1.0
Background
1.1 Film industry in order to have discipline had
set up self-disciplinary association or agencies. First of all the name of the
film was to be registered with one of the association. Such registration protects
two films having the same name are not released at the same time. Secondly
whenever a producer entered into
an agreement with a distributor for a certain
zone, this was also registered by an association.
Publicity of this fact was
given through various publications
such as Trade Guide etc.
This is being done
with the idea that
a producer does not
sell the same movie to another
distributor in the same area and
in this manner obtain further finance.
Sometimes when the
film being produced involved large amount of finance
and the distributor could not finance the production
another distributor was appointed
for the zone or two distributors would form
a joint venture to finance the film. In every
zone where the distributor operated, the exhibitors and the
distributors formed associations to regulate the entire business of film exhibition
and distribution.
1.2 The associations were either societies
or companies under Section 25 of
the Companies Act. These associations or companies formulated bye-laws and
they worked as
dispute resolution agencies for disputes between the exhibitors,
between the producers and the distributors/exhibitors and
between the distributors and the exhibitors. These associations
regulated the business in the way that
once a producer / distributor had
agreed to give the
business of exhibition to an exhibitor, the producer/
distributor could
not then give the rights to
another exhibitor. In this manner, the pecuniary interests of the
exhibitors were protected. Similarly, when there
were similar disputes between the
producers and the
distributors/exhibitors, these associations
protected the interest of their members. All
the producers / distributors had to become
members of the association by paying
a nominal fee before a film could
be released in that zone /
area. They also had
to register the films with the zonal associations so that the names
of the producer / distributor /
exhibitors were known.
1.3 These
associations has no statutory backing but were created for
the regulation of the entire industry and
they had evolved over a period of
time. Any regulator in order to effective
has to have penal powers. As no statutory
authority available to
the Associations, they exercised
the power of boycott. These associations
took upon themselves the power to
levy penalty which
were nothing but the failure to honour contractual
obligations. Failure to pay the penalty resulted
in boycott by the associations and their members.
1.4 Now with the advent of
new technology, migration
of the Indian community to
different countries and due to various other reasons the
demand for Indian films extended in various
countries. This provides opportunity to the producers sell world rights,
DTH and satellite rights, internet rights etc of the film. All this expanded
the earnings of the producers. But at the same time shelf
life of a
film are reduced. The new technology also led
to an increase in piracy and reduction in
the earnings of the producers. The
period for the exploitation of films
got reduced as far as the exhibitors were
concerned. This reduced the earning
of the exhibitors. Another
factor which came up was
the arrival of multiplexes where multiple screens
were used for screening films in a more
congenial atmosphere. Multiplexes also received
various direct & indirect tax concessions. These factors and the rising
property prices all over India led to closure
of many single screen exhibitors all over India. All these factors gave rise to
disputes within the industry.
2.0
Whether practices of Self-regulatory Association are anti-competative?
2.1 Self-regulatory associations of distributors and exhibitors asks
the producers-distributors
·
to compulsorily register their films before release
·
force members to abide with the rules,
·
directs members not to deal with the
non-members,
·
prescribes long holdback period for satellite, DTH and other rights in
respect of exhibition of films and
·
Imposes bans, penalties and giving a call of
boycott against those who violate the rules and regulations of the
associations.
2.2 The producers has pointed that under the garb of a trade Association,
these associations has become a vehicle for collusive conduct for persons and
enterprises engaged in identical business of distribution and exhibition of
films. Its members have adopted a coercive mechanism for ensuring the
enforcement and compliance of anti-competitive agreements amongst themselves.
