Case Law Details
Consumer Unity & Trust Society Vs PVR Limited (Competition Commission of India)
Commission finds that the present case filed by the Informant is based on an apprehension that the PVR and INOX merger will result in the new entity being the largest player in Film Exhibition Industry. This entity, as per the Informant, will be dominant in terms of Section 4 of the Act by virtue of owning 1646 multiplex screens out of 3200 multiplex screens (approx.) in India. It is the contention of the Informant that the Proposed Transaction is likely to cause appreciable adverse effect on competition (AAEC) in the relevant market and create barriers for entry given the limited availability of space at key locations for opening multiplexes by new players, the high capital expenditure required to outfit an operating space, the onerous regulations and the long drawn process of getting approvals as well as economies of scale.
Commission notes that the Informant is also skeptical that the proposed transaction would not lead to consumer benefit due to the absence of competitive constraints, and is of the view that the proposed agreements will result in short and long term consumer harm. Apprehension has been raised that consumer harm may manifest in rise in ticket price, reduced service quality, slower adoption of new technologies, fewer new screens etc. It is also averred by the Informant that the Combined Entity could bring a chilling effect on the film exhibition industry as it would be able to extract more favourable terms due to the enormity of its network.
The Commission notes that, in a previously decided case, being Case No. 02 of 2021 (Vikas Verma v. Adani Ports and Special Economic Zone Ltd. & Others), which was closed under Section 26(2) of the Act by the Commission vide order dated 24.03.2021, it was held that there was no requirement to notify the Commission of the transaction as the target entity did not meet the required threshold under law. The Commission in the said case had also observed that ‘the mere existence of dominance bereft of any abusive conduct under the provisions of Section 4 of the Act, cannot be held to be the basis to order an investigation’.
In the present case also the main thrust of the Informant is that the proposed agreement to merge falls foul of the provision of Section 3(1) of the Act as this agreement has the likelyhood to cause AAEC in India. The Informant is trying to make a case under Section 3(1) of the Act by drawing sustenance on certain previously decided cases wherein the Commission held that a case can be seen under Section 3(1) standalone without recourse to other sub sections of Section 3. The Commission in this regard notes that, in all such cases, some conduct of an anticompetitive nature was sought to be impugned, allegedly emanating from the agreements referred to therein. The same, however, is not the case here. In the present case, an agreement has been stated to be entered into amongst the OPs to merge, and it has been alleged that such merged entity will have substantial market power and is likely to conduct itself in a manner which may undermine competition and cause AAEC, based on factors under Section 19(3) of the Act. The Commission observes that, even for Section 3(1) to get attracted, there has to be, firstly, an agreement between two or more parties, and secondly, the agreement should be of the nature which may result in an AAEC or a likelihood thereof. A case cannot be made out in the facts and circumstances of the present case merely on an apprehension that the agreement may give rise to a conduct in the future which would thereafter cause AAEC in the market.
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