COMPETITION ISSUES IN THE INDIAN FILM INDUSTRY
Dissertation submitted in part fulfillment for the requirement of the
Degree of
LL.M
Submitted by Supervised by
DRISHTI PARNAMI DR. GARIMA DADHICH
NATIONAL LAW UNIVERSITY
DELHI (INDIA)
2016
i
DECLARATION BY THE CANDIDATE
I hereby declare that the dissertation entitled “Competition issues in the Indian Film
Industry” submitted at National Law University, Delhi is the outcome of my own work carried out under the supervision of Dr. Garima Dadhich.
I further declare that to the best of my knowledge, the dissertation does not contain any part of work, which has not been submitted for the award of any degree either in this University or in any other institution without proper citation.
Drishti Parnami
Roll No. 35 LLM 15
National Law University, Delhi
New Delhi
May 30, 2016
i
CERTIFICATE OF SUPERVISOR
This is to certify that the work reported in the LL.M dissertation entitled “Competition issues in the Indian Film Industry” submitted by Drishti Parnami at National Law University,
Delhi is a bona fide record of her original work carried out under my supervision. To the best of my knowledge and belief, the dissertation: (i) embodied the work of candidate herself; (ii) has been duly completed; and (iii) is up to the standard, both in respect of content and language, for being referred to the examiner.
Dr. Garima Dadhich Assistant Professor, Corporate Governance and Public Policy Indian Institute of Corporate Affairs Ministry of Corporate Affairs - Govt. of India
New Delhi May 30, 2016
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ACKNOWLEDGEMENT
Completion of this L.L.M dissertation was possible with the support of several people. I would like to express my sincere gratitude to all of them.
I wish to express my deepest gratitude and regards to my respected teacher, Dr. Garima
Dadhich, who despite her busy schedule was always available for my help. She always has been an inspiration and it was her efforts and constant guidance only which have made this work possible. Her valuable inputs and motivation at the times of distress kept me going.
I would like to thank my Grand Parents and Parents who have always trusted me and provided me with whatever I asked for. It is due to their endless love and blessings only that I could pursue my goals and reached this place.
I would also like to thank film distributor, Mr. Kishan Khurana for taking out his valuable time and guiding me with the intricacies of the industry working.
Last but not the least; I would like to thank my friends at NLUD who made this journey memorable for me. Arya Singh, Shyam Adhlakha, Parul Madan and Tania Singla deserve a special mention.
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LIST OF ABBREVIATION
(FTPGI) Film and Television Producers Gild of India Ltd.
AAEC Adverse Affect on Competition
AMPTPP The Association of Motion Pictures and TV Programme Producers
CCCA Central Circuit Cine Association
CCI Competition Commission of India
COMPAT Competition Appellant Tribunal
DG Directorate General
EIMPA Eastern India Motion Pictures Association
FDA(k) Film Distributor Association (Kerala)
FICCI Federation of Indian Chambers of Industry and Commerce
IMPPA Indian Motion pictures Association
IP Intellectual Property
KFCC Karnataka Film Chamber of Commerce
KFEF- Kerala Film Exhibitors Federation
Ltd. Limited
MPA Motion Pictures Association
MPPC Motion Picture Patent Company
NIMPA North Indian Motion Pictures Association no. Number
P. Page
iv
Pvt. Private
U.S- United States
U.S.C United States Code
UPDF- United Producers/Distributors Forum v. Versus
v
LIST OF CASES
Indian Cases
1. Aamir Khan Production Private Limited v. Competition Commission of India Writ
Petition No. 358 OF 2010
2. Ajay devgan films against Yash Raj Films Case no. 66 of 2012
3. Competition Commission of India v. Steel Authority of India, Civil Appeal no.
7779/201
4. CrownTheatre v. Kerala Film Exhibitors Federation , Case no. 16 of 2014
5. Eros International Media Limited. Against CCCA, Indore, FDA (k), NIMPA, MPA,
Case no. 52 of 2010
6. FICCI – Multiplex Association of India Federation House v. United Producers/
Distributors & Ors Case No. 01 Of 2009
7. Film & Television Producers Guild of India Against Multiplex Association of India
(MAI), Mumbai, PVR Ltd, Inox Leisure Limited, Fame India Ltd, Reliance Media
Works Ltd, Cinemax India Ltd. , Fun Multiplex Pvt. Ltd., HDIL Entertainment Pvt.
Ltd., DT Cinemas, Movietime Cineplex Pvt. Ltd., Satyam Cineplexes Ltd., SRS
Entertainment & Retail Ltd., AB Movies Pvt. Ltd., Velocity Limited, Case no.
37/2011
8. Hemant Sharma v. Chess Federation Writ Petition no. 5770 of 2011
9. In re Kerala Cine Exhibitor Association Against Film Distributor Association
(Kerala), Kerala Film Producer Association, Kerala State Chalchitra Academy, State
of Kerala Case no. 45 of 2012
10. In re M/s Reliance Big Entertainment Private Limited Informant and Tamil Nadu
Film Exhibitors Association, Case No. 78 of 2011
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11. In re: M/s Cinergy Independent Film Services Pvt. Ltd. Telangana Telugu Film
Distributors Association, Karnataka Film Chamber of Commerce, Indian Film
Exporters Association, Andhra Film Chamber of Commerce, M/s Big Bang Media
Pvt. Ltd., Case No. 56 of 2011
12. Kannada Grahakara Koota , Shri Ganesh Chetan Against KFCC, Karnataka
Television Association (KTVA) , Karnataka Film Directors Association, Kannada
Film Producers Association, Kannada Chalanachitra Academy, Karnataka Film
Artists, Workers and Technicians Union Case no. 58 of 2012
13. M/s Cinemax India Limited (now known as M/s PVR Ltd) v. M/s Film Distributors
Association (Kerala) Case No. 62 of 2012
14. M/s. Shri Ashtavinayak Cine Vision Limited v. PVR Picture Limited and Others
15. Motion Picture Patents Co. v. Independent Moving Pictures Co. of America, 200 F.
411(2d Cir. 1912)
16. Mrs. Manju Tharad, Proprietress and M/s. Manoranjan Films, Kolkata v. EIMPA
17. Multiplex Association of India Federation House v. United Producers/ Distributors &
Ors Case No. 01 Of 2009
18. P.V Baheer Against Film Distribution Association (Kerala), Case No.32of 2013
19. Reliance Big Entertainment Ltd. etc. Against Karnataka Film Chamber of Commerce
and ors. 2012CompLR269(CCI)
20. Sunshine Pictures Ltd. v. Motion Pictures Association and others., Case no. 56 of
2010
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International Cases
21. United States v. Motion Picture Patents Co., 225 F. 800, 808 (E.D. Pa. 1915).
22. American Tobacco Co. v. United States, 328 U.S. 781
23. Compagnie générale maritime and Others v Commission [2002] T-86/95, ECR-
1011ECR 215,
24. Europemballage Corporation and Continental Can Company Inc. v Commission ,
Case 6/72, [1973]
25. Hilti AG v Commission [1991], Case T-30/89 ECR II-1439
26. Hoffmann-La Roche & Co. AG v Commission [1979] Case 85/76 , ECR 461
27. Interstate Circuit Inc. v. United States, 306 U.S. 208 (1939).
28. Kalem Co. v. Harper Bros., 222 U.S. 55 (1913).
29. Lexmark Int'l, Inc. v. Static Control Components, Inc., 387 F.3d 529
30. Motion Picture Patents Company v. Universal Film Manufacturing Company, 243
U.S. 502, 512 (1916).
31. Sony Corporation v. Universal City Studios. Inc., 464 U.S. 417 (1984)
32. United Brands Company and United Brands Continental v Commission [1978] Case
27/76 ECR 207
33. Unites States v. Paramount Pictures 334 U.S. 131 (1948)
34. United States v. Topsco Associates Inc. [1972] 405 US 596 (610)
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TABLE OF CONTENTS
TITLE PAGE No.
DECLARATION BY THE CANDIDATE I
SUPERVISOR’S CERTIFICATE Ii
ACKNOWLEDGEMENT Iii
LIST OF ABBREVIATIONS iv-v
LIST OF CASES vi-viii
TABLE OF CONTENTS ix-x
CHAPTER ONE
INTRODUCTION 1-8
CHAPTER TWO
ABOUT FILM INDUSTRY: BASIC OVERVIEW 9-18
2.1Economic Aspect 9-10
2.2Territorial Classification of Industry 10-11
2.3Film Industry Working 11-12
2.4Price Negotiation System 12-14
2.5Industry Regulation 14-18
CHAPTER THREE
ANTI-COMPETITIVE AGREEMENTS IN FILM INDUSTRY 19-39
3.1Background 19-21
3.2Case Analysis 21-32
3.3 Revenue Sharing Arrangement 32-35
3.4Antitrust in U.S 35-39
CHAPTER FOUR
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ABUSE OF DOMINANCE IN FILM INDUSTRY 40
4.1Meaning of Dominance 40-42
4.2Relevant Market 42
4.3 Abuse 43-44
4.4Film Cases 44-49
4.5 Case Analysis 49-50
4.6Position in U.S 50-52
CHAPTER FIVE
INTEFACE OF COPYRIGHT AND COMPETITION LAW 53-64
5.1 Copyright and Competition Law: Basic Overview 53-55
5.2Industry Copyrights 55-57
5.3 Competition Law Analysis of the Film industry Copyrights 58-59
5.4 Interface of the two laws 59-63
5.5Analysis of the two laws 63-64
CHAPTER SIX
CONCLUSION AND RECOMMENDATIONS 65-68
6.1Conclusion 65-66
6.2Recommendation 67-68
BIBLIOGRAPHY i-vi
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CHAPTER ONE INTRODUCTION
1.1 BACKGROUND
Indian Film industry is one of the most popular, glamorous fields to work in. It has a huge working field with many players as its part. This work is based on the working of the Indian film industry and the Competition Law issues involved in it. Competition Law is described as the “magna carta” or the engine of free enterprises1. Through the means of Competition Law the resources are decentralised2 and are distributed among the various participants and through this law certain limit could be imposed on a state power with regard to giving of privileges.
The objective of Competition Law is to protect competition as the most efficient means of ensuring efficient allocation of resources which would result in efficient market outcomes in free market economies3.
In India, the primary rationale behind the placing of effective competition is the interest of the consumers and promoting efficiency in the markets. Indian political structure and ideology is highly influenced by the socialism which means there would be lot of state intervention in business and equitable distribution of wealth. Government of India first initiative in controlling and regulating the free business was in 1964, when it appointed the Monopolies Inquiry Commission to investigate the level of concentration of industries in the market. The committee found out that 85 percent of the markets are highly concentrated4 and the Indian producers and distributors are engaged in restrictive and manipulative practices.
Another major effort to control the competition was taken by the legislature by enacting the Monopolies and Restrictive Trade Practises Act, 1969. The Act was based on the welfare ideology of the Indian jurisprudence as enshrined in Article 38 and 39 of the Indian
1 Introduction to Competition Law, http://old.unipr.it/arpa/defi/furse_ch01.pdf. (Last Visited May 23rd 2016, 9: 29 A.M). 2 United States v. Topsco Associates Inc. [1972] 405 US 596 (610). 3 Herbert Hovenkamp, Federal Antitrust Policy: The law of Competition and its practices (west, 1994), p.3; ABIR ROY & JAYANT KUMAR, COMPETITION LAW IN INDIA, (Eastern Law House) (2008) 4 GOVERNMENT OF INDIA, REPORT OF MONOPOLIES INQUIRY COMMISSION(1965), http://reports.mca.gov.in/Reports/44Report%20of%20the%20monopolies%20inquiry%20commission%201965 %20Vo1.-I-II.pdf. (Last Visited May 23rd 2016, 10 A.M).
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Constitution5. It covers all the fields of production i.e. from manufacturing to distribution to retail6 and aims to rationally allocate the resources and make available the goods and services at a reasonable price.
