Competition Commission of India dismisses complaint against Multiplexes

July 30, 2019
Rules and regulation

By Vikram Narula and Rupin Chopra

The Competition Commission of India (‘CCI’) recently passed an order dismissing the complaint filed alleging anti-competitive practices by FICCI Multiplex Association and four multiplex chains, namely including PVR, Inox, Cinepolis and Carnival Motion Pictures. The four multiple chains are members of FICCI Multiplex Association of India.

Unilazer Ventures Pvt. Ltd, the Informant through its division, RSVP a film content creator alleged that four multiplexes in the country have been involved in cartelization in violation of the provisions of Section 3 of Competition Act, 2002.

Allegations imposed by Informant

  • The multiplexes charged high Virtual Print Fee (‘VPF’) [the fee paid by film producers/ distributors towards procuring digital cinema projection equipment for screening of films] from content creators. The multiplexes instead of negotiating the VPF individually, connived together in charging the same owing to an anti-competitive agreement amongst them. Further, VPF was charged even after expiry of the ‘sunset period’.
  • As a standard industry practice, multiplexes functioned on a non-negotiable revenue sharing arrangement
  • In order to obtain theatrical rights, the multiplexes held up the advance booking payments that were meant to be paid to content creators.
  • Owing to lack of transparency in the advertising policy of multiplexes, they attach lengthy advertisements during intervals which results in lack of transparency in their advertising policy
  • Multiplexes were required to adhere to the standard terms prescribed by FICCI Multiplex Association on a non-negotiable basis which clearly demonstrated an element of cartel under its support/guidance.

Submissions by Exhibitors (i.e. Multiplexes)

The multiplexes denied all the allegations and made the following submissions:

  • VPF was charged to recover the cost of digital equipment which accrues to both the content creator and the multiplex, however is more inclined in favour of the content creator. Accordingly, the multiplexes could not be accused of anti-competitive trade practices.
  • The revenue share agreement was not on account of the involvement of the multiplexes, instead it was on account of negotiations between the producers and the multiplexes.
  • The delay in sharing of collection by advance booking payments was not on account of any conspiracy.
  • It is incorrect to states that multiplexes were conspiring to make advertisements and intervals longer for earning higher revenue as their major source of income was from the sale of tickets
  • FICCI Multiplex Association of India never provided a platform to its members for entering into any unlawful arrangement

Discussion and Findings by CCI

While dismissing the allegations of cartelization against the FICCI Multiplex Association of India, the CCI made the following observations in the case:

  • Reliance was placed by CCI on the judgment of National Company Law Appellate Tribunal (NCLAT) in the matter of Reprographic India, New Delhi vs. Competition Commission of India & Ors., Competition Appeal (AT) No. 09 of 2019, where it was held that the informant is required to discharge the burden of proof to warrant an investigation.
  • No written agreement in place for charging the VPF. Accordingly, the question pertaining to sunset clause does not arise
  • The Informant has not been able to demonstrate that the revenue sharing arrangement between producers and multiplex owners is anti-competitive
  • Delay in payments made to the content creators were discarded on account of no evidence on record which can substantiate the claim that the multiplexes individually.
  • Lack of transparency in exhibition of trailers and promotions does not fall within the ambit of the provisions of the Competition Act, 2002
  • Cartelization between multiplexes had been decided by CCI in the matter of Film & Television Producers Guild of India v Multiplex Association of India, Mumbai & Ors, wherein CCI held that, multiplexes did not have a common intention for entering into an unlawful arrangement.
  • No prima facie case warranting investigation into the present matter was found.
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