2010 (8) TMI 176 - HC - Law of Competition

Whether the Competition Commission established under the Competition Act 2002 does not have any jurisdiction to initiate any such proceedings in respect of films for which the provisions of the Copyright Act 1957 contain exhaustive provisions? Held that - In the facts of the instant case it cannot be said that requiring the petitioners to appear before the Competition Commission will subject the petitioners to lengthy proceedings and unnecessary harassment. Sections 8 and 9 of the Competition Act provides that the Commission shall consist of a Chairperson and two to six Members having special knowledge of and professional experience of at least fifteen years in international trade economics business commerce law finance accountancy management industry public affairs or competition matters including competition law and policy. The Chairperson and Members of the Commission are to be appointed by the Central Government from a panel of persons recommended by a Selection Committee headed by the Chief Justice of India or his nominee. We are inclined to dismiss the petitions only on the ground that the petitions challenge show-cause notices and that it is open to the petitioners to raise all available contentions including preliminary objection against legality or otherwise of initiation of the proceedings against the petitioners

Summary

Issues Involved:
1. Jurisdiction of the Competition Commission of India (CCI) under the Competition Act, 2002.
2. Applicability of Section 3(5) of the Competition Act regarding copyright protection.
3. Validity of show-cause notices issued to non-producer entities.
4. Allegations of cartel-like activities by film producers.
5. Resolution of disputes between multiplex owners and film producers.
6. Disclosure of information received by respondents.
7. Premature challenge to show-cause notices.

Detailed Analysis:

1. Jurisdiction of the Competition Commission of India (CCI) under the Competition Act, 2002:
The petitioners challenged the jurisdiction of the CCI to initiate proceedings under the Competition Act, 2002, arguing that the exhibition of films, governed by the Copyright Act, 1957, is excluded under Section 3(5) of the Competition Act. The court held that the CCI has the jurisdiction to determine whether the preliminary facts, which are essential for the exercise of its jurisdiction, exist. The court emphasized that the CCI is competent to decide mixed questions of law and fact, including jurisdictional issues.

2. Applicability of Section 3(5) of the Competition Act regarding copyright protection:
The petitioners contended that Section 3(5) of the Competition Act specifically excludes the exhibition of feature films, which are subject to copyright protection, from the purview of the Act. They argued that the right to release a film cannot be considered as goods or services under the Competition Act. The court noted that the CCI has the authority to decide whether the conditions under Section 3(5) apply and whether the petitioners' actions constituted reasonable conditions necessary for protecting their copyright.

3. Validity of show-cause notices issued to non-producer entities:
The petitioners argued that the show-cause notices issued to certain petitioners who are not producers of feature films in their individual capacity were without jurisdiction and showed non-application of mind. The court did not specifically address this issue in detail but implied that such jurisdictional questions could be raised before the CCI during the inquiry.

4. Allegations of cartel-like activities by film producers:
The show-cause notices alleged that the petitioners, along with other entities, engaged in cartel-like activities by collectively deciding not to release films to multiplexes to extract higher revenue sharing ratios. The court noted that the CCI had formed a prima facie opinion based on the Director General's investigation report and decided to proceed with further inquiry. The court emphasized that the CCI is yet to take a final decision, and the petitioners could raise their objections during the inquiry process.

5. Resolution of disputes between multiplex owners and film producers:
The petitioners contended that the disputes between multiplex owners and film producers were resolved by June 2009, and agreements were being signed individually. They argued that the allegations and show-cause notices had become academic and stale. The court did not delve into the resolution of disputes but focused on the procedural aspect, allowing the CCI to continue its inquiry.

6. Disclosure of information received by respondents:
The petitioners argued that the information received by the respondents from FICCI-Multiplex Association of India was not disclosed to them, and their legal contentions were not considered. The court did not specifically address this issue but implied that such procedural concerns could be raised before the CCI during the inquiry process.

7. Premature challenge to show-cause notices:
The court held that the petitions challenging the show-cause notices were premature. It emphasized that the CCI is yet to take a final decision, and the petitioners have the opportunity to raise all their contentions, including jurisdictional objections, during the inquiry. The court cited precedents where it was held that challenging show-cause notices at a preliminary stage is generally not entertained unless it causes unnecessary harassment or lengthy proceedings.

Conclusion:
The court dismissed the petitions, allowing the CCI to proceed with its inquiry. It directed the petitioners to submit any further replies to the show-cause notices within one month and ensured that the CCI would give them an opportunity for a personal hearing before taking any decision. The court did not express any opinion on the merits of the controversy, keeping all contentions open for consideration by the CCI.