal agreement as the arrangement between the parties are not engaged in identical or similar trade of goods or provision of services.
  • Regarding Clause 6, OP-2 specifically argued that the intention of the agreement was overlooked by the DG. It further pointed out that the rule of member to member working between producers’ associations and OP-2 dates back to almost fifty years and thus, the same cannot be construed as a unilateral imposition on the producers’ associations. They said that the intent of the clause was to address information asymmetry between the parties as to the availability of the required workers and to provide for such special requirements of the producers which might not be met from the available pool of employees.
  • Regarding Clause 18, referring to the formation of a Vigilance Committee, OP-2 argued that it was to secure effective enforcement of the MoU by assuring adherence to the rule of member to member working. It is further submitted that the said clause did not provide unfettered powers to the Vigilance Committee and was reasonable in nature.
  • Regarding Clause 8, OP-2 submitted that the clause was there to safeguard the member’s wellbeing. The clause on the minimum wages and conveyance charges of members of OP-7 was only to provide yardstick while the exact terms are left to be negotiated amongst the parties.

Commission’s Decision

  • At first instance, the Commission noted that the members are all organized and regulated by their respective associations. Also, regarding the status of the Respondents it mentioned that:

    1. OP-2 is the parent body of the OPs No. 6 to 25, who are different associations and independently representing different crafts of the Western India Film and Television Industry.
    2. OP Nos. 3 to 5 are the mother bodies of different associations representing different crafts in the film industry for Eastern India, Northern India and Southern India, respectively.
    3. OP Nos. 26 to 28 represent film producers and television producers.
  • Examining issue 1 of the case, the commission found out that the members of OP-6 to 25 are economic operators. They are hired to offer their respective services to make a film, songs, serials or advertisement for a certain amount of remuneration by the producers. As a result, they are assumed to take the financial risks attached to the pursuit of that service and therefore, are engaged in economic activity. Thus, each of the constituent members of the OP trade unions are enterprises under Section 2 (h) of the Act and the OPs are associations of enterprises. Further, the actions of the OPs is ‘practice carried on’ or ‘decision taken by’ an ‘association of enterprises’ under Section 3 (3) of the Act. Even if the OPs are not associations of enterprises, they will still be ‘associations of persons’ and will fall within the purview of Section 3 of the Act. Thus, the Commission has jurisdiction in the present case.
  • Scrutinizing the MoU, the commission took note of Clause 2, 4, 6, 8 and 18 majorly. Regarding Clause 2 and 4, it concluded that it is only an understanding/agreement entered into by OP-2 and the producer associations for regulating/monitoring the day to day affairs of the film/TV industry such that cordial and healthy relationship is maintained between the parties and disputes regarding wages, work schedule, performance of workers, etc. are amicably resolved.
  • According to the commission, Clause 6 did put a specific restriction on the producers to not hire any other worker/ artist who was not a member of the OP associations for any work i.e. film, television, music, advertising or any other employment. It further noted that the clause mentioned that if they want to hire it could be only after intimation to OP-2. Additionally, the clause states that in case of certain shows 30% of the work should mandatorily be given to junior artist members as well as Mahila Kalakar Sangh member affiliates of OP-2. Thus, Clause 6 imposed a restriction on the freedom of the producers to hire craftsmen as per their desire. Such clauses also deprive the opportunity of fair and free competition in the market.
  • Regarding Clause 8 the commission noted that it includes fixation of minimum wages for certain affiliates of OP-2 and increase in wages on a yearly basis. The commission was of the view that Clause 8 was not in contravention of the Act. Reason being wages and increment being also a condition of labor/term of employment, can fall within the realm of legitimate trade union activity when negotiated by a registered trade union.
  • Further the commission took note of accountability of the parties violating the provisions of the Act.
  • Thus, the commission examined conduct and every OP in detail and stated that the Complainant and many third parties furnished documentary evidence alleging violation of different provisions of the Act by OP-2 and its affiliates. The DG found certain specific evidences supporting the allegations to which OP-2 and its affiliates failed to provide any justification/ clarification. Thus, after careful inspection of the evidences, the Commission is of the view that the allegation of the Complainant that artists/workers could only be hired by the producers from those trade associations which are affiliated to OP-2 stands established.
  • In view of the findings and observations recorded by the Commission, it is ordered as under:

    1. OP-1, OP-2, OP-7, OP-9, OP-10, OP-13, OP-20, OP-21, OP-26, OP-27 and OP-28 are directed to cease and desist from indulging in conduct which has been found to be in contravention of the provisions of the Act, as detailed in this order.
    2. OP-6, OP-8, OP-11, OP-12, OP-14, OP-15, OP-16, OP-17, OP-18, OP-19, OP- 22, OP-23, OP-24 and OP-25 are directed to desist from indulging in conduct which has been found to be in contravention of the provisions of the Act, as detailed in this order.
    3. Clauses 6 and 18 of the MoU dated October 01, 2010, are held to be anti-competitive and are ordered not to form a part of the MoU should it be extended or be part of any agreement entered into in future.

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