2024 (1) TMI 1388 - CCI - Companies Law

Contravention of the provisions of Sections 3 and 4 of Competition Act, 2002 - Abuse of dominant position by the Opposite Party (OP) in the film exhibition market - controlling more than half of the upscale multiplex screens in India - special treatment to films of powerful and monetarily affluent production houses and constraining the entry of films by independent filmmakers - HELD THAT - The Commission is of the view that the commercial wisdom of the exhibitors is largely governed by consumer demand and unless harm to competition is apparent, any intervention will only lead to undesirable consequence by taking away the autonomy of such undertaking and substituting the decision of such entity by the decision of the regulator. In the realm of competition law, it is widely understood that firms have an autonomy to choose their trading partners as long as the exercise of such autonomy does not affect the fair functioning of the markets. The Commission in its various orders has upheld the freedom enjoyed by the enterprises in the market subject to compliance of the provisions of the Act. The Commission is of the view that there must be autonomy available to the exhibitors to deal with movies the way they want, in alignment with their business requirements and subject to provisions of the Act. In this vein, nobody can ask for an absolute right to deal with a particular business. Similarly, there is no absolute right of refusal. This will depend upon the facts and circumstances of each case. Thus, the right to choose a movie for exhibition lies with OP and this freedom cannot be curtailed by compelling it to exhibit the movie of the Informant unless and until it causes any harm to competition. The Commission is of the opinion that, prima facie, as there appears no discernible competition concern in the matter, it would not be appropriate for the Commission to delve into allegations of abuse of dominant position which requires delineation of relevant market. Accordingly, the Commission does not deem it necessary to delineate the relevant market and undertake further assessment thereupon. With regard to applicability of Section 3(4) of the Act, the Commission is of the view that the existence of an agreement/arrangement between the parties is a sine qua non which aspect is neither captured in the Information nor any material evidence given in relation thereto. Further, the Commission notes that the mere fact that the OP is vertically integrating itself with film production does not per se amount to any contravention of Section 3(4) of the Act. Prima-facie, no case of contravention of Section 4 of the Act is made out in the facts, circumstances and allegations levelled in the case and the matter is ordered to be closed forthwith under Section 26(2) of the Act. Consequently, no case for grant of relief(s) as sought under Section 33 of the Act arises in the matter.

Summary

Issues Involved:

1. Alleged abuse of dominant position by the Opposite Party (OP) in the film exhibition market.
2. Alleged cartelization and vertical integration by the OP.
3. Alleged discriminatory treatment and preferential allocation of screens by the OP.
4. Alleged non-disclosure of commercial policies by the OP.
5. Alleged violation of other laws by the OP.
6. Request for interim relief by the Informant.

Issue-wise Detailed Analysis:

1. Alleged Abuse of Dominant Position:

The Informant alleged that the OP, by controlling a significant portion of the upscale multiplex screens in India, abused its dominant position by giving preferential treatment to films from large production houses, thereby creating entry barriers for independent filmmakers. The Commission noted that the primary grievance was the alleged discriminatory allocation of screens, which favored large production houses. However, the Commission found that OP had exhibited the Informant's film alongside a blockbuster, indicating no absolute exclusion. The Commission concluded that there was no prima facie evidence of abuse of dominant position, as the OP's conduct did not harm competition.

2. Alleged Cartelization and Vertical Integration:

The Informant claimed that the OP engaged in cartelization and vertical integration by entering into film production, distribution, and exhibition, which allegedly squeezed out competition. The Commission observed that vertical integration is not prohibited under the Act unless it results in preferential or discriminatory conduct. The OP provided evidence that a majority of its revenue came from third-party films, and independent filmmakers were not foreclosed. The Commission found no contravention of Section 3(4) of the Act, as there was no evidence of an anti-competitive agreement or arrangement.

3. Alleged Discriminatory Treatment and Preferential Allocation of Screens:

The Informant alleged that the OP allocated screens preferentially to films from large production houses, leaving no space for independent films. The OP countered that screen allocation was based on objective criteria such as revenue potential, marketing efforts, and consumer demand. The Commission emphasized that exhibitors have the autonomy to make commercial decisions based on market demand, and there was no evidence of harm to competition. The Commission upheld the OP's right to choose films for exhibition, provided it did not contravene the Act.

4. Alleged Non-disclosure of Commercial Policies:

The Informant accused the OP of not disclosing its commercial policies regarding screen allocation and agreements with production houses. The OP argued that such terms are commercially sensitive and cannot be publicly disclosed. The Commission accepted this reasoning, noting that the revenue-sharing terms were known in the industry and available in the public domain.

5. Alleged Violation of Other Laws:

The Informant also alleged violations of environmental and municipal laws by the OP. The Commission clarified that such allegations fall outside the purview of the Competition Act and did not address them in this judgment.

6. Request for Interim Relief:

The Informant sought interim relief to restrain the OP from exclusive tie-ups with production houses and to disclose terms for independent filmmakers. Given the lack of prima facie evidence of contravention, the Commission found no basis for granting interim relief under Section 33 of the Act.

Conclusion:

The Commission concluded that there was no prima facie case of contravention of Section 4 of the Act regarding abuse of dominant position. It also found no evidence of anti-competitive agreements under Section 3(4). Consequently, the matter was closed under Section 26(2) of the Act, and no interim relief was granted. The Commission also granted confidentiality to certain documents filed by the OP for three years, as per the General Regulations.