MRTP Act was more controlled and strict; it regulated monopolistic, restrictive and unfair trade practices7. However, the Act lost its relevance when the Indian economy was transformed from closed economy to free economy in 19918. As India opened up its economy, it becomes necessary to adopt the trade laws at par with the world standards. Since MRTP law was based on the anti-monopoly ideology as India was the close economy before 1991. Competition Law came up with a broader horizon and is against the enterprise whether monopoly or not, if it causes AAEC.
The major Competition Law issues with respect to Film Industry revolve around the association of different members, such as the association of producers or distributors or exhibitors or the combine associations of any of them. The associations are formed to promote the general welfare of industry; but the limits on the power of the associations are not set. This is the reason that many cases are filed against the rules and regulations set by the associations for the promotion of industry alleging that they are causing AAEC. Another concern is applicability of Competition Law provisions in the films, as films are the piece of art governed by the Copyright Act. This work would give a detail analysis of the Statutory Competition Law provisions and its applicability in the working of Indian Film Industry.
5 Competition Act (12 of 2003), Preamble 6 Dr. Chakraborty, India: Pros and Cons of Competition, INT’L BUS. L. 457(1997) 7 Abir, Supra note 3 at 39. 8 New Economic Policy, http://www.britannica.com/event/New-Economic-Policy-Soviet-history (Last Visited May 22nd 2016, 5:39 P.M)
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1.2 LITERATURE REVIEW
The Indian film industry is leading the world with the largest number of films produced per year. According to the study conducted by (FICCI-KPMG) the Indian film industry is valued at US$ 2.11 billion and projects its growth at 9.1 per cent till 2013. (C. Barathi, C.D Balaji, Dr. CH Ibohal Meiti, 2011) pointed out that Indian film industry is regulated and governed by the norms of the Associations which are formed by Producers, Distributors, Exhibitors such as Film Television Producers' Guild of India, Film Writers Association, Indian Motion Picture Producers' Association (IMPPA), The Association of Motion Pictures and Television Programme Producers. Further, there are many different associations formed region wise controlling cinema release and are working in the specified territory for example (EIMPA, NIMPA, CCCA, KFCC, MPA, Delhi). The objective of the federations and associations is to promote trade and to secure the interest of all the stakeholders that includes producers, distributors etc. as mentioned in the official website of (Film Federation of India, an Apex body of Film Industry in India). Rules and regulations formed by these associations have raised legal concerns in the matter of violation of Competition Law provisions as there are many cases registered with CCI by the producers, exhibitors of films alleging that the norms set by the associations are hindering the smooth supply and limiting the release of films. Another concern with the associations is that since there is one association in one territory which manages the distribution and release of films, thus they hold a dominant position in the particular territory and are abusing the same as alleged in (Eros International Media Limited Against CCCA, FDA(k), NIMPA, MPA, case no. 52 and 56 of 2010; Reliance Big Entertainment Ltd. etc v. KFCC, case no. 25 of 2010). Till now, the issues that are raised is pertaining to the norms set by the Associations. In the (Ajay Devgan against Yashraj films, case no. 66 of 2012), the allegation of abuse and anti-competitive behaviour is raised against the studios. In U.S also the issue of dominance of studios had disturbed the entire pricing system and working of the industry as discussed by (Barak Y. Orbacht, 2004). Films are the subject matter of copyright and (Copyright Act, 1957) gives protection to the holders of copyright which eventually gives them a monopoly position. In the film industry as pointed out by (Iyenger’s, 2005) producer is the copyright owner of the film. (Jonnathan A. Mukai, 2005) mentioned that copyright owners because of their position exert pressure on the downstream players in the market. On the other hand objective of Competition Law is to promote competition and according to (Carlos M. Correa, 2007) this can be achieved by
3 removing the market barriers. Competition Law as pointed by (Federal Trade Commission) and (John T. Cross & Peter K. Yu) are applicable to copyrights. Thus, there is an intersection in the application of Copyright and Competition Law which is discussed in the (Paramount case) in U.S and in India this intersection was raised in (Aamir Khan Productions Private Limited a company incorporated under the Companies Act, 1956 and Aamir Hussain Khan vs. Union of India (UOI) through Ministry of Company affairs, 2010 CompLR105(Bombay)) as discussed by (K.D Raju, 2012). This research work would be detailed analysis of the working of the film associations and scrutinize their norms in the light of the existing Competition Law statutory provisions in India. Further, it is important to know whether the Competition Law can be applied to films, as it is a creative work of art whose owner is the producer of the film (William Fisher). As Competition Law in India is still evolving, not much work has been done in relation to film industry. Therefore, the researcher for analysing the Competition Law aspect has much relied on the cases which are registered with CCI and took a basic reference of U.S antitrust law; as there the antitrust law was enacted in 1860 and therefore jurisprudence is far more evolved.
1.3 RELEVANCE
Entertainment industry is very dynamic and is considerably contributing to the growth of the economy. It is important to analyse if the industry is working in a fair manner and is providing each player with an equal level playing field. This work is initiated by the researcher primarily for the reason that in India, Competition Law is at a very nascent stage and not much work is done in this regard. A lot of work is done explaining the working of film industry. Also the basic concepts of Competition Law including anti-competitive agreements, abuse of dominance etc. is also done by various authors. But the integration of Competition Law principles in the film industry matters is not much worked upon in the Indian context.
Further, there are Competition cases applied and decided by CCI, but a proper set of guidelines for governing the future course of action in industry is not yet developed. Thus, through this research work researcher would identify the competition issues and attempt to give solution to regulate the film industry.
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1.4 OBJECTIVE
1. To study the rules and regulations formed by Associations of producers/ distributors and exhibitors and analyse the anti-competitive effects that are caused which harms the working of film industry. 2. To understand and analyse the dominant position of the film associations which regulates the industry norms and set the terms of release, exhibition of movies in theatre. 3. To study the extent and scope of the application of Competition Law provisions in the in the matters pertaining to Copyright protection in film industry
1.5 HYPOTHESIS
1. Motion Pictures Associations are non profit entities and are formed for the general benefit of film industry, therefore acts that are performed by them falls outside the ambit of Competition Law. 2. Competition Law can be applied in the film industry matters even if it is the subject matter of Copyright Law
1.6 RESEARCH QUESTIONS
1. Whether the agreements that are entered by parties at various levels from the film making to its release are anti-competitive in nature? 2. What is the position of Film Associations in the industry and whether they are controlling the cinema regime? 3. Whether Competition Law can be applied on the issues related to the distribution, release of the films which is the subject matter of Copyright Law?
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1.7 METHODOLOGY
Research for this work is conducted at the library of National Law University, Delhi. In this study researcher has used “Doctrinal Method”. As the study is based on the following primary and secondary sources:- Cases of CCI, COMPAT, producer- distributor agreement, Associations Annual General Report booklet of Film association, books, reports and journal articles.
1.8 STATEMENT OF PROBLEM
Competition Law in India is enacted replacing the MRTP law, it is though at a very nascent stage, and is enforced in 2009. There are many cases that are registered with the Competition Commission and as the awareness of this forum is increasing, the case registration is rising at a fast rate. The basic aim with which Competition Law is enacted is to promote competition in the markets and to promote the interest of consumer. Further, it aims to ensure freedom to trade. Even in this short span of time, there are many cases of film industry though of similar nature are registered with the Commission. These cases are mainly pertaining to the rules and regulation formed by the associations which is a collective body of producers, distributors and exhibitors formed for the purpose of general industry regulation. The basic concern is that the rules framed by these associations are generally regulating the industry, or in the name of regulation they are crossing the scope and intention with which they are made. In this research work, researcher would make an attempt to solve this concern. Further, another problem is that as Competition Law provision exempts its application on any work which is a subject matter of Copyright Law, and cinematograph films falls under the ambit of Copyright Law which could lead to no jurisdiction of CCI in the film matters. This work would attempt to rest this conflict.
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1.9 SCOPE AND LIMITATION
This research work is a study of the applicability of Indian Competition Law on the Indian Film Industry. A small reference of U.S antitrust law is made in all the chapters, as U.S antitrust law is of 1860 and much worked upon, but this work does not cover the detailed study of Motion picture industry in U.S. Further, this is a pure legal study, the economic aspect of price fixation of movies in theatres etc. is not covered in this work. This work is not dealing with the issue of piracy in films and is based purely on Competition Law content. Also, procedural aspect of Competition Law is not dealt with and the researcher has focused this research primarily on the application of substantive part in the film industry matters.
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1.10 CHAPTERIZATION
Chapter 1: Introduction: In this Chapter the objective of the research, Statement of problem, hypothesis of the research and literature review is done.
Chapter 2: Indian Film Industry: Basic overview: In this chapter economic importance, working of the Indian film industry would be discussed. As the major film matters registered with CCI are against the different associations formed by producers/ distributors/ exhibitors. Therefore, it becomes very important to know what these associations are and how it is formed and who are its members.
Chapter 3: Anti-Competitive Agreements in the Indian Film Industry: Section 3 of the Act deals with anti-competitive agreements. In this chapter the statutory concept of anti- competitive agreements would be discussed first, thereafter a detailed analysis of film cases would be done applying section 3 of the Act.
Chapter 4: Dominance of Film Associations: There would be an elaborated discussion of abuse of dominance concept and whether the associations of film producers/ distributors/ exhibitors are dominant and if they are; whether they are abusing their position would be the matter of concern.
Chapter 5: Interface of Copyright and Competition Law: Competition Law is a new legislation and its applicability is not absolute over all the fields. There are certain exceptions where this law cannot be applied for example in the cases of intellectual property, and export related cases. This chapter will focus whether Competition Law can be applied in the matters of copyright and to what extent; as films are the subject matter of copyright.
In the last chapter researcher would draw conclusion of the work by answering the research questions, proving the hypothesis and suggestions would be given to regulate the industry in a better way.
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CHAPTER TWO
ABOUT INDIAN FILM INDUSTRY
2.1 ECONOMIC ASPECT
Indian film industry forms one of the major parts and oldest segments of the Indian entertainment industry constituting about 27 percent of the whole industry. The film industry was given the status of industry under section 2[C][XVII] of Industrial Development Bank of India Act, 1961 on 16th October 2000 wide notification of the Union Government issued by the Ministry of Finance (Department of Economic Affairs)1.
In India, films are generally divided into three categories on the basis of language which includes hindi, regional and foreign films. Out of these hindi cinema forms the major part of the whole industry comprising of approximately 43 percent of the box office revenue. Second major contributor is regional cinema including only Tamil and telugu movies which contribute to approximately 36 percent and then other regional segment (Malayalam, Kannada, Bengali, Gujarati, Punjabi, Bhojpuri) contribution is 15 percent. Further, there are many large producers such as reliance, Viacom 18, Eros etc. that plans to invest 20 percent of their annual budget on regional cinema.2 International cinema is considerably small but this a growing segment.
Film business with the development in technology now works as a corporate house giving heavy businesses to the economy. The industry produces 1000 films in a year3 on an average and sells about six billion tickets with a gross turnover of more that seventy two billion dollars globally4. Box office collection had contributed 75 percent to the total film industry
1 Central Circuit Cine Association, Bhusawal, 60th Annual Report (2012-2013) 2 Nandini Raghavendra “Reliance Entertainment, Eros, Disney UTV and others see bright future in regional films”, THE ECONOMIC TIMES March 29, 2013. Also see, DELLOITTE, ECONOMIC CONTRIBUTION OF THE INDIAN MOTION PICTURE AND TELEVISION INDUSTRY, MOTION PICTURES ASSOCIATION (March 2014) 3 Stefan Lovgren, Bollywood: Indian Films Splice Bombay, Hollywood, NATIONAL GEOGRAPHIC NEWS, at http:// news.nationalgeographic.com/news/2004/ 01/0121040121_bollywoodfilms.html (Jan. 21, 2004). 4 Bollywood Comes to Town, SABC NEWS, http://www.sabcnews.com/entertainment/ cinema/0,2172,58725,00.html (May 15, 2003). (Last Visited May 11th 2016, 4:55 P.M)
9 revenue in the year 20135. Further, there are approximately 400 production houses all over the nation6. The industry is “expected to grow at a rate of 9.1 per cent per annum from US$ 1.9 billion in 2011 to about US$ 3 billion in 2016”7. The reason behind is first, the development of satellite DTH technology, which has made film an easy access. Second, CD’s and DVD’s, online culture has also changed the film market dynamics. Third, multiplexes has revived the cinema viewing experience, all these factors have contributed to the gross film revenue8. Due to such high revenue raised by the industry and its high demand, the working of this industry is a bit complicated involving many players, and therefore there is a high chance of raising of legal dispute between them. This paper would only focus on the Competition Law related legal dispute.
