This is, indeed, a foregone conclusion that the Competition Act, 2002 (The Act) has played its part well when it comes to correcting the dynamics and ecosystem of the markets and ensuring a fair competition among business enterprises so that maximum benefit is passed on to the consumers.
Time and again, the Competition Commission of India (The CCI) and Competition Appellate Tribunal (COMPAT) have passed leading judgments, under different provisions of the Act, which have been a benchmark for charting the course of the markets in India.
Recently, on 24-07-2019, in the case of Unilazer Ventures Pvt. Ltd. vs PVR Ltd. & Ors., the CCI decided the issue between the Informant, an independent creation company and the Opposite Parties, which are the exhibitors and are in the business of operating multiples cinema theatres in various cities and, collectively, control about 60% of the entire multiplex film exhibition business in India.
The dispute arose from the changed business dynamic, owing to the producers gravitating towards digital medium for production and distribution of films because of the relatively higher costs and risks incurred with the physical prints. The grievance of the Informant was that the OPs, being in a position of strength were resorting to conditions which are prejudicial to the interest of the Informant. The Informant was, in fact, aggrieved with the OPs on multiple fronts of their business transaction such as Virtual Print Fee (VPF) paid by producers to exhibitors; revenue sharing model and sharing of market between the parties; advance payment hold up by the exhibitors; trailers and promotions during the movie; intervals in the movie etc.
According to the Informant, VPF is a fee paid by the producers to the exhibitor to recoup part of the purchase price of digital cinema projection equipment by exhibitors for use in the screening of the film. It was submitted that the VPF model was agreed upon with a sunset period in order to rein in various difficulties faced with the physical medium. The grievance hovered around the fact that, notwithstanding the expiry of the sunset period, the VPF was still being charged by the exhibitors. Informant also claimed parity with Hollywood studios on the ground of an alleged agreement, whereby, they do not pay the VPF and Indian producers are prejudiced by the same. However, this argument was sought by the OPs to be demolished on the ground that digital equipment aggregators entered into agreements with 6 leading Hollywood producers in 2008, thereby, undertaking to lease relevant and compliant equipment to exhibitors in India and to collect a payment of Rs. 20,000/- per print per multiplex/theatre. OPs submitted that they have no involvement in the fixation of the price and there was no agreement between exhibitors and producers to this effect. Further, as the Indian producers gravitated towad digital medium, this amount of Rs. 20,000/- became a benchmark for them as well but there has been no oral or written agreement to this effect.
Further, the Informant complained about the revenue sharing model and sharing of market between itself and the OPs. It was submitted that, under the aegis of OP-5, unfair and non-negotiable agreement were being put forth by the OPs. The terms of the agreements are standard across the spectrum and this pointed towards collusion between the parties. The Informant also assailed the current revenue sharing model between the parties to make out its case. This argument was countered by the OPs that the current revenue arrangement is the result of deliberations between the parties in the wake of a dispute that arose in the year 2009 and, as a result, the terms are leaning in favour of the Informant. Further, the Informant has never approached the OPs for negotiation.
As regards the release of timely payments, the Informant submitted that the exhibitors, in a display of arbitrariness, were not releasing the payment, collected through various modes, to the Informant on time, at times, with a delay of about 45-60 days. The stand of the OPs was that the entire system is automated and there is no opportunity for them to interfere with the same and a delay, if any, is purely operational in nature.
Advertisements and intervals in a movie was also a point of contention for the Informant. It was submitted that long advertisements are attached to a film by the OPs owing to a lack of transparency in the advertising policy and to gain revenue from independent promotions. This action on the part of the OPs was prejudicing the efforts of the content creator while editing to curtail the length of a film. It was the averment of the Informant that any such revenue should be shared equally with the producers. The grievance was also raised as regards revenue earned during interval in the movie. Both the above grievances were also answered by the OPs.
All the OPs furnished their versions on similar lines and all of them were analyzed by the CCI in its judgment. While dealing with the allegation of collusion between the parties, the CCI observed that the sine qua non for the collusion requires an agreement between entities engaged in identical or similar trade which causes an appreciable adverse effect on competition. However, the Information had not been able to produce any such agreement between the OPs.
Further, qua the contravention of Section 3 of the Act, it was held that the evidence on record must demonstrate a meeting of minds. However, no such evidence has been adduced by the Informant and this was further strengthened by the reliance of the OP on a precedent by NCLAT which clearly laid down that it was imperative upon the Informant to discharge the initial burden of proof so as to warrant an investigation by the CCI.
The allegation of the Informant as regards the OPs indulging in parallel conduct and allegedly resorting to anti-competitive practices was also thwarted by the CCI while holding that mere parallel behavior in an oligopolistic does not fall foul of the Competition Act and the Informant has not been able to corroborate the allegation.
The specific allegations of the Informant were also individually analyzed by the CCI and the same were set aside vide a reasoned order. As a result, the Information was dismissed.
It is to be noted that the entertainment industry, in the past as well, has been at loggerheads with each other and has approached the CCI on various occasions. The present case is one of the many in the list. Every case in the past has cleared the air and set the record straight in its limited sweep but the present case seems to have raised the questions of generic importance for the entire industry across the spectrum.
The judgment would definitely be appealed against and it would take some time before the case attains finality but, irrespective of the party which eventually wins, the industry will receive its ‘commandments’ to be followed for long.
Mr. Siddharth Jain
Co-Founding Partner, PSL Advocates & Solicitors