Case Law Details
Yogesh Pratap Singh Vs PVR Ltd. (Competition Commission of India)
PVR cleared of anti-competitive charges by Competition Commission in Yogesh Pratap Singh case. Analysis of allegations and Commission’s findings.
PVR Found Not Guilty of Anti-Competitive Practices in Preferential Treatment for Films by Powerful Production Houses
Introduction: The Competition Commission of India recently concluded its inquiry into allegations made by Mr. Yogesh Pratap Singh against PVR Ltd., accusing the company of engaging in anti-competitive practices in the film exhibition market. The order, issued under Section 26(2) of the Competition Act, 2002, sheds light on the details of the case and the Commission’s findings.
Background: Mr. Yogesh Pratap Singh, a lawyer, novelist, script-writer, and filmmaker, filed a complaint under Sections 3 and 4 of the Competition Act, 2002, alleging that PVR Ltd., a major player in the film exhibition industry in India, abused its dominant position. The Informant claimed that PVR favored films produced by powerful production houses, creating barriers for independent filmmakers like himself.
Allegations: The Informant made several key allegations against PVR:
- Special Treatment: PVR was accused of according special treatment to films from large production houses, resulting in preferential treatment, such as playing multiple trailers for free, extensive promotional efforts, and significant screen allocation.
- Lack of Transparency: PVR was alleged to have undisclosed commercial policies regarding screen allocation, release parameters, and relative placement of films by independent filmmakers and large production houses.
- Vertical Integration: The Informant contended that PVR, through its group company, engaged in film production and distribution, creating a vertical integration that discriminated against independent filmmakers.
- Violation of Other Laws: The Informant also claimed that PVR violated various laws, including environmental and municipal regulations.
Commission’s Analysis and Findings:
The Commission considered the Informant’s claims and PVR’s response before reaching its conclusions:
- Screen Allocation: PVR provided evidence showing the exhibition of the Informant’s film alongside blockbuster movies. The Commission found that the allocation of screens was based on revenue potential, buzz around the film, marketing efforts, historical data, and other relevant factors.
- Vertical Integration: The Commission acknowledged that vertical integration is not prohibited, and PVR demonstrated that it exhibited films produced by independent filmmakers alongside those from large production houses.
- Preferential Treatment: PVR argued that its agreements with producers and distributors, irrespective of size, had similar terms. The Commission found no evidence supporting the claim of preferential treatment for large production houses.
- Lack of Transparency: The Commission accepted PVR’s argument that privately negotiated terms are commercially sensitive and may not be publicly disclosed.
Conclusion: The Commission, after careful consideration, found no prima facie case of contravention of Sections 3 and 4 of the Competition Act. It concluded that there was no discernible competition concern, and the matter was ordered to be closed under Section 26(2) of the Act.
Confidentiality: The Commission granted confidentiality to certain documents filed by PVR, in accordance with Regulation 35 of the Competition Commission of India (General) Regulations, 2009, for a period of three years.
Final Remarks: The order highlights the importance of autonomy for exhibitors in choosing films based on commercial considerations. The Commission emphasized that unless harm to competition is apparent, interventions may lead to undesirable consequences by impinging on the autonomy of businesses. PVR, in this instance, has been absolved of the allegations made against it, and the case has been closed.
FULL TEXT OF THE ORDER OF COMPETITION COMMISSION OF INDIA
Order under Section 26(2) of the Competition Act, 2002
1. The present Information was filed by Mr. Yogesh Pratap Singh (hereinafter, the “Informant”) under Section 19(1)(a) of the Competition Act, 2002 (hereinafter, the “Act”) alleging contravention of the provisions of Sections 3 and 4 of the Act by PVR Ltd. (hereinafter, “Opposite Party”/ “OP”).
Facts and allegations as stated in the Information
2. The Informant, after demitting public office, is stated to have taken up the profession of a lawyer, along with being a novelist, script-writer, lyricist and film maker.
3. OP is stated to be primarily in the businesses of exhibition of films in India through multiplexes and is also engaged in the production, promotion and release of films.
4. The Informant alleges that the OP, by virtue of controlling more than half of the upscale multiplex screens in India, is in a dominant position in the film exhibition market and has abused its dominance by according special treatment to films of powerful and monetarily affluent production houses and constraining the entry of films by independent filmmakers. It is also stated that OP has indulged in cartelization and vertical integration by entering into business of film production, film distribution and film exhibition with the big production houses.