2.2 TERRITORIAL CLASSIFICATION OF INDUSTRY
The film industry was first divided into different circuits as per the territorial classification in 1930’s. These classifications are not state wise but are according to territories of the colonial times9. In that time, there were four film territories including Nizam, Central Province, Central India, East Punjab. At present there are eleven circuits. Currently there are 11 circuits
Apart from this territorial distribution, for the purpose of revenue sharing the areas are divided into A,B,C categories. In category A, most populated cities are included from where there is a possibility of high revenue earning. In this centre producers have full capacity to earn profits. Thereafter in B and C centres, but then here it is difficult to track the film earnings and due to piracy and television, the difference between these centres has reduced10. This classification on the basis of categories are made in accordance with location of the
5 DELLOITTE, ECONOMIC CONTRIBUTION OF THE INDIAN MOTION PICTURE AND TELEVISION INDUSTRY, MOTION PICTURES ASSOCIATION, http://www2.deloitte.com/content/dam/Deloitte/in/Documents/technology-media- telecommunications/in-tmt-economic-contribution-of-motion-picture-and-television-industry-noexp.pdf (last visited March 25th 2016, 3:58 P.M). 6 Id. 7 INDIAN BRAND EQUITY FOUNDATION, CORPORATIZATION OF THE INDIAN FILM INDUSTRY; A REPORT ON THE PROGRESS OF THE INDIAN FILM INDUSTRY AND THE IMPACT ON CORPORATIZATION, (November 2013), http://www.ibef.org/download/corporatisation-of-indian-film-industry.pdf (Last Visited March 25th , 2016, 5: 12 P.M) 8 Id. 9 TEJANSWANI GANTI, PRODUCING BOLLYWOOD: INSIDE THE CONTEMPRARY HINDI FILM INDUSTRY, 186, Duke University Press (2012). 10 Id. at 188.
10 theatre, seating capacity, other facilities such as advance booking, parking space, cooling system etc11.
Presently, the film industry is divided into six territories which are further divided into eleven circuits. These circuits are divided for the purpose of easing the process of distribution. When a distributor buys a film from the producer, it is for selling the film to a specific territory12. In each of these circuits generally associations are formed either under section 25 of the Companies Act, 1956 or under the society registration Act, 1860. These associations have their own Memorandum of Association and they regulate the film activities in their area13.
2.3 FILM INDUSTRY WORKING
There are three stages involved in the film business that goes from production to distribution to exhibition.
Producer- Producers are persons or a company who are basically the financer of the film and are involved in the production activity. The producer selects the director, actors, storywriters and all other experts required for the film making. He arranges for the studio or the outdoor location where the film is to be made. After the film is ready, producers have to get a certificate from the Central Board of Film censor for the exhibition of film14.
There are four types of producers, first is the category of well established age old studio owners and they have a strong finance and organisational backup to produce the film. Their banner has a strong impact on the film market. For example, Yashraj films. Second category is of the adhoc producers who are attracted to the industry because of glamour and quick money. Third category is of directors cum producers who basically are directors but turned into a producer, as they don’t have one for their films. Fourth category is of cooperative producers in which technicians; artists join together and form cooperation to produce a film15.
11 ASHOK MITTAL, CINEMA INDUSTRY IN INDIA; PRICING AND TAXATION, 56, Indus Publishing Co. (1995) 12 Agreement of ‘Indian’ between Sunny Sounds Pvt. Ltd. and Chhavi Films. 13Sunshine Pictures Ltd. v. Motion Pictures Association and others., Case no. 56 of 2010; Eros International Media Limited. Against CCCA, Indore, FDA (k), NIMPA, MPA, p. 8, Case no. 52 of 2010 14 Supra Note 11 at 49-50. 15 Id.at 51.
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The discussion about the rights of the producers is important to know the extent of application of Competition Law over their copyrights. This issue would be taken up in detail in Chapter 3 of this work.
Distributor- Takes right from the producer make copy of the film, market the film and enters into an agreement with the exhibitors. The need of the distributor is to meet the requirements of taking the film to the cinema which is spread all across the territory. Distributors as middlemen are beneficial to both the parties. For the producer they have simplified the task of marketing and for the exhibitors’ regular supply of films are ensured16. They have acquired tremendous knowledge regarding the market preferences and are therefore called as “film market experts”. These days because of satellite facilities, distribution work is not much complicated and therefore, producers prefer to carry out this work themselves17.
There are different systems of distribution. First is when the big producers have their own distribution chain and they directly sell the films to exhibitors. Second system is when distributor act as a mere wholesaler to market the film and resell it. Third is commission based distribution system. Fourth is Minimum guarantee scheme and last category is outright selling18.
Exhibitor- Owner of single screen theatres and multiplexes
2.4 PRICE NEGOTIATIONS SYSTEM
The revenue which is generated after the film is exhibited is divided amongst the producers, distributors and the exhibitors on the specific revenue sharing arrangement19. There are three main types of distribution arrangement that exists in film industry which includes minimum guarantee system, commission system and outright sale. The most common system which prevails is the minimum guarantee system.
MSG: In this system distributor guarantees a specific sum to the producer which is payable in instalments and distributor pays a fixed amount to the producer. This is a minimum guarantee
16 Id.at 52. 17 Supra note 13 18 Supra note 14 at 53. 19 Ajay devgan films Against Yashraj films and odrs., case no. 66 of 2012
12 that is offered by the distributor and is non refundable20. During the phase of production 30 to 40 percent of the amount is paid and rest of the amount is paid after prints are received. At the time of the release of films, it is the distributor who pays for the rent of the theatre and the publicity cost. The distributor after covering their cost take 25 percent revenue and if any amount is still left then it is shared among the producer and distributor equally. In such kind of system it is the distributor who bears the maximum risk as with the producer a minimum sum is safely guaranteed21.
In the commission system, when distributor advances money to the producer then that investment by the distributor becomes the first charge on the collection of the films22. Distributors bear the least amount of risk as the only cost they have to incur is that of publicity. Distributors collect their commission of around 25 to 30 percent and remit the rest of the amount to the producer23.
Outright system is not very common in India and is generally followed in overseas transaction. In this system it is the distributor who pays the producer out rightly and then incurs all the cost. The hit and flop of the movie is determined not by the theatrical collection but by the profit statement of the distributor24.
There are issues that become a subject of dispute between the players which their respective associations attempt to resolve, but the manner and means of resolution that includes banning of the movie of the defaulter, restraining the members of the association not to deal with the parties who are not its members. In such a situation, the association concern would not have any power to resolve the matter. Further, the associations prevailing in territories make it mandatory for every producer, distributor, exhibitor to be their member and they do not allow independent players to work outside the purview of their hold25.
Different regions in India follow different price negotiation system. For example, in Tamil Nadu, generally films are distributed on an outright basis. In Karnataka, outright and Commission method is followed, whereas in Kerala commission and simple method is the
20 Supra Note 14 at 53. 21 Id. at 189. 22 Id. at 53. 23 Id.at189-190. 24 Id.at190. 25Reliance Big Entertainment Limited etc Against Karnataka Film Chamber of Commerce and odrs. Etc. [2012] 108 CLA116 (CCI)
13 trend. In distribution of Hindi movies MSG system is followed and for the regional movies distribution is done on commission basis26.
2.5 INDUSTRY REGULATION
Ministry of Information and Broadcasting formulates law relating to media and entertainment. Further, entertainment sector of which films are a major part should also adhere to the provision of Copyright Act, Cinema exhibition rules, Entertainment Tax specifically and Motion pictures Associations27. Competition Act should also be applied for the smooth working of the industry. This work would focus on the Competition law issues in the film industry and a reference to Copyright Law would be made to the extent of its intersection with the Competition Law. Producers, distributors and exhibitors form associations which regulate the industry working.
2.5.1 ASSOCIATIONS
An association is formed when group of persons join together to achieve a common purpose. Competition Law doesn’t define the term Association. Business Association and Chamber of commerce, federation of association are defined as the “trade bodies which represents the common and collective interest of their business members, whether individual entrepreneurs, companies, or organizations”28. The business association for achieving effective governance should represent the interest of its members, create value for the industry and it should be ensured that the activities they are carrying are transparent and fair and equitable treatment must be given to its members29. In simple terms association should work for the welfare of its members. The film associations primarily work for the development of film industry and to aid, encourage, develop, popularize the film or motion picture industry. Further, they aim to protect the interest of its members by formulating rules for the conduct of its members and
26 Id. at 54. 27C. Barathi, C.D Balaji, Dr. CH Ibohal Meiti, Trends And Potential Of The Indian Entertainment Industry- An Indepth Analysis, J. ARTS, , SC. & COMM. (2011). 28 World Chamber Federation, Centre for International Private Enterprise, Governance Principles for Business Associations and Chambers of Commerce, http://www.cipe.org/sites/default/files/publication- docs/governancePrinciples_060911.pdf (last visited May 10th 2016 at 10:21 P.M). 29 Id.
14 other persons in the film industry. They also settles dispute through arbitration or mediation between the parties engaged in film business. Now, we would be discussing in brief about major different associations working in the industry and the competition issues that are raised as against the acts of these Associations.
2.5.1. i Eastern India Motion Picture Association (EIMPA)
It was established in the year 1938 and was later registered under the Companies Act of 1956 under section 25 (Section 8 of the Companies Act 2013). It is a non-profit organization which is there to promote and guide the progression of the Indian film industry generally and particularly of the regional film industry. There are four classes of members in this association that includes producers, distributors, exhibitors and associates (laboratory and studio owner). The association mediate, settle disputes amongst its members and provide a common platform to its members for exchanging views and work in harmony. The association does not carry out any business activity for profit motive and it is set up for the welfare and promotion of the industry. Further, its office bearers are elected on honorary basis30.
2.5.1.ii Karnataka Film Chamber of Commerce (KFCC)
It is the association formed in the year 194431 for the purpose of regulation of film producers, theatre owners and distributors having around 5000 members in the State of Karnataka. This association regulates the release of films in the territory. Takes interest in government decision pertaining to the film policy and it also acts as a conciliation board for arbitration of its members. The action of association would be analysed on the point that its regulation on the release of the films is justified or not.
2.5.1.iii Central Circuit Cine Association (CCCA)
It was formed in 1952 and is registered under section 25 of the Companies Act (Section 8 of the Companies Act 2013). The members of this association are the distributors and
30 About Eastern India Motion Picture Association http://eimpa.org/about_us.php (Last Visited May 12th 2016, 1:48 A.M). 31Karnataka Film Chamber of Commerce, http://www.bangalorebest.com/cityresources/Entertainment/filmchamber.php (Last Visited May 20th 2016, 10:00 P.M).
15 exhibitors working in the State of Maharashtra, State of Chhattisgarh, Madhya Pradesh and Rajasthan (Vidarbha &Khandesh Regions)32.
2.5.1.iv Hyderabad /Telagana Film Chamber of Commerce (TFCC)
Hyderabad Film Chamber of Commerce was established in the year 194133, under the Societies Registration Act, 1860. The members of this association are producer, distributors of telugu and hindi cinema and all the exhibitors. The jurisdiction of this cinema is over nine districts of telangana, seven districts of Marathwada and three districts of North Karnataka. When Telanana was created, TFCC was established in the year 2014, 34 in Hyderabad to cater the needs of tollywood actors .
2.5.1.v Northern India Motion Pictures Association, Jalandhar (NIMPA)
It is registered under section 25 of the Companies Act, 1956 (Section 8 of the Companies Act 2013) and operates in the area of Punjab, Haryana, Jammu and Kashmir, Himachal Pradesh and Chandigarh35.
