2013 (4) TMI 161 - Commission - Companies Law

Anti-competitive agreements - Information has been filed under section 19(1)(a) of the Competition Act, 2002 informant alleging inter alia contravention of the provisions of sections 3 and 4 of the Act. It is alleged by the informant that the opposite party associations make it compulsory for every film distributor to become their member and/or register his/its film with them before the exhibition of such film. A distributor who refuses to become a member with them is not allowed to distribute and exhibit his/its film in the territory which is governed/regulated by the respective opposite party association. It is averred by the informant that the opposite party no. 1 directed its members not to release the film Mausam , in its territory unless the claim of its member of Rs.2.5 crores was settled and convened its other members to intervene in the distribution of the film until recovery of dues. It is, thus, alleged that the opposite party associations acted malafidely and arbitrarily in boycotting the film with an effort to secure a claim of their member. Held that - On a plain reading of the aforesaid circulars/letters, it is evident that the opposite party associations through these circulars/letters tried to limit/control the supply of the film in contravention of the provision of section 3 (1) read with section 3(3)(b) of the Act. By virtue of the provisions contained in section 3(3) of the Act, any agreement entered into between enterprises or associations of enterprises or persons or associations of persons or between any person and enterprise or practice carried on, or decision taken by, any association of enterprises or association of persons, including cartels, engaged in identical or similar trade of goods or provision of services, which (a) directly or indirectly determines purchase or sale prices; (b) limits or controls production, supply, markets, technical development, investment or provision of services; (c) shares the market or source of production or provision of services by way of allocation of geographical area of market, or type of goods or services, or number of customers in the market or any other similar way; (d) directly or indirectly results in bid rigging or collusive bidding, is presumed to have an appreciable adverse effect on competition. The Commission directs the Opposite Parties to cease and desist from the practices of pressurizing the distributors to settle the monetary disputes with its members and also imposed penalty to ensure effective functioning of the market.

Summary

Issues Involved:
1. Alleged contravention of Sections 3 and 4 of the Competition Act, 2002 by film distributors' associations.
2. Specific grievances regarding the release of the film 'Mausam'.
3. Findings and conclusions of the Director General (DG) investigation.
4. Replies and objections from the opposite parties.
5. Analysis and final decision by the Competition Commission of India (CCI).

Issue-wise Detailed Analysis:

1. Alleged Contravention of Sections 3 and 4 of the Competition Act, 2002:

The informant, M/s Cinergy Independent Film Services Pvt. Ltd., alleged that film distributors' associations (TTFDA, KFCC, APFCC) and others enforced compulsory membership and film registration, hindering free competition. These associations allegedly coerced distributors to sign restrictive agreements, limiting their rights over films. The informant claimed that these actions contravened Sections 3 and 4 of the Competition Act, 2002.

2. Specific Grievances Regarding the Release of the Film 'Mausam':

The informant alleged that TTFDA and APFCC issued circulars to their members to boycott the film 'Mausam' unless a claim of Rs.2.5 crores by M/s Suresh Productions Pvt. Ltd. was settled. This action allegedly aimed to pressure the informant to resolve a financial dispute involving M/s Big Bang Media Pvt. Ltd., which had connections with the informant. The informant argued that these actions were arbitrary and aimed at securing payment for M/s Suresh Productions Pvt. Ltd.

3. Findings and Conclusions of the DG Investigation:

The DG's investigation concluded that TTFDA, KFCC, and APFCC engaged in anti-competitive practices by limiting and controlling film distribution and exhibition. The DG found that these associations coerced producers and distributors, restricting the market and violating Section 3(3)(b) of the Act. However, no contraventions were found against IMPEX and M/s Big Bang Media Pvt. Ltd.

4. Replies and Objections from the Opposite Parties:

KFCC:
KFCC argued that its membership was voluntary and it did not impose restrictions on film distribution. It claimed that its actions were aimed at resolving disputes amicably and promoting the Kannada film industry. KFCC denied issuing any directives regarding 'Mausam' and contended that the DG's findings were baseless and erroneous.

TTFDA:
TTFDA stated that it did not impose compulsory membership or registration. It clarified that the circular regarding 'Mausam' was issued in response to a complaint from M/s Suresh Film Distributors and was later withdrawn. TTFDA denied any anti-competitive conduct.

APFCC:
APFCC highlighted that M/s Cinergy and M/s Big Bang Media were interconnected and had a financial dispute with M/s Suresh Productions. APFCC claimed that its letter aimed to facilitate an amicable settlement and did not impose any restrictions. APFCC also argued that its rules did not completely restrict dealings with non-members.

5. Analysis and Final Decision by the CCI:

The CCI examined the DG's report, the replies from the opposite parties, and the relevant evidence. It found that TTFDA, KFCC, and APFCC issued circulars/letters to limit/control the supply of the film 'Mausam', violating Section 3(1) read with Section 3(3)(b) of the Act. The CCI noted that these actions aimed to pressure the informant to settle the financial dispute with M/s Suresh Productions.

Order under Section 27 of the Act:

The CCI directed TTFDA, KFCC, and APFCC to cease and desist from pressurizing distributors to settle monetary disputes. It also instructed APFCC to modify its rules to remove anti-competitive provisions. The CCI imposed a penalty on APFCC at the rate of 10% of its average income/receipts for the last three financial years, amounting to Rs. 12,89,735.1. TTFDA and KFCC were not subjected to additional penalties due to previous penalties imposed in similar cases.

The CCI directed the opposite parties to comply with the order immediately and file an undertaking within 30 days. The Secretary was instructed to inform the parties accordingly.