Summary: The PVR case, filed by film director Yogesh Pratap Singh, accused India’s largest multiplex chain of favoring major production houses, creating barriers for independent filmmakers. Singh alleged that PVR’s practices, including its involvement in film production and distribution, restricted market access for smaller players and constituted anti-competitive behavior under Section 4 of the Competition Act, 2002. The case was referred to the Competition Commission of India (CCI), which examined whether PVR’s dominance in the cinema exhibition market led to the abuse of its market power. Section 4 addresses concerns such as market entry barriers, reduced consumer choice, and unfair trade practices. However, the CCI ruled in favor of PVR, concluding that the multiplex chain did not hold a dominant position in the relevant market. It found that PVR’s business practices, including pricing strategies and contractual terms, were consistent with industry standards and did not result in an appreciable adverse effect on competition. This decision highlighted the challenges of proving market dominance in competitive industries and affirmed the importance of safeguarding fair competition without stifling legitimate business practices.
Introduction: Fair competition is crucial to the well-being of consumers and the health of an economy in a dynamic and competitive market system. The Competition Act, 2002 is the governing legislation in India for promoting and preventing anti-competitive practices. Section 4 of the Competition Act, 2002[1], provides for dealing with abuse of dominant position.
Yogesh Pratap Singh, a film director had alleged that India’s biggest multiplex chain PVR gave preference to films made by big production houses which was advantageous for the independent filmmakers. It was also claimed by the complainant that this action of the multiplex has restricted entry of films made by independent filmmakers and PVR has indulged in cartelisation and vertical integration. He cited PVR’s foray in film production and its work on film distribution and exhibition with top production houses.Among his allegations of discriminatory practices, Mr. Singh stated that his films, Kya Yahi Sach Hai (2022) and The Indian Supari Company (2022), faced difficulties because PVR and larger production houses were purportedly responsible for creating entry barriers[2] for independent filmmakers. Thus, the case was referred to the Competition Commission of India (CCI) for investigating their alleged actions.
Section 4 of the Competition Act, 2002 is an important provision in the Indian competition legal framework. It was created to address and prevent the abuses of dominant market power by companies. This clause is to a great extent for good competition, after all, consumer welfare also matters somewhere while ensuring that no enterprise, small or big uses its market power to tamper with such competitive mechanisms. Market power can be measured on a variety of factors, including:
(1) Elimination or Marginalization of Competitors: Predatory pricing and/or denial of market access may limit or prevent access to infrastructure, essential facilities in markets where the output is sold. This could prevent competitors from entering or expanding their presence in the market and hence bolster the position of strength that the dominant firm already enjoys ;
(2) Creation of Entry Barriers: A dominant firm might enter into exclusive supply or distribution agreements that prevent new competitors from accessing the market. This practice can also help to solidify the dominant firm’s position in the market ;
(3) Reduced Consumer Choice and Innovation: A dominant firm may deliberately limit the production of a product so as to create an artificial scarcity. It could result in higher prices and less variety for consumers leading to weakening of the competitive environment impacting the competitors who may struggle to gain or maintain market share ;
(4) Unfair Trade Practices: A dominant firm might pressure customers or suppliers through unfair or discriminatory conditions that are difficult for competitors to match their terms. This may drive market share towards the dominant firm as smaller competitors might not have the resources to offer similar terms ;
(5) Concentration of Market Power: In some cases, a dominant firm might use its position to acquire smaller competitors, further consolidating its market share. While that action is not necessarily abusive, it can lead to reduced competition and increased concentration of market power, which can be scrutinized under the Competition Act.[3]
The market position of PVR is one such major reason in this aspect. And dominance isn’t just about how many screens or theaters, but also whether the film can drive market conditions. Secondly, if PVR enjoys a significant market share and is in a position to affect the competition, its conduct is analyzed under Section 4 of the Act. That brings us to the million-dollar question – are PVR’s actions anti-competitive or not? Exclusive deals or low cost pricing could establish high barriers to market entry or chill competition, restricting consumer choice and leading to higher prices down the road.
PVR contended that it was not dominant in the relevant market as the market remained competitive with several players and alternatives available to consumers thereby making such determination of dominance challenging. They asserted that its pricing strategies, revenue-sharing models, and contractual terms were standard in the industry. The practices were not designed to eliminate competition or affect competitors negatively, they were simply common business practices. Thereby, PVR contended that it did not either indulge in practices which had an Appreciable Adverse Effect[4] on competition, or denied market access and imposed unfair conditions at all and these are the primary objections of Section 4.
In a big win for PVR, the Competition Commission of India (CCI) ruled that the company did not contravene Section 4 of the Competition Act which deals with abuse of dominant position.[5] Since the market was clearly competitive and there were far too many other participants, PVR could not be said to occupy a dominant position in the relevant market for cinema exhibition services. The Commission also concluded that the business practices adopted by PVR in relation to pricing as well as non-pricing like contractual terms with film distributors were standard industry practices and did not result in anti-competitive outcomes. Thus, the CCI concluded that PVR’s actions did not restrict competition or harm consumer welfare, and therefore, did not constitute an abuse of dominance under the Act.
The dominant position that PVR holds in the sector has raised red flags over anti-competitive practices.The complaints against PVR suggest potential violations, including imposing unfair conditions and prices, which could distort the competitive landscape. This case highlights the importance of effective competition law enforcement to eliminate market discrimination to the budding enterprises. Dealing with these matters are important not only in the light of consumer interests but also to ensure that the market remains clean. Businesses with monopolistic tendencies have to always walk that proverbial tightrope of operation to ensure minimal regulatory responsiveness, hence the reason why best practices must be strictly adhered to in every sector as regards operating within the confines of a defined market jurisdiction. Whatever the resolution of this investigation, it is likely to be controversial and give widespread closure on fair competitive practices under Competition Act to all other dominant firms in the industry.
Notes:-
[1] Competition Act, 2002, Indiacode.nic.in (2014), https://www.indiacode.nic.in/handle/123456789/2010 (last visited Sep 25, 2024).
[2] Vertical agreements in Indian competition law – Shardul Amarchand Mangaldas & Co, Shardul Amarchand Mangaldas & Co (2021), https://www.amsshardul.com/insight/vertical-agreements-in-indian-competition-law/ (last visited Sep 25, 2024).
[3] Market Power – Definition, Factors, Measurement Tools, Wall Street Oasis, https://www.wallstreetoasis.com/resources/skills/economics/market-power.
[4] Adverse Effect under Competition Law – Finology, Finology.in (2018), https://blog.finology.in/Legal-news/Adverse-Effect-under-Competition-Law (last visited Sep 25, 2024).
[5] Ghosh, S. (2024) What were the allegations against PVR for abuse of dominant position? : Explained, The Hindu. Available at: https://www.thehindu.com/business/Industry/what-were-the-allegations-against-pvr-for-abuse-of-dominant-position-explained/article67730175.ece (Accessed: 25 September 2024).
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Author: Rishabh Singh, a 5th-year BBA LLB (Hons) student at CHRIST (Deemed to be University), Pune, Lavasa,
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