2.5.1.vi Indian Motion Pictures Distributors Association (IMPDA)
IMPDA is an association of film distributors formed in 1939. This association works within the territory of Gujarat, Goa, Mumbai and some parts of Karnataka and covers eleven districts of Maharashtra, twelve districts of Gujarat, seven of Saurashtra and four of Karnataka36.
32Central Circuit Cine Association, https://sites.google.com/site/cccaindore/ (Last Visited May 19th 2016, 10:11 P.M). 33 Manisha Mandllecha, We want to make Hyderabad the hottest hub of film-making'' , http://starblockbuster.com/we-want-make-hyderabad-hottest-hub-film- making#sthash.BiYqL9UQ.dpufhttp://starblockbuster.com/we-want-make-hyderabad-hottest-hub-film-making (Last Visited May 11th 2016, 10:35 P.M). 34 About TFCC , http://telanganafilmchamberofcommerce.com/web/index.html (Last Visited May 11th, 2016, 10:31 P.M). 35Northern India Motion Pictures Association, , https://www.zaubacorp.com/company/NORTHERN-INDIA- MOTION-PICTURES ASSOCIATION/U92111PB1949NPL001569 (May 11th, 2016, 2:07 P.M). 36 Indian Motion Pictures Distributors Association , http://impdaindia.com/who-we-are.html (Last Visited May 11th, 2015 , 10:49 P.M).
16
2.5.1.vii Bihar and Jharkhand Motion Pictures Association (BJMPA)
It was formed in 1987 under the Companies Act, 1956 under section 25 (Section 8 of the Companies Act 2013) and regulates the territory of Bihar and Jharkhand37.
2.5.1.viii Federation of Indian Chambers of Commerce & Industry (FICCI)
It was established in 1927 and is the oldest business organisation of this country. It takes part in policy debates for the development of industry. Entertainment industry division of this large body is involved in conduction of study in the sector and it serves a connection between the media & entertainment industry, Information & Broadcasting Ministry and global interests in this vibrant sector. FICCI Media & Entertainment Committee, Business Conclave Committee, Multiplex Association of India (MAI), FICCI Animation, Visual Effects, Gaming & Comics (AVGC) Forum, Broadcast Forum, Radio Forum are different forums and association formed under its umbrella38.
Multiplex Association of India was formed in 2002 under the Federation of Indian Chamber of Commerce and Industry (FICCI). Its objective is to promote the interest of the multiplex theatre operators in the film industry before Government and other bodies and it has 22 multiplex operators as its members.
Apart from these; there other Associations of film distributors specifically operating in Chennai (Chennai Kanchipuram Thiruvallur District Film Distributors Association); Film Distributors' Association of Kerala which regulates the distribution and exhibition of films in the State of Kerala. In Orissa, there are three film associations that are functioning. i.e. Orissa Film Distribution Syndicate which was registered under Certificate of Registration Act XXI of 1860; Orissa Film Producers Association; Orissa Film Producers Guild Association, where different producers and distributors are the members. The Associations of producers, distributors and exhibitors combine or their association separately exist in different states of the country leading towards the common objective welfare of the members, dispute settlement and overall industrial growth. In this research
37 Bihar Jharkhand Motion Pictures Association https://www.zaubacorp.com/company/BIHAR-JHARKHAND-MOTION-PICTURES ASSOCIATION/U00095BR1987NPL002789(last visited May 10th 2016, 4:07 P.M). 38 FICCI Media and Entertainment Division, http://www.ficci-frames.com/about.htm (Last Visited April 5th 2016, 9 P.M).
17 work researcher would analyse the power that these association should enjoys in the light of statutory provision of Competition Law. For the assessment of competitive conditions in the film sectors, first degree of concentration in the market should be seen. Thereafter, it must be seen whether the regulations or practises prevailing in the industry is creating entry barriers or the risk of exercise of market power which would lead horizontal or vertical concentration threatening competition39.
Now, in the next chapter we would look into the agreements that are framed by the associations discussed in this Chapter and would analyse the anti-competitive effects of the same in reference to section 3 of the Competition Act, 2002.
39 BACKGROUND NOTE OECD REPORT, COMPETITION POLICY AND FILM DISTRIBUTION (1995) p. 6, http://www.oecd.org/regreform/sectors/1920038.pdf (last accessed on April 5th 2016 at 6 P.M)
18
CHAPTER THREE ANTI COMPETITIVE AGREEMENTS IN FILM INDUSTRY
3.1 BACKGROUND
Agreements that are entered into between persons, enterprises etc. related to production, supply, distribution of goods or provision of services that may cause AAEC is prohibited under Section 3 of the Indian Competition Act, 2002.
The film associations comprising of producers or distributors hold a dominant position in a particular region as they frame the agreements in the industry as per their whims and fancies. They instead of helping the players for the smooth functioning of the industry, impose unreasonable conditions and restrictions, which lead to AAEC. Even though the Act was enforced just in 20091, still there are several competition cases filed and appealed in the Competition Commission and appealed in tribunal.
This Chapter would look into the provision of anti-competitive agreements and thereafter its applicability in the film industry disputes in India and other jurisdictions
As per section 3 of the Act, enterprises or association of persons or association of enterprises shall enter into any agreement that determines or limits the purchase or sale prices2 or control the production of goods or services3 or distribute the market as per the geographical area or involved in the process of bid rigging. The agreement could be in respect of production, supply, distribution, storage, acquisition or control of goods or provision of services, which causes or is likely to cause an AAEC within India,4 is void5. However, if any agreement is entered to increase efficiency by way of joint ventures and the agreements that are not causing any AAEC is exempted.
1 Manoj Pandey, Overview of Competition Law - Provisions of Competition Act, 2002. http://www.cci.gov.in/sites/default/files/presentation_document/OverviewofCompetitionLawManojPandey.pdf (last visited May 20th , 2016, 3: 15 P.M). 2 Competition Act (12 of 2003), Sec.3(3)(a)(2002). 3 Sec. 3(3) (b), id. 4 Sec. 3 (1), id. 5 Sec. 3 (2), id.
19
The term AAEC is not explicitly defined in the Act, but the factors through which AAEC could be determined are discussed in section 19 (3) of the Act which includes the level of entry barriers in the market, the market power of the enterprise through which it can drive the competitors out of the market., technical advancement and improvement in production, supply of goods and services6.
The provision specifies certain type of arrangements by the enterprise that may lead to certain anti competitive effects in the market such as tie in arrangement7, in which a customer is bound to buy one product if he is in the requirement of other. In the Ajay Devgan case8, single screen theatre owners were bound by the clause of the Yash Raj production house that in case they want to screen Ek tha Tiger on eid, then they compulsorily have to screen Jab tak hai jaan on diwali as a tie-in clause.
Another important factor that may lead to anti-competitive agreement is exclusive supply and distribution agreement9which means agreement that would “limit, restrict or withhold the output or supply of any goods or allocate any area or market for the disposal or sale of the goods”10. It means that any kind of agreement which controls the supply of any product or service would be anti-competitive in nature and therefore would be void.
In the film industry matters release, exhibition of a film is regulated by various film distributor and producer associations11. The objective of these associations is to promote trade and commerce in general and specifically to watch over the interest of all the stakeholders involved in the industry which includes producers, distributors and exhibitors of the film. Further, they aim to maintain uniformity in the working of this industry with regard to the enforcement/ cancellation of contract, dispute resolution mechanism between the members of the federation and the members or any other person interested or associated with the industry etc.12.
The film federation or associations have various other administrative, advisory functions including protection of the interest of the industry by taking all the possible steps to protect the economic interest of the members of industry by either supporting or opposing the
6 ABIR ROY & JAYANT KUMAR, COMPETITION LAW IN INDIA, (Eastern Law House) (2008). 7Sec. 3(4) (a), Supra note 2. 8 Case no. 66 of 2012. 9Sec. 3(4)(b),(c), Supra note 2. 10 Explanation, Sec.3, Supra note 2. 11 C. Barathi, C.D Balaji, Dr. CH Ibohal Meiti, Trends and Potential of the Indian Entertainment Industry- An in depth analysis, J. ART. SC. & COMM (2011). 12 Film Federation of India, http://www.filmfed.org (Last Visited May 13th , 2016, 2:10 P.M).
20 legislature. Also, they try to encourage friendly relations among the members by encouraging cooperation in the industry and protecting the interest of the members associated.13
The producer and distributor associations enter into agreements with distributors with regard to the exhibition of their films. However, the problem is that these associations are encroaching upon their power and are entering into anti-competitive agreements with the exhibitor of the film. The Acts which led to AAEC includes
Controlling the release of the films by inserting a restrictive clause in the Article of Association that members can deal only with members Controlling the film by making it mandatory for every producer to register the film with the Association Issue related to holdback period for showing the movie on television14
3.2 CASE ANALYSIS
In the case of Motion Pictures Association v. Reliance Big Entertainment Pvt. Ltd15, which is the association of producers16 and their job is to promote and protect the Intellectual Property Rights of these companies and conduct public awareness programs to highlight to movie fans around the world the importance of content protection17. The association engaged in the production, distribution and exhibition of the films.
The informant alleged that the associations were imposing unreasonable and unfair conditions on producers, distributors and exhibitors. Their call was that every distributor shall compulsory register themselves with the associations and those distributors who violated the terms and condition of the association bans, penalties would be imposed upon them. Exhibitors of the film were also threatened and penalised if they exhibit the film of that producer or distributor who is not the member of the association. The complaint was filed under section 3 of the Competition Act. The first issue in the said case was whether the film association would be covered under the definition of enterprise as per section 2(h) of the Act which would be discussed in detail in the next chapter. Second, whether the conduct of
13 Id. 14Reliance Big Entertainment Ltd. etc. Against Karnataka Film Chamber of Commerce and ors. 2012CompLR269(CCI). 152013CompLR466(CompAT). 16Motion Picture Distributor Association, http://www.mpaa-india.org/ (Last Visited May 11th, 2016, 1:10 A.M). 17 id.
21 associations would be covered under section 3 and if they are, whether it is anti competitive or not.
Judgment and Analysis: Section 3 of the Act prohibits agreements that would cause or likely to cause AAEC within India. This case is specifically pertaining to section 3(3) (b) of the Act which prohibits agreements entered between enterprises that are engaged in “identical or similar trade” of goods or provision of services if the said agreement limits or controls the production, supply , markets, technical development, investment or provision of services. Now, the first issue is whether the agreements entered into by the association with the producers/ distributors/ exhibitors would be covered under this provision, as the said provision is applicable to agreements that are identical or similar in nature. The Commission on this issue said that though the association is not an enterprise as per section 2(h) of the Act, but they would come under the ambit of persons or association of persons. Further, the agreements that are entered into between the parties would be considered as anti-competitive as it is limiting the control, supply and production of movies. The case was in dispute on the basis of several other grounds pertaining to Abuse of Dominance and the intellectual property which would be dealt in the further Chapters.
This case was challenged in COMPAT, it was held that the decision taken by the association were certainly decision by the “association of enterprise” or “association of persons”. Secondly, these persons were certainly in the trade of identical “goods” or “services” and lastly their action resulted in restricting or limiting the supply of films and the decision of CCI was absolutely correct in this case18.
In the case of M/s. Shri Ashtavinayak Cine Vision Limited v. PVR Picture Limited and Others19, the issue was similar to the case discussed above. In this case, the distributor who is not registered with the association, the film of that distributor would not be exhibited in a particular territory. In that case the Commission ordered that the compulsory registration of the distributors with the registration is anti competitive in nature as it is causing AAEC and directed the association to cease and desist from practises of pressurising the distributors.
Further, in another case, Kerala Film Exhibitors Federation ('KFEF') of the Kerala circuit, which represents theatres in the State of Kerala and around three hundred and fifteen theatres
18 2013CompLR466(CompAT). 19 2013CompLR368(CCI).
22 in the State are its members. As the federation has control over the theatres in the relevant market, which would include the theatres in the State of Kerala, the theatres not the part of the federation were restricted in showing movies, because of the economic power that the federation has over the Malalayam and Tamil industries, the distributors and producers are hesitant in releasing their films in the theatres that are not registered with the federation20.