2.3 Commission in the case of Eros International Media Limited
observed that it is true that the activities of an association including
keeping association members informed of trade developments, improving the
quality of products, and working together at improving trade and industry laws,
had benefited their members. It also played a significant role in encouraging
and enforcing codes of ethics. But the rules and regulations, acts and conduct
of the associations are not making markets perform efficiently and create
restrictions on free and fair competition. Accordingly it held that various
practices of the association as anti-competitive and directed the associations
to cease and desist from the following practices:
a) The associations should not compel any producer, distributor or
exhibitors to become its members as a pre-condition for exhibition of their film
in the territories under their control and modify their rules accordingly,
b) The associations should not
keep any clause in rules and regulations which makes any discrimination between
regional and non- regional films and impose conditions which are
discriminatory against non- regional films
c) The rules of restrictions on the number of screens on the basis of language or the manner in
which a particular film is to be exhibited should be done away with.
d) Associations should not put any condition regarding release of
films through other media like, CD, Satellite etc.
these should be left to the concerned parties.
e) The condition of compulsory registration of films as a
precondition for the release of any film and various existing rules of
association should be dispensed with.
3.0 Whether collective bargaining by the
association with Multiplex is anti-competitive?
3.1 Over the period of time there is integration of the business
of film production and distribution. The film production units are turning into
corporate entities and several film production companies are venturing and
diversifying into the film distribution business. The distribution game is
changing, may small distributors have been marginalized. Producers are also
dealing directly with major multiplex companies for distribution deals, while other
cinemas, which are largely single-screen theatres, are handled by individual
distributors.
3.2 The conflict has arisen between the producers/distributors and
the members of the FICCI-Multiplex Association of India on revenue sharing
ratio. Generally the revenue sharing ratio is negotiated between individual
producer and individual multiplex operator film by film. United Producers/
Distributors Forum (UPDF) has issued notice on March 27, 2009 to all producers
& distributes, whether its member or otherwise, for not to release any new
film to the members of the FICCI-Multiplex Association of India. Notice also
contained a warning given to the respective members that in case of failure to
comply with the instruction given in the notice, it would lead to life time
suspension/ strict disciplinary action etc. against the concerned member.
3.3 Accordingly during the period of April 4, 2009 to June 12,
2009 no films were released by producers / distributors on account of their
concerted action of not releasing films to the multiplexes. This created
pressure on the multiplexes forcing them to enter into a compromise. The new
agreements, under the new revenue sharing arrangement, were signed on June 9,
2009, with some producers/distributors.
3.4 FICCI-Multiplex Association of India has informed Competition
Commission of India that the members of the UPDF who are controlling almost
100% of the market for production and distribution of Hindi pictures in
multiplexes in India (relevant market) are acting in concert to fix prices and
also limiting/controlling supply by refusing to release Hindi films for
exhibition in multiplexes.
3.5 Competition Commission in its
order
observed that the producers/distributors with their collective market power
attempted to ensure that multiplex owners did not get the business of film
exhibition till they agreed to the proposal of enhanced revenue share.
The plea of collective bargaining by the
producers/distributors on the grounds of greater public or consumer interest,
was also negated by the commission. It also observed that the new
negotiated revenue sharing arrangement has given substantial enhanced revenue
sharing to the producers / distributors which are permanent in nature and
ultimately, this burden was passed on to the ultimate consumers who are final
multiplex cinema goers for watching the films, i.e., ‘the common man’.
Accordingly UPDF was directed to refrain from indulging in such anti-competitive
practices in future and are further directed to file an undertaking to this
effect.
4.0 Is there any cartelisation by various channels to have
commercial break at same time?
4.1 The Consumer Unity &
Trust Society (CUTS),
a non-profit consumer advocacy group, has prepared a preliminary investigation
report on television channels. It tries to establish co-relation, how each
channel has been going in for advertising breaks around the same time. The CUTS
is planning to present this report to the Competition Commission of India.
Competition Commission may launch an investigation against major television
channels to find out if they have abused their dominance or formed cartels
against consumer interest in programming advertising slots. Hence the TV channels may be probed for scheduling advertising slots during programs
in such a way that viewers are denied their right to choose by switching
channels and are forced to watch ads.
Article Published in the CTC's IT Review - July '12 Issue
