Mere Exchange of Information Amongst the Members of a Trade Association Does Not Amount to Collusion

Geethika Satti | ILS Pune | 3rd April 2020

Film and Television Producers Guild of India v. Multiplex Association of India and Ors. (Case 37 of 2011), as decided on 3^rd January, 2013, by Competition Commission of India (CCI)

Facts of the Case:

Film and Television Producers Guild of India (FTPGI) filed an Information U/s 19 of The Competition Act, 2002(Act), against Multiplex Association of India (MAI) and all its members, alleging contravention of Section 3 and 4 of the Act, and prayed for an interim relief under Section 33 of the Act.

The Members of MAI are operators of Multiplexes across India and command 60% of the Market share.

In 2009, a dispute arose between the Producers of FTPGI and MAI regarding profit-sharing margins. Consequently, a revenue-sharing agreement was drawn between them.

At that time, Multiplex owners had filed an Information U/S 19 against UDPF (United Distributors and Producers Forum), through a body called FICCI-Multiplex Association of India (FMAI), alleging that the Producers and Distributors had entered into Anti-Competitive Agreements. CCI found the allegations to be true and imposed a fine of 1 lakh on each of the parties in the case 1/2009.

The aforesaid agreement entered into by FTPGI and MAI members ended on 30/6/2011 and then, although the former were ready to continue with the same terms in the new agreement, the latter started to impose unreasonable terms for the continuation of the agreements.

The MAI members were coercing FTPGI members and other Hollywood Producers to accede to its unreasonable terms, by various means, such as : imposing penal sanctions on the Multiplex owners who individually approached the Producers for procuring films, Unreasonable scheduling of number of shows to reduce the Revenue collected at box office in order to avoid sharing more profits with Producers, collecting Entertainment Tax in places where it is not levied and confirming the booking of films at the last minute, to make the Producer accede to all their terms and conditions unfairly.

DG’s Report:

After receiving directions from the Commission for conducting an investigation, the Director General found the following facts to be true during the investigation:

Dg found out that most of the revenue from the production of a film is accrued from the distribution process, in which 70% of the revenue of a film is generated from theatrical exhibition of the film. And multiplexes are preferred these days more than single screens and leverage other sources of incomes, such as advertisements, games, food and beverages. There is huge amount of capital investment and risk, due to which the players are less, and thus, the existing multiplex owners possess a monopoly over the market.

Therefore, the Relevant Market in this case was determined to be “Exhibition of films in Multiplex theatres in India”.

It was observed that even though single film theatres consist of almost 90 percent of the theatres in India, due to their dilapidated conditions, the multiplexes are gaining popularity, despite the prices being thrice charged in single screen theatres, hence increased the dependency of the Producers on the Multiplex owners.

The Activities of MAI were found to be in contravention of Section 3(3) of the Act, as the members of MAI have acted in a concerted way to control the relevant market and indirectly fix the prices of the films through collective agreements related to revenue-sharing.

DG had not found a violation of Section 4 of the Act, as the MAI is itself not involved in the business of exhibition of films, and MAI enjoys its power only through the collective power of its members. None of the opposite parties were found to be in dominant position in the relevant market, and hence, were not contravening provisions of Section 4 of the Act.

Contentions of the Opposite Parties: (MAI and others):

They have denied the allegations, by saying that they are still dealing with the Producers in individual manner and MAI only seeks to promote interest of the multiplex industry before the Government and other bodies.

Issues delineated:

1. Whether the Opposite Parties have contravened the provisions of Section 3 of the Act?
2. Whether the Opposite Parties have contravened the provisions of Section 4 of the Act?

Decision of the Commission:

Issue 1:

• If one member of the trade association proposes to discuss a matter which relates to collective action, in the absence of evidence, it does not mean that all the members decided collectively to give effect to the issue proposed by one of the members.
• Mere non-preparation of the agenda for a meeting of members od a trade association does not point out that the meeting was held for the purpose of discussion of certain Anti-competitive concerted actions.
• Mere exchange of information amongst the alleged co-conspirators is not sufficient to prove anti-competitive conduct; the exchange of information should also enable the conspirators to act upon the common scheme of illegal conduct.
• After the expiry of the master agreement between the producers and multiplex owners in 2011, all the parties were free to renegotiate the terms and conditions individually, and no threat of boycott was looming over the producers and they faced no problems to exhibit their films in multiplexes, hence there was no concerted action.
• Hence, the Commission found no violation of Section 3 by the MAI.

Issue 2:

• The Commission concurred with the decision of the DG and held that there is no contravention of Section 4 by the Opposite Parties.