The Commission held that the said practises were anti-competitive in nature and the punishment under section 27 was in two fold. First, to discipline the party at fault and second, that this case shall have deterrent effect on all others indulging in similar kind of activities. The fine of 10% of the average income was charged which was to be paid in sixty days and the federation shall mandatorily organize, at least five competition awareness and compliance programmes over next six months in the State of Kerala for its members21.
In the film industry, associations are formed at every level i.e. there is a separate association of producers, distributors, exhibitors and these associations then control the whole market structure and working system of the industry.
The case of Cinergy Independent Film Services Pvt. Ltd22 is filed against associations of producers, distributors by the Company involved in production of films. The dispute is pertaining to the release of the film ‘mausam’ which is produced by the informant company. The associations such as Andhra Film Chamber Association, (which is an apex body in the film industry that is recognised by the Government of India, and is established to settle disputes between producers and distributors and exhibitors, the association works in the five regions of Southern India23), Telangana and Karnataka film associations were imposing unreasonable restrictions on the release of this film, as the producer is yet to pay the amount of Rs. 2.5 crores of M/s Suresh Productions Pvt. Ltd. Mr. Suresh is the member of these association and is also the President of the Andhra Film Chamber of Commerce. The commission held that the release of the film was controlled by the associations involved and would come under the ambit of section 3 of the Act, as they in order to recover the money of their member directed the non release of the film. The associations were cease and
20 CrownTheatre v. Kerala Film Exhibitors Federation , p.3, Case no. 16 of 2014. 21 Id. at 15. 22In Re: M/s Cinergy Independent Film Services Pvt. Ltd. Telangana Telugu Film Distributors Association, Karnataka Film Chamber of Commerce, Indian Film Exporters Association, Andhra Film Chamber of Commerce, M/s Big Bang Media Pvt. Ltd., Case No. 56 of 2011. 23 Andhra Pradesh Film Chamber of Commerce, http://www.apfilmchamber.com/AboutUs.aspx (Last Visited May 20th, 2016, 4:44 P.M).
23 desist from the practices of pressurizing the distributors to settle the monetary disputes with its members. In the Sunshine Pictures case24, the facts are similar to the cases discussed above. Sunshine Pictures filed complaint against the CCCA, NIMPA, MPA, TTFDA, FDA(K) for contravention of section 3 and 4 of the Competition Act, 2002. The Associations banned the release of the film “Action Replay” directed by Vipul Shah. The producers gave rights of distribution to PVR, which when to the Associations for registration were denied the rights of registration as the director of the film owe certain amount for his film “London Dreams”25. The Commission held that even though some amount is left to be paid, but there is an appropriate mode for recovery of the said amount and the aggrieved party should approach Court or any other appropriate forum for the same26. Informant in the cases of this nature files prayer for interim relief under section 33 of the Act, as the film release date is due and the matter is urgent. The Commission can grant interim relief when it is satisfied that act in contravention is committed or about to be committed or continues to be committed and such commission should be analysed keeping the standards higher than of the prima facie view under section 26. Second, order of restraint should necessarily be issued and third, that the party would suffer irreparable loss or there is a definitive apprehension that there would be AAEC27. In film matters, huge amount is spend to acquire rights of the film and if interim relief is not granted then there would be huge financial losses in the earnings of the film in the territory in question28. In the case of Eros International Media ltd. against CCCA, Indore, FDA(k), NIMPA, MPA, Delhi, information is filed by eros against these associations. It alleges that CCCA members are entering into agreements of the nature of tie in, exclusive distribution and refusal to deal arrangement. Various clauses of AoA and MoA of CCCA prohibit members from dealing with non members29. The agreements which are compulsorily excecuted by the associations have anti-competitive effects as they try to control, limit and restrict competition30. Further, broadcasting period of film via satellite was restricted to 1 year from the theatrical release of the film in theatres. CCCA demanded 50 percent of the amount from the non
24 Sunshine Pictures Ltd. Against Motion Pictures Association and odrs.., Case no. 56 of 2010. 25 Id. at 2. 26 Id. at 4. 27 Competition Commission of India v. Steel Authority of India, Civil Appeal no. 7779/2010. 28 Supra note 24. at 7. 29 Eros International Media Limited. Against CCCA, Indore, FDA (k), NIMPA, MPA, p. 8, Case no. 52 of 2010. 30 Id. at 9.
24 theatrical profits of the film ‘kambaqt ishq’ , ‘Namaste London’ and ‘love aaj kal’ as the films were released against the conditions imposed by the association31. As the said amount is not paid by the producer, therefore association has imposed a ban on further dealing with its members and the producer’s next film “Anjana Anjani would not be released. In both the cases, Sunshine and eros, the producers owe certain amount to the members of the associations, the association claimed that registration of film would facilitate healthy competition. Regarding the issue of holdback period, the associations argued that proposal of reducing the time to four months is proposed, but till now no action is taken up by All India Producers Councils and Film Distributor Council (Apex body of producers and distributors respectively)32. Therefore, CCCA without their approval cannot reduce the time frame as it would harm the interest of its members. Moreover, with regard to the issue of jurisdiction of domestic arbitral tribunal formed under the rules of CCCA, it was submitted by the associations that their settlement mechanism and procedure is in consonance with the Arbitration and Conciliation Act, 1996 and their validity can only be challenged in the civil court33. The associations have resolved many disputes between the parties and are formed for the benefit of the members. NIMPA submitted that the facility of arbitration it supplies is less expensive and less expeditious in time in comparison to the general court proceedings34. KFCC submitted that right to form associations is a Constitutional right and as per section 62 of the Competition, this law is in addition to and not in derogation of any other law for the time being in force, therefore, CCI has no right to question the competitiveness of the association35. Commission observed that the rules of the associations, as discussed above are actually not allowing the market to work efficiently and they are restricting the competition, and therefore have imposed a penalty on 10 percent of the average turnover36 and ordered the associations to do away with the compulsory registration clause, restrictions in the theatre screening and also there should be no discrimination on the basis of language37. Both these cases, Sunshine38 and Eros39 were appealed in CompAT , but the appeals were dismissed, as the order was not complied and the Counsels were seeking for extension.
31 Id at 11. 32 Id at 38. 33 Id at 39. 34 Id at 41. 35 Id at 53. 36 Sec. 27(b), Supra note 2. 37Supra note 29 at 85-86. 38 Appeal no.68/2012. 39 Appeal no. 74/2012.
25
In the case of Reliance Entertainment Ltd etc. v. Karnataka Film Chamber of Commerce and ors40. delivered on 16th February 2012, as a combined order of eight cases. The common contention was regarding the anti-competitive practises carried out by various associations working in different territories. The Commission held that Memorandum and Article of Associations of these associations reflect the common intention of the members. Thus, even though Association as a whole is not taking part in any business activity, but they were controlling the acts of its members who are the direct participants in the business of production, distribution and exhibition of films. The Commission applied section 3(3) in the matters relating to restriction in film release, dealing with non members and refused to apply section 3(4) as associations and its members are not in vertical chain. Regarding the issue of compulsory registration, Commission held that such a clause gives immense power to the associations to regulate the business affairs of the whole industry and are violative of section 3(3)(b) of the Act. KFCC specifically has imposed an additional limitation on the release of non kannada films. They have restricted the release of non kannada films to 24 screens, while kannada films were given 200 screens. Full release to non kannada films were given after two weeks of the premier release. Such differentiation was made to promote regional films. But Commission held that such differential treatment cannot be given by the association and it is on the consumer to choose which film they want to see and imposition of such kind of limitation would trigger section 3(3)(b) of the Competition Act. Associations were also imposing restrictions on the supply of films through other mediums such as television, DvD’s etc. Different holdback periods were imposed by different associations ranging from 6 months to five years. The Associations are formed to regulate the business and not to run the same. The hold back period is for the parties to be decided by as per their best business interest and not by the Associations, and therefore Commission held that such imposition of periods is limiting the distribution and production which is violative of the section 3(3)(b) of the Competition Act. Dissenting opinion in the Reliance entertainment case against the Karnataka Film Chamber of Commerce, eros case and Sunshine case was provided by R. Prasad. According to him enterprises have separate legal entity from the members of the association and thus, we cannot say that an agreement is entered into parties therefore barring the applicability of section 3 of the Competition Act. Further, he says that there is one entity existing in an area,
40 [2012] 108CLA 116 (CCI)
26 therefore there is absence of association of enterprises. He has charged the associations under section 4 of the being; considering them to be dominant and not under section 3. Further, the penalty was reduced to 2 percent unlike the majority order where they have charged 10 percent penalty. This case was also dismissed by the Appellate tribunal on the ground that the compliance order was not followed. Further, counsel was seeking extension of time41. Another case registered with CCI against KFCC on the grounds of its discrimination on the basis of language is the case of Kannada Grahakara Koota , Shri Ganesh Chetan Against KFCC, Karnataka Television Association (KTVA) , Karnataka Film Directors Association, Kannada Film Producers Association, Kannada Chalanachitra Academy, Karnataka Film Artists, Workers and Technicians Union42, informant filed a complaint against the Association that it did not allow the telecast of dubbed shows and movies in the State of Karnataka. Association view was that first DG has not defined the relevant market properly, as television industry was beyond its scope and second, it was necessary to promote kannada work. Commission rejected this argument and held that the act of the association was violative of section 3(3)(b) of the Act. This same issue of differentiation on the basis of language was also raised in the case of Sajjan Khaitan against EIMPA and coordination committee43; here the issue was regarding the telecast of dubbed serial Mahabharata in Bengali language. This case was also rejected by CCI. This case was rejected, when appealed in CompAT44, and the appellate tribunal has followed the minority opinion formed by J. Dhingra. It was finally held that the relevant market defined by the DG and later on approved by the Commission was not correct and television and films are two separate markets. Secondly, regarding the issue of anti-competitive agreements, it was held that television channel have full rights to screen the programme and there was no agreement between the association and channel and therefore section 3 would not be triggered.
Another case on similar line of facts is Mrs. Manju Tharad, Proprietress and M/s. Manoranjan Films, Kolkata v. EIMPA45, informant alleged denial of market access by association and Central Board of Film Certification (CBFC) on the ground that they have
41 Appeal no. 72/2012 42 Case no. 58 of 2012 43 Case no. 16/2011 44 Appeal no. 131 of 2012 45 2012CompLR1178(CCI)
27 submitted wrong declaration in the application of registration. Thereafter the association deregistered the title of the film and informed the censor board which stopped the subsequent release of film. Informant alleged that these two bodies are denying market access. Commission upheld their contention but only under section 3(3)(b) of the Act and did not apply section 3(4), as the association was not having a vertical relation with its members. Further, the two bodies in question were not considered to be an enterprise under section 2(h), therefore they were not dominant.
This case was challenged in CompAT, not on the ground that the Commission applied section 3(3) (b) on the act of the parties. But the issue of concern was the penalties which were imposed on four office bearers of EIMPA by the Commission and there was no substantive reason given for the same. The Commission, however have relied on section 36 sub clause 4 of the Act, which says that the Commission can direct any person to produce the diocument before DG relating to the trade ; “the examination of which is required’. CompAT, held that Commission should give a prima facie view as to why the document in required. The penalties that were imposed by the Commission were rejected by the tribunal46.
In another case of In re Kerala Cine Exhibitor Association Against Film Distributor Association (Kerala), Kerala Film Producer Association, Kerala State Chalchitra Academy, State of Kerala47, in this case informant is an association of cinema exhibitors comprising of 171 members, whereas opposite party is an association of exhibitors of 315 members, and another opposite party is an association of 221 film distributors. The issue which is alleged is that new films are not released in the theatres of the members of the informant because of the cartel which is formed by the association of exhibitors and distributors48.
New films are released only in the theatres of class A category that have all the facilities which includes air conditioner, washrooms, canteen etc49. The problem is that even though the theatres who are the members of the informant’s association are not given new movies and class B theatres of the opposite parties are given movies, which is unfair and is violative of section 3(3)(b) of the Act.
46 Appeal no. 14/2011 47Case no. 45 of 2012 48 Id at 3. 49 Id at 5.
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The Commission in this case observed that there is an agreement between association of distributors, exhibitors and producers as per section 2(b) of the Act. The said provision says that there should be an arrangement between the parties, it is not necessary that the said arrangement should be in writing or indented to be enforceable by legal proceedings50. Further, it was held that association of distributors is following the diktat of exhibitor’s association. Thus, they would also be found guilty under the Competition Act51. The informant has also filed a complaint against Chalchitra Academy52 and State of Kerala53 which was rejected by the Commission. The penalty under section 27 of the Act was imposed at the rate of 7 percent of the average income of two financial years on the exhibitor’s association and 3 percent is charged on the average income of the distributor’s association.
This decision was appealed in CompAT54which was decided on 4th February 2016, and it was held that Additional DG and CCI were correct in their observation and upheld the penalty imposed by the Commission.
The issue which I found with these cases of similar nature and facts is not with the order of the Commission upholding the act of association as contradictory, but my concern is with respect to the application of the Act. If we read section, it says enterprises or association of enterprises should be engaged in “identical or similar trade of goods or provision of services” The concern which the researcher wanted to raise is that the associations on which this provision is applied are the association of producers, distributors, exhibitors and these are the stakeholders of the larger unit called the film industry, but are not engaged in similar or identical provision of goods or services. As we have discussed above in introduction in detail, the work done by producer, distributors and exhibitors are different. Producer is the film financer; distributor publicizes the film and exhibitors are the owner of theatres. According to me these three players are engaged in related business or are vertically related but are not engaged in similar business. This issue is not pondered upon by the Commission in the film cases which I found it to be problematic. Further, the status of association is not clear whether they are the entities different from its members or it is mere the association of enterprises in a combined form. If the status of associations is separate from its members, then dispute
50 Id at 22. 51 Id at 24. 52 Id. at 25. 53 Id. 54 Appeal no. 100 of 2015.
29 between producers, distributor’s exhibitors separately could be scrutinised under section 3(4) of the Act.
In the Reliance big cinemas case55, Reliance entered into an agreement with Balaji Real Media Private Limited, to screen the movie ‘oshti’ which is the remake of hindi film ‘dabbang’. Reliance has given exclusive rights for distribution to Kural TV Creations Pvt. Ltd., and the satellite rights were assigned to Sun TV Pvt. Ltd. Kural TV MD informed reliance that Tamil Nadu Theatre Owners Association has decided not to screen this film in the theatres that are its members. The reason alleged was that Sun TV owed some money to the members of this association, and thus in order to recover the money, it has decided to ban all the movies that distributed or even satellite by Sun TV. Thus, the film was only released on a few screens in the territory of Tamil Nadu on its first day and that too on compromised commercial terms and also missed out on all the opening shows in the territory of Tamil Nadu due to the ban imposed by the opposite party.
The association while raising its objection mentioned that Reliance was the party to the association of theatres and one hand it is filing the complaint and on the other hand it is not following the decision/ policy agreed. Thus, it has not come with clean hands. Also, reliance has made the profit of 9.5 crores from the sale of satellite and theatrical rights of the movie. Commission after analysing the facts and the evidences said that the conditions that are imposed by the association would be listed in section 3(3) of the Act as it is established that an agreement exists, it will be presumed that the agreement is having AAEC; the onus to rebut this presumption would lie upon the opposite party, which it failed to establish. The commission imposed a penalty upon the film associations @ 10% of their respective average receipts income. Also, the associations were ordered that it should not coerce producer, distributor or exhibitor to become its member as a pre-condition for exhibition of their films in the territories on which they have a control and they were ordered not to make discriminatory clauses. Further, they could not impose restrictions regarding the number of screens and the holding back period. This case was overturned by CompAT on the ground of the statements recorded of president of the Tamil Nadu Exhibitor’s Federation saying that the association has never imposed a ban on the association and the release of the film was on the due date. There were negotiations
55 In Re M/s Reliance Big Entertainment Private Limited Informant and Tamil Nadu Film Exhibitors Association, Case No. 78 of 2011.
30 that were going on with Sun TV till two days before the release. But, this is the pattern that the industry works in56.
In the case of FICCI – Multiplex Association of India Federation House v. United Producers/ Distributors & Ors57, The informant FICCI-Multiplex Association of India had alleged that the respondents namely United Producers/Distributors Forum (UPDF), the association of Motion Pictures and TV Programme Producers (AMPTPP) and the Film and Television Producers Gild of India Ltd. (FTPGI) were behaving like a cartel. The Informant alleged that UPDF is an association of film producers and distributors which includes both corporate houses and individuals independent film producers and distributors. The AMPTPP and FTPGI were the members of UPDF. It was further alleged that UPDF, AMPTPP and FTPGI produce and distribute almost 100% of the Hindi Films produced/supplied/distributed in India and thereby exercise almost complete control over the Indian Film Industry
It had been further alleged that UPDF vide their notice dated 27.03.2009 had instructed all producers and distributors including those who are not the members of UPDF, not to release any new film to the members of the informant for the purposes of exhibition at the multiplexes operated by the members of the informant. It had been further informed that being aggrieved by the decision of UPDF various members have approached the informant and sought its assistance. The CCI after considering the contentions of the opposite parties on merit and after elaborate discussion ruled that Opposite Parties had contravened the provisions of Section 3(3)(a) and 3(3)(b) of the Competition Act. The CCI imposed a penalty of Rs. 1,00,000 on each of the 27 opposite parties. The appeal of the said case was dismissed by CompAT58.
In the case of Producer’s Guild against Multiplex Association and fourteen other multiplex owners59, there was a dispute between the association of producers and distributors regarding the revenue share, it was alleged that the multiplex association has formed a cartel and was dictating the terms of the release of the film. DG in his report also has formed the opinion that the act of the multiplex association was anti-competitive. Commission however rejected the report of the DG on the ground that the evidences of the meeting which was relied upon did not prove that the meeting was conducted to behave in a concerted manner against the
56 Appeal no.14/2014. 57 Case no. 01 of 2009. 58 Appeal nos. 01/2012 to 03/2012. 59 Case no. 37/2011.
31 producers. Commission has referred the American case60where it was held was held that to show unity a common design and meeting of mind should be considered. therefore, in this case it was held that to prove collusion, it is necessary that economic evidence are relied on; and exchange of information can be used as a mere plus factor61
3.3 The revenue sharing arrangement It is the most important concern of the distributors, producers and the exhibitors. The percentage of share that is to be shared is determined by the parties independently as per their terms and conditions, and associations also set up the share for its members, which then are applied uniformly. This section would analyse the Indian competition cases where the dispute arose specifically in regard to the revenue sharing matters.
In the case of M/s Cinemax India Limited (now known as M/s PVR Ltd) v. M/s Film Distributors Association (Kerala)62, information is filed by the multiplex company i.e. PVR against the distributor associations challenging the fix revenue sharing arrangements by the excecutive committee of and the fixed percentage is the first week 60% of the Net amount would be the Distributor’s share and second week: 55% of the Net amount and 3rdweek: onwards 50% up to holdovers63. The contention of the informant was that the association have fixed the arrangement, and have restricted the distributors who are the members of the association not to give movie to the multiplex as they are not agreeing to the fix prices. The contentions that the opposite parties raised is that the revenue sharing arrangement was fixed between the distributors and the exhibitors for last 5 to 6 years and the said arrangement is profitable for both the parties64, but PVR after entering the zone has set its own conditional share arrangement that is 50 percent for the first week, 42.5 percent for the second and so on65.
60 American Tobacco Co. v. United States, 328 U.S. 781. 61 Film & Television Producers Guild of India Against Multiplex Association of India (MAI), Mumbai, PVR Ltd, Inox Leisure Limited, Fame India Ltd, Reliance Media Works Ltd, Cinemax India Ltd. , Fun Multiplex Pvt. Ltd., HDIL Entertainment Pvt. Ltd., DT Cinemas, Movietime Cineplex Pvt. Ltd., Satyam Cineplexes Ltd., SRS Entertainment & Retail Ltd., AB Movies Pvt. Ltd., Velocity Limited, Case no. 37/2011. 62 Case no. 62 of 2012. 63 Id at 3. 64 Id at 9. 65 Id at 10.
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But, as per the CCI, association could not rebut its arguments, as they could not prove that by fixing the revenue share they are benefitting the customers in any way66. The Commission uphold the contentions of the informant and found that the revenue fixation is violative of section 3(3)(a) and 3(3)(b) of the Act and the penalty of 5 percent of the average turnover of the preceding 5 years is levied on67.
In the case filed by the Film And Television Guild of Producers (which is is an autonomous, non-profit making film trade body formed for the betterment of the film and motion picture industry, comprising of members who are the stakeholders of the motion picture industry. It acts as a principal negotiator with the Government of India (“Government”) on various critical issues related to the motion picture industry, with a view to resolve any internal and external trade disputes of the industry), against the Association of multiplexes68 and the multiplex companies such as PVR, inox, fun cinemas etc. The contention of the informant is that the association members do not disclose the fix date of release and until the last day69, people are not aware as to which film would be released in which multiplex. Another issue is that the multiplexes deduct the entertainment tax before the revenue share even in the states where entertainment tax is abolished70 and it was also alleged that the members of the multiplex association do not make advance payments which they are bound to as per the agreements. The association raised the issue that multiplexes contribute just twenty five percent to the revenue and thus for the rest amount producers are free to negotiate71. Further, a film is a work that would come under the ambit of the Copyright Act, 1957 which permits the owner of copyright to exploit such copyright in a manner as he deems fit. Therefore, the producers are free to exhibit his creation to the public as per his desire. Therefore, no multiplex theatre operator can demand that the film be released in his theatre let alone dictate the commercial terms on which such film must be released. The commission found that the model/percentage of revenue sharing between the different constituents in cinema is not the concern for competition and the multiplex association has not asked its member to not deal with producers or distributors on individual basis, as there was no evidence of it. Further, regarding the films ‘Delhi Belly’ of UTV and
66 Id at 17. 67 Id. 68 Supra note 59. 69 Id. at 6. 70 Id. 71 Id. at 8.
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‘BudhaHogaTeraBaap’ of Viacom 18 have categorically stated that the terms of the agreements with regard to the revenue sharing arrangement and the terms of release of these films were mutually agreed between them and the multiplex operators and there was no role of association72. The commission was not able to find sufficient evidence against the association and concluded that they did not formed cartel and are not acting in violation of section 3(3) (a) & 3(3)(b) of the Act73.
In the P.V. Basher Ahmad case74, Mr. Ahmad is a producer, distributor and exhibitor of films. He is Managing Director (MD) of M/s Liberty Distributors and is the President of Kerala Film Exhibitors Federation. Also, he is the member of Kerala film distributor association (opposite party in this case) for the last 25 years75.
The informant alleged that in the year 2010, some issues arose between the Kerala’s exhibitors association and distributor regarding revenue sharing between distributors and exhibitors. Also, exhibitors released the films produced and directed by Shri Kamal and Shri Jayaraj that were opposed by the distributors association76. In 2011, during the release date of the two films i.e. ‘Swapana Sanchari’ directed by Kamal and another film ‘Nayika’ directed by Jayaraj, both the exhibitor and distributor’s association went on strike against the service tax matter by the state government. After the end of the strike, there were series of movies that were lined up of release. The dispute between the two associations was regarding the release of Tamil and Malayalam films. Distributor association has asked Tamil exhibitors that they should release Tamil films first. But the exhibitors released the two Malayalam films ‘Swapana Sanchari’ and ‘Nayika’. Thereafter, the distributors association declared that the movies by the said director would be banned from distribution in Kerala. Commission is of the opinion that the that the circular dated 01.12.2011 to its members issued by the distributor association to its members including the Informant with a direction not to commit any film produced or directed by Shri Kamal and Shri Jayaraj for distribution in the State of Kerala. As agreement is a sine qua non for section 3 to sustain, the circular was issued which unequivocally communicates the decision taken in the above meeting to all its members and it would come under the definition of agreement under section 3 of the Act77.
72 Id. at 67. 73 Id. at 87. 74 P.V Baheer Against Film Distribution Association (Kerala), Case no.32of 2013. 75 Id. at 3. 76 Id. 77 Id. at 14.