5. As per the Informant, his first fictional Hindi film titled ‘Kya Yahi Sach Hai’ and second film, ‘The Indian Supari Company’ suffered due to the alleged undercurrent of anticompetitive conduct by the OP, which is a result of collaboration/cooperation between big production houses and the OP, creating entry barrier for films by independent film producers. The Informant has stated that the movie ‘Kya Yahi Sach Hai’ received an overwhelming response on YouTube, garnering about 1.3 crore views.
6. Further, the Informant has stated that he attempted to contact the OP for striking a dialogue for the exhibition of his upcoming film in the OP’s theatres, vide email dated 19.04.2022 on its authorized email address, but the same was blocked by the OP. Later on, vide letter dated 19.04.2022, the Informant tried to get certain issues redressed; however, there was no response from OP.
7. The Informant has leveled allegations against OP in respect of contravention of the provisions of Sections 3 and 4 of the Act, which are, inter alia, listed as under:
(i) OP accords special treatment to films of large production houses by entering into special tie-ups with them for production, promotion, release and exhibition of films, thereby causing entry barrier for films made by independent filmmakers. It has been stated by the Informant that the OP was indirectly involved in the production of film Brahmastra, as consequence of which, the film received preferential treatment. This preferential treatment allegedly contained playing multiple trailers of the film free of cost, putting up huge banners and LED displays, assigning overwhelming number of screens for its screening etc., so much so that, except “Brahmastra” other films got almost no space in the first week of its release. It has also been stated that the OP, for the promotion of the film RRR, entered into a special tie-up with the filmmaker and changed its brand identity and logo from “PVR” to “PVRRR”. OP is also alleged to have entered into a tie-up with Aamir Khan Productions for film “Laal Singh Chaddha” where overwhelming number of screens were allotted to it and remaining screens were allotted to another prominent filmmaker, Akshay Kumar, leaving no screens available for the films made by the independent film makers. Thus, OP allots almost all of its screens to the films of large production houses in their release week, thereby banning the entry of films by independent filmmakers.
(ii) OP has not disclosed its commercial policy on allocation of screens, release parameters including cost and availability of theatres and relative placement of independent film vis-à-vis large production houses. Because of its opaque allocation policy relating to screening of movies, the OP has discriminated against the Informant.
(iii) OP, through its group company, Starlight Pictures Private Limited (“SPPL”), has entered into business of film production and through ‘PVR Pictures’ is also engaged in film distribution, thereby vertically integrated itself in producing, distributing and exhibiting films. By this conduct, OP has created discretion in its favour such as, inter alia, promotion of films by multiple methods, showing of trailers free of cost for several months, according disproportionate prominence to films etc., which are not available to the independent filmmakers.
8. The Informant has also alleged violation of some other laws such as environmental, municipal laws etc. by the OP.
9. It has been stated that the film exhibition business is extremely sensitive to the intellectualism of the nation as it influences thoughts of the people, which, in turn, have a bearing on the growth of the nation. For this reason, the touchstone of competition in this sphere is very critical and thus has to be considered through an extremely strict interpretation of the provisions of the Act vis-à-vis other sectors of the economy.
10. In view of the foregoing, the Informant has prayed to the Commission for an investigation into the allegations made in the Information and inter-alia issue following directions to the OP: (i) to give concessions to all filmmakers on same terms, (ii) to make public all the terms of the agreements made with large production houses, (iii) not to enter into special tie-ups with large production houses with respect to allocation of screens, promotional trailers and (iv) to disband vertical integration of film production and exhibition. The Informant has also prayed that suitable fine be imposed upon the OP for indulging in anticompetitive conduct.
11. The Informant has also sought interim relief under Section 33 of the Act restraining the OP from entering into exclusive tie-ups with specific production houses during the pendency of the instant proceedings and directing the OP to spell out the terms and conditions for screening films by independent filmmakers.
12. The Commission considered the matter on 05.07.2023 and directed OP to file its comments/reply, if any, within 4 weeks with a direction to serve a copy to the Informant, in advance. The Informant was directed to file its response/comments to the comments/response filed by OP, if any, within 2 weeks thereafter, with an advance copy to OP. In terms of order dated 05.07.2023, OP filed its response/comments on 25.08.2023, after seeking extension of time. The Informant has not filed its rejoinder to the response/comments filed by OP.
Submission of OP
13. The Commission notes that OP, in its submission, has denied all the allegations leveled against it and stated that the Information primarily deals with issues outside the purview of the Act and is based on false/misleading statements. It is also stated that the allegations made by the Informant are not backed by evidence and that proceedings before the Commission have been initiated by him with the intention of pressurizing it to exhibit the Informant’s film, in absence of any legal obligation to do so.
14. OP has further stated that it has no special tie-ups or recurring/long-term arrangement and that the terms of agreement, including those of promotion, agreed to by the OP with independent filmmakers as well as that with large production houses are similar. OP has further stated that it is not in its own interest to provide preferential treatment to any particular producer/distributor. With regards to screen allocation, OP has submitted that the same is decided based on mutually objective criterion where the prime consideration is revenue generating potential of the movie. OP has stated that it does not discriminate against independent film makers but exhibits movies of independent filmmakers regularly.
15. With regards to making its commercial terms public, OP has stated that privately negotiated terms (including prices etc.) are commercially sensitive and cannot be made publicly available, as sought by the Informant. OP has further stated that revenue sharing terms/percentage followed by it is known to everyone in the industry and is available in public domain.
16. With regards to allegations in relation to OP’s vertical integration in the industry being anti-competitive, it has been submitted that vertical integration of enterprises is not prohibited under the provisions of the Act, unless such integration results in some preferential or discriminatory conduct towards other players. OP has further submitted that it does not offer any preferential terms to its own films and majority of OP’s exhibition revenue is earned from films produced and distributed by third parties. It has also been stated that vertical integration between exhibitors and other stakeholders is fairly common in the industry.
17. OP has also submitted that allegations with regards to violation of several local and municipal laws and not promoting intellectualism of the nation are not covered within the ambit of the Act.
Analysis of the Commission
18. The Commission considered the matter on 08.11.2023 and decided to pass an appropriate order in due course.
19. The Commission notes that the primary grievance of the Informant stems from the alleged discriminatory treatment by OP in allocation of screens for exhibition of movies. It has been alleged that OP allocates almost all of its screens to films produced by large production houses which leaves no place for films produced by independent filmmakers. Furthermore, vertical integration by OP in the film exhibition industry which may squeeze out competition has also been alleged by the Informant.
20. With regard to the allegation of allocating almost all its screens to films produced by large production houses, the Commission notes that OP has submitted evidence of exhibiting Informant’s film titled as ‘Kya Yahi Sach Hai’ alongside blockbuster commercial movie ‘Don 2’. Further, it has been submitted that the Informant’s film earned a collection of merely Rs. 3 lakhs in 90 allocated shows across 11 different locations.
21. With regard to the allegation that the OP has vertically integrated itself with production, distribution and also exhibition of films, the Commission notes that the vertical integration per se is not prohibited under the provisions of the Act. Furthermore, the Informant has not adduced any evidence in this regard to substantiate the allegations. On the other hand, OP has submitted that films produced by independent filmmakers were exhibited alongside exhibition of films produced by large production houses. It has also been submitted that in FY 2022-23, majority of the films exhibited at the OP’s theatre as well as revenue earned from them were produced or distributed by third-party. Accordingly, OP has submitted that there can be no question of foreclosure to the films produced or distributed by the third-party. The Commission finds force in the argument of OP.
22. With regard to the allegation of preferential treatment being afforded to the large production houses, the Commission notes that OP has stated that most of the terms including the revenue sharing terms, agreed to with all producers/distributors are largely the same, regardless of whether they are independent filmmakers or large production houses. Further, OP has submitted that the agreement for exhibition of movies at OP’s multiplexes is prepared by the producers/distributors of the films themselves and not the exhibitors like the OP.
23. As far as allegations of discriminatory screen allocations, the Commission notes that the OP has submitted that the allocation of screens is being done following criteria such as revenue generating potential of the movie, excitement/buzz around the film, marketing, advertising and promotions done, historical data (admission/box office revenue) of films of similar genres, previous review of the film maker, selection team’s estimate of box office collection, language of the film and cast & crew etc. It has further been submitted that the guiding factor for selection of films and screen allocation is maximization of footfalls and revenue.
24. 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.
25. Based on the justifications provided in preceding paragraphs, 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.
26. Against the aforesaid backdrop, 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.
27. In view of the foregoing, 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.
28. Before parting with the order, the Commission deems it appropriate to deal with the request of the OP seeking confidentiality over certain documents/information filed by them under Regulation 35 of the Competition Commission of India (General) Regulations, 2009 (General Regulations). Considering the grounds put forth by the OP for the grant of confidential treatment, the Commission grants confidentiality to such documents/information in terms of Regulation 35 of the General Regulations read with section 57 of the Act for a period of three years from the passing of this order. It is, however, made clear that nothing used in this order shall be deemed to be confidential or deemed to have been granted confidentiality, as the same has been used for the purposes of the Act in terms of the provisions contained in section 57 thereof.
29. The Secretary is directed to communicate to the parties, accordingly.