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Also the commission held that forming the association not per se illegal under the Act. But, when these trade associations carry on activities that have illegitimate objectives which are against the Act, such as facilitation of collusive or collective decision making with the intention of limiting or controlling the production, distribution, sale or price of or trade in goods or provision of services is prohibited. Penalty on Film Distribution Association of Kerala at the rate 5% of the average turnover of the last three years is imposed78. This case was challenged in CompAT, and the appeal of the association was dismissed holding the investigation and decision of the DG and Commission respectively to be correct79.
The overall analysis of the case studies done above, we can conclude that the film associations that are formed at various levels and of different stakeholders in the industry, the purpose of which if we read their objective is to promote trade and development in the industry and to resolve the matters of their members by amicably settling the dispute. But, when these associations are deviating from their objective and using their collective power as a means to restraint competition in the market, there the Commission has taken a strong step by first passing a cease and desist order and thereafter penalising them for infringing the provision of Competition Act by entering into agreements that shall have AAEC. Generally, in the Competition cases of this industry, the dispute is between a party and the association of film producers, distributors or exhibitors specifically or the associations where they all the parties. But, the concern is when section 3(3)(b) is applied which is the charging section in most of the cases that talks about the agreement that are entered into between enterprises, association of persons that shall limit or control the supply of goods or services would be presumed to have an adverse effect on competition. Here, the term agreement as per the Act is the arrangement or understanding that may be formal or informal80 and it also includes arrangements which are not intended to be enforceable by legal proceedings81. Thus, the term agreement has wider connotation and it is easier to prove agreements between the parties, as they have form association to achieve a common objective. But, if we read the provision it says that agreement between Parties engaged in identical goods or service, which in the case of associations of distributers, producers, and exhibitors would not be applicable, as they are not engaged in identical or even similar trade. Further, another concern is
78 Id. at 23. 79 Appeal no. 61/2105. 80 Sec. 2(b)(i), Supra note 2. 81 Sec. 2(b)(ii), Supra note 2.
35 regarding the non applicability of section 3(4) of the Act in such cases as was decided by the Commission in the common judgment delivered on 16th February. Producer, distributors and exhibitors are not in identical business; rather they can said to be in a vertical chain.
3.4 ANTITRUST IN U.S As Competition Law in India is relatively new, the jurisprudence and judicial trends of the law are still o be developed. In United States, anti-trust law is into existence since a long time. This section would first deal with the anti-competitive provision in U.S and thereafter its applicability in film antitrust cases would be pondered upon.
According to Section 1 of the Sherman Act (which is the U.S antitrust law, “Every contract, combination in the form of trust or otherwise, or conspiracy, in restraint of trade or commerce among the several States, or with foreign nations, is declared to be illegal. Every person who shall make any contract or engage in any combination or conspiracy hereby declared to be illegal shall be deemed guilty of a felony, and, on conviction thereof, shall be punished by fine not exceeding $10,000,000 if a corporation, or, if any other person, $350,000, or by imprisonment not exceeding three years, or by both said punishments, in the discretion of the court” 82.Unlike India where there is only a civil liability, in U.S there is a criminal liability for entering into a contract that would restraint the trade. In United States, the issue related to vertical integration of studios was solved long back.
In both the jurisdictions, the standards to prove conspiracy are far higher, we can conclude this by referring to the case of India and U.S. In U.S, in the Interstate Circuit case83, two major theatres fix the admission price for the running of movies. The Supreme Court took a very lenient approach and on the basis of similarity in letters of the two theatres, they approved that both the theatres have formed the Cartel. But this approach was revised in the theatre enterprise case84, wherein the batlimore movie theatre complained filed a complaint against the distributors for not providing them with first run release and this is violation of Sherman Act. The Supreme Court held that proof of parallel behaviour is not sufficient for proving an offence under the Sherman Act. Parallel conduct have to be substantiated with certain “plus factors” which includes actions which shall proof that there is direct communication between the rivals, then there are evidences of opportunities to collude.
8215 U.S. Code § 1 83 Interstate Circuit Inc. v. United States, 306 U.S. 208 (1939). 84 Theatre Enterprises v. Paramount Distributing, 346 U.S. 537 (1953).
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In the Multiplex Association case, DG on the basis of meetings of the parties and thereafter subsequent conduct regarding the release of the films have concluded that the multiplexes are in cartel85, which was denied by Commission as mere meeting was not sufficient to prove that parties were acting in concert86.
Hollywood was a unique industry in U.S because from its beginning, there was a need to apply antitrust law. The landmark cases that have changed the structure of US motion industry was Unites States v. Paramount Pictures87. Before discussing in detail this case, it is important to discuss the pre paramount scenario.
The history of Paramount pictures started with the merger of film companies’ Famous player and lasky. After the merger the company that was formed acquired many other production companies and also acquired the film financing and distribution company Paramount Pictures that was established in 1914. Thereafter, it acquired many theatres and the name of the company was changed to the Paramount Famous Lasky Corp. Paramount soon became one of Hollywood’s most powerful studios. In 1928, this merger case was brought before the antitrust organisation and in 1930, they were declared guilty because of monopolization. But, due to great economic depression during this period, the effects of this arrangement were nullified because of the controversial deal of President Franklin D. Roosevelt88.
After the end of the great depression, the studios were all the more powerful. Here the Roosevelt government filed an antitrust suit against the studios, as they were having total control over movie distribution and exhibition. There were seven studios that were controlling the country’s movie theatres through block booking89 this case first went for trial New York Federal Court. But, the case did not succeed as a compromise deal was entered into between government and studios that the studios would retain their movie theatres but limit block booking. This consent decree led to the formation of the Society of Independent Motion Picture Producers (SIMPP) by some of the leading independent movie producers. Their efforts brought the case back to the Court and the Supreme Court in 1948 ruled that the block booking should be ended and the theatres were ordered to divest their theatre chains and this lead to the end of the Hollywood studio system.
85 Supra note 44. at 66. 86 Supra note 44.at 88. 87 334 U.S. 131 (1948). 88 The paramount Antitrust Case, http://www.cobbles.com/simpp_archive/1film_antitrust.htm (Last Visited May 14th 2016, 6: 08 P.M). 89United States v. Paramount pictures, http://www.history.com/this-day-in-history/u-s-supreme-court-decides- paramount-antitrust-case (Last Visited May 15th 2016, 3:12 P.M).
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In this case these major studios developed a structure and vertically integrated themselves; as they have acquired outlets the outlets in all the phases of film industry (production, distribution and exhibition)90.Government filed have filed several charges against the distributor which includes block booking of movies, blind selling, discrimination between major players and small and independent theatre owners, film licenses terms and minimum charges were fixed, independent producers were excluded91. After this long litigation which ended in 1949, three rules were formulated first, admission price which were set up by producers or distributors were prohibited. Second, licensing negotiation was prohibited except for theatre to theatre and movie to movie bases and paramount studio would not integrate vertically with the exhibitors92. After this judgment, the market was now open to many independent producers and distributors and all the artificial constraints on ticket pricing were removed. The difference between India and U.S is that in U.S the issue of restricting competition is created by the studio which tries to control the whole film industry. Further, the nature of film industry is oligopolistic as there are few major studios still governing the whole industry, whereas in India the case is not so. Here in India the nature of film market is competitive and free with many independent players as its part. But here we have the system of associations which create restrictions in the market by imposing unreasonable terms and condition for the sake of protection of its members. Now, the concern which should be looked into is that what exactly is the status of these associations i.e. are we considering them as a separate body regulating the film business or it is a mere group of organisation and also the corporate veil of these associations should be removed to see the real intentions of its members. To take hypothetical example in this regard, an association of distributor forming rules that it would not sell its films to theatres at a price below ‘x’ amount. Here, we have to see the faces who are deciding this clause on behalf of the association and their intention or personal benefit that they seek to achieve from this clause. The purpose of these associations to promote welfare of its members, but what is important is that the settled guidelines should be formulated at the industry level setting the limits of their regulatory power.
90 P. SOLMAN & T. FRIEDMAN, LIFE AND DEATH ON THE CORPORATE BATTLEFIELD: HOW COMPANIES WIN, LOSE, SURVIVE 84 (1982). 91 Barak Y. Orbacht Antitrust and Pricing in the Motion Picture Industry., 21 YALE J. ON REG 339 (2004) 92Id.
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In both the jurisdiction detection of cartels is the same, but U.S law is stricter in terms of penalization as compared to the Indian laws. In the next chapter researcher would discuss the dominant position of association to have a clearer understanding of the power of associations in the film business.
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CHAPTER FOUR
ABUSE OF DOMINANCE IN THE FILM INDUSTRY
One of the most important legs of the Competition Law is the Abuse of Dominant position. It is prohibited by the Competition laws world over. For example, section 2 of the Sherman Act, 1890 makes it unlawful for a company to "monopolize, or attempt to monopolize, or combine or conspire with any other person or persons to monopolize any part of the trade or commerce" in the United States1. Article 102 of the Treaty on the Functioning of European Union (hereinafter referred as TEFU) also prohibits Abuse of Dominant position. In Indian Competition laws, it is prohibited under section 4 of the Competition Act, 2002 which came into force in 20092 (hereinafter referred to as the Act). It is to be noted that in the Competition Act to be a ‘dominant entity’ is not the concern which was there in the Monopolies and Restrictive Trade Practices (MRTP) Act of 1969, but the Abuse of Dominance is the sin.
This chapter would first discuss the meaning of dominance and the factors which would lead to its abuse, covering legal provisions of the Indian Competition Act. This part is important as it is necessary first to be clear with the basic provision of Competition law and thereafter the cases which would well substantiate the concept. In the second part, approach of the Competition Commission would be analysed with regard to the issue of abuse in the film industry and lastly we would have a brief look into the U.S antitrust laws to analyse their concept of abuse of dominance and collective dominance.
4.1 MEANING OF DOMINANCE
There is no standard definition of market dominance3. But however it is defined as the “ability of a firm to pre-commit itself to a strategic position which narrows the range of replies open to rivals. Dominant firms have access to a differential movement advantage which can be exploited by making some creditable commitment which prompts rivals, and
1 Sherman Act 15 U.S.C. § 2 (1890) 2The Competition Act (12 of 2003), (2002) 3 Ajit Singh, Competition policy in emerging markets: International and Developmental dimensions, UNITED NATION CONFERENCE ON TRADE AND DEVELOPMENT (September, 2002).
40 thus restricts the scope of their activities”.4 As the Act defines, it can be related to a position of economic strength that is enjoyed by any enterprise, and that enterprise is in such a position that it could operate independently of its market forces, prevent effective competition in the relevant market5 and affect the consumers or the competitors by standardising terms of the industry6.
Dominance in common parlance means to be able to control others, a dominant entity has the power to act independently and make its own rules as per its convenience.7 Dominance of the firm can be seen by the profit statements of the entity8 and the kind of goods or services they are offering i.e. whether the substitutes of the product or service is easily available or not9, dependency of the consumer on such goods or sevices10. European Court of Justice interpreted position of dominance as “the economic strength enjoyed by an undertaking, which enables it to prevent effective competition being maintained on a relevant market, by affording it the power to behave to an appreciable extent 11 independently of its competitors, its customers and ultimately of consumers” . Economic strength is tested on the market position of the entity and how far it is able to restrict the supplies and entry of other firms to play in the field12. If we see the Indian context, Abuse of Dominance is covered under section 4 of the Competition Act13. It prohibits unfair or discriminatory condition in purchase or sale of goods or services14. An entity would said to have abuse its position if it enters into other relevant market15and when it is in the position to affect the consumers or the competitors in its favour16.
4 John A. Derek, Hollywood Dominance of the movie industry: How did it rise and How it has been maintained?(November 2007) , http://eprints.qut.edu.au/16687/1/Jonathan_Derek_Silver_Thesis.pdf (Last Visited May 27th 2015, 6:58P.M) 5 ABIR ROY& JAYANT KUMAR, COMPETITION LAW IN INDIA, p. 98-99, Eastern Law House (2008) 6 Competition Commission of India, Provision Related to Abuse of Dominance, Advocate series, Competition Act, http://www.cci.gov.in/sites/default/files/advocacy_booklet_document/AOD.pdf (Last Visited April 5th 2016 , 6 P.M) 7 Hoffmann-La Roche & Co. AG v Commission [1979] Case 85/76 8NV Nederlandsche Banden Industrie Michelin v Commission (Michelin I) [1983] Case 322/81.; Case 27/76 United Brands Company and United Brands Continental BV v Commission,¶126 [1978] ECR 207 9 Compagnie générale maritime and Others v Commission ¶ 48[2002] T-86/95, ECR-1011 10 Europemballage Corporation and Continental Can Company Inc. v Commission , ¶32 Case 6/72, [1973] ECR 215; Hilti AG v Commission [1991], Case T-30/89 ECR II-1439, ¶ 64 11 Hoffmann-La Roche & Co. v Commission, ¶ 38 [1979] ECR 461 12 Guidance on the Commission’s enforcement priorities in applying Article 82 of the EC Treaty to abusive exclusionary conduct by Dominant undertakings, Official Journal C 45/02, 24.02.2009, p. 7–20. 13 Sec.4, Supra note 2. 14 Sec.4 (2)(a)(i), Supra note 2. 15 Sec. 4(2)(e), Supra note 2. 16 Sec. 4, Explanation (ii), Supra note 2.
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In the Act, there are various factors that specify the dominance of the enterprise which would include market share, economic power, size and power of the enterprise, dependence of consumer on the enterprise, monopoly acquired by virtue of being a government company, entry barriers created by the enterprise, market structure of the enterprise, and the advantage to the overall economic development caused by the enterprise17.
An enterprise assessment of dominance would only be made in the specific relevant market, as the scope of dominance is not unlimited and is confine product wise or geography wise. To know if the firm is abusing its dominant position, it is important to first know the relevant market in which the firm is working and this forms the basic step to test dominance. In the next part, I will be elaborating upon the concept of relevant market.
4.2 RELEVANT MARKET
Relevant market is defined under section 2 (r) of the Act, but what the relevant market is, depends on the discretionary power of the CCI by referring to the relevant product market or geographic market. To assess relevant product market, it is to be seen that there is a market where the products are interchanged or substituted by the consumer for the reason that products or services are having similar characteristics, prices and its usage are similar18. It means that if the consumer shifts to other product for the reason that there is an increase in price of the product they are consuming. In this case relevant product or service market would include the product/ service consumer is consuming plus other product she is shifting to. The Small but significatory and non transitory increase in price (SSNIP), an economic test is used to see the shift in price. But the researcher in this research would not be dealing with the economic aspect. In a relevant geographic market, there should be a specific territorial area where the goods, services that are supplied are distinctly homogenous, and the conditions of the area should be different from the neighbouring area19. The manner in which the relevant market is defined by the commission has a direct implication on the assessment of dominance of the firm. After discussing the concept of dominance and the relevant market in which the firm’s dominance would be assessed, we will now discuss the concept of abuse in the language of Competition law in India.
17 Sec. 19(3), Supra note 2. 18 Sec. 2 (t), Supra note 2. 19 Sec. 2 (s), Supra note 2.
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4.3 ABUSE
It is easy to identify the dominance by profit statements, share in the market etc. the problem comes when the dominance of the firm is abusive or not is to be seen. Conduct of the firm is the most important parameter through which abuse of dominance can be tested. It can be classified as follows:- Exploitative Abuses: It means when the firm due to its dominant share in the market impose unreasonable price leaving consumers with no choice. This has the direct effect on the consumers. In this chapter we would be seeing the film associations as alleged to be in a dominant position by the informant. In the film industry cases, this issue is not of much importance specifically if we see the Indian scenario.
Exclusionary Abuses: This type of abuse causes long term injury, as the Dominant firm has lot of powers, if it refuses to deal with certain players thus exclude them from competition20, other method to exclude rivals is the selective price discrimination that is treating consumers differently. In the film industry competition cases, this issue is raised which we will be discussing in the later part of this chapter. Here, consumers of the firm would include the film producers/ distributors/ exhibitors and not the common man watching the film.
There are certain tests though not exhaustive but can help in deciding the parameters of Abuse Harm Test: In this test the impact of the conduct of the dominant entity on the consumers shall be analysed and see whether the consumers are harmed because of the dominant entity behavioural structure'21. This test have to be relied upon as we have to see the harm caused to the consumers, who are the generally the producers, distributors and exhibitors depending upon the nature of the case. ‘As efficient’ Test: As per this test, there is a hypothetical competitor having the same cost and efficiency as that of the dominant entity and the only case because of which the competent entity is closed off is the setting up of lower price by the dominant entity.22It does
20DG Competition discussion paper on the application of Article 82 of the Treaty to exclusionary abuses Public consultation, EUROPEAN COMMISSION DG Competition Brussels (2005), http://ec.europa.eu/competition/antitrust/art82/discpaper2005.pdf (Last Visited May 27th 2016, 6:59 P.M) 21 windowsphonenetwork.com/.../google-is-complaining-competitors-ar.\ (Last Visited March 26th 2016, 4:00 P.M) 22 Id.
43 not check the effects on the consumers directly, but off course consumers are affected indirectly23 Sacrifice Test: If the dominant firm is sacrificing certain amount of profits to remove the rivals from the market, and then subsequently increase the price and recover the sacrifices profits. In this situation dominant firm could said to have abused its dominant position24. This test is not of much relevance in the Indian film industry scenario; as the cases which is registered with CCI predatory pricing issue is not a concern. Abuse of dominant position of the film industry cases would be analysed in the light of these tests.
4.4FILM CASES In the film industry cases, the applicability of the test of dominance is the secondary concern, the primary concern is whether the Associations on whom the dominant cases are to be applied are enterprises or not within the definition of section 2(h) of the Competition Act or not. In this section we would determine the status of association as lay down by the Commission and thereafter an analysis of the dominance of enterprises would be done by interpreting the statutory provisions.
In the Ajay Devgan Competition Case25, informant i.e. Ajay Devgan through Naik Naik and Company file an information againg Yash Raj films pvt ltd, which is the the only privately owned Studio in India was formed by Yash Chopra which is engaged in film production and distribution26. Yash Raj films imposed the condition on the single screen cinemas that if they wanted to screen ek tha tiger which is a super starrer film on eid and would bound to be a blockbuster27, then it is mandatory for them to screen jab tak hai jaan on diwali. Informant concern was that his film Son of Sardar release date was clashing with Jab tak hai jaan and they contended that that the agreement between the Yashraj studios and the single screen cinemas for the exhibition of the two films together is a tie in arrangement28, exclusive supply
23 M de la Mano & B Durand, A Three-step Structured Rule of Reason to Assess Predation under Article 82, DISCUSSION PAPER, DG COMPETITION, EUROPEAN COMMISSION (2005). 24 M Motta, Competition Policy, Theory and Practice), chapter 7.2.4.2, CAMBRIDGE UNIV. PRESS, (2004) 25 Case no. 66 of 2012. 26 Company information, http://www.yashrajfilms.com/AboutUs/CompanyInfo.aspx?SectionCode=PRO001 (Last Visited April 6th 2016 at 10: 14 P.M) 27 Supra note 25 at 2. 28 Sec.3(4)(a) Supra note 2
44 agreement29 and there is unfair and discriminatory condition in purchase of goods or services30.
The Commission held that there is no contravention of section 4 of the Act as there is no date which shows that Yashraj productions were dominant in the proposed relevant market. It was accepted that the said production is a big name and it has produced several blockbuster films but that is not the sufficient reason to prove the dominance.
There might be a possibility that due to the fast track proceeding requirement in this cases, relevant information is not collected. But according to the information available on the website of yashraj films, Yash Raj studios is the only privately owned Studio in India and is the a leading light of the Indian entertainment industry for the last five decades. The Company started in 1970 and in the four decades it has grown from strength to strength and today has to its credit India's most enviable film catalogue and some of their films of which have been the highest grosser in the entertainment business31.Therefore, the company can said to be enjoying a market share32 and economic strength33 which is one of the factor for enquiring the dominant position under Competition Act.
In the Combine CCI order as decided on 16th February 2012, this issue of associations as enterprises is settled. In this order, eight cases which were based on similar lines of facts regarding complaint against the association of being a dominant entity and regulating the working conditions of industry by not allowing members to deal with non-members; restricting the distribution of supply of films of non members, or the payment defaulters; imposing conditions regarding the film exhibition.
In the Reliance Big Entertainment Ltd. v. The Karnataka Film Chamber of Commerce (KFCC), Bangalore & Ors34, Reliance (informant) is engaged in the activity of film production, distribution and exhibition of films and T.V programmes. The films produced by it are also distributed by it. Thus, it is the company which is involved in the complete chain of
29 Sec.3(4)(b) Supra note 2. 30 Sec.4(2)(a), Supra note 2. 31Company Information, available at, http://www.yashrajfilms.com/AboutUs/CompanyInfo.aspx?SectionCode=PRO001 (Last Visited April 16th 2016 at 9:09 P.M ). 32 Sec. 19(4)(a), Supra note 2. 33 Sec. 19(4)(b) Supra note 2. 34 2012CompLR269(CCI).
45 distribution35. It filed information with the CCI against the KFCC under section 4 read with section 336. Issues pertaining to section 3 are discussed in detail in the previous chapter
The issue in this case is that the association enjoys a position of strength37 as they do not allow the distributor to work who is not its member and they control the exhibitors. Thus, no independent distributor could carry on the work if he does not abide by the rules of the association. Even after the issuance of license by the State Government, the association restrict and control the exhibitor. Reliance has prayed for interim relief under section 33 of the Act regarding the ban that was imposed on the release of the movie Raavan in the theatres by the Association38. Further, association restricted the number of theatres for the exhibition of movie kites. Also, the association has the discriminatory attitude towards non-kannada films. The commission granted interim relief as the film release date was near and it would frustrate the concept of justice if the interim relief was not sorted.
Now, with regard to the argument of Abuse of Dominance, the first concern is whether Association is an enterprise or not because to come under the purview of section 4 of the Act, it is necessary that an entity shall be an enterprise.
An enterprise as defined in the Act is “a person or a department of the Government, who or which is, or has been, engaged in any activity, relating to the production, storage, supply, distribution, acquisition or control of articles or goods, or the provision of services, of any kind, or in investment, or in the business of acquiring, holding, underwriting or dealing with shares, debentures or other securities of any other body corporate, either directly or through one or more of its units or divisions or subsidiaries, whether such unit or division or subsidiary is located at the same place where the enterprise is located or at a different place or at different places, but does not include any activity of the Government relatable to the sovereign functions of the Government including all activities carried on by the departments of the Central Government dealing with atomic energy, currency, defence and space”. Now, as we can see the definition of enterprise is very wide and includes any activity that is done by a person to come under its ambit. Before, analysing the status of association further, it is necessary to understand the inclusive definition of person which includes “(i) an individual; (ii) a Hindu undivided family; (iii) a
35 Id. at 18. 36 Supra note 34 at 17. 37 Id. 38 Id. at 21.
46 company; (iv) a firm; (v) an association of persons or a body of individuals, whether incorporated or not, in India or outside India; or (vi) any corporation established by or under any Central, State or Provincial Act or a Government company as defined in section 617 of the Companies Act, 1956 (1 of 1956); (vii) any body corporate incorporated by or under the laws of a country outside India; (viii) a co- operative society registered under any law relating to cooperative societies; (ix) a local authority; (x) every artificial juridical person, not falling within any of the preceding sub- clauses” In the order of CCI, it was decided in these film associations’ members that includes producers, distributors or exhibitors. They are not producing the film; rather they just act as the regulator to solve the film industry issue. Any issue would come under the subject matter of Competition Law section 4 only when the firms in question are engaging in some kind of economic activity.
In the case of Mrs. Manju Tharad, Proprieties and M/s. Manoranjan Films, Kolkata v. Eastern India Motion Picture Association (EIMPA), Kolkata and The Censor Board of Film Certification, Kolkata39, the facts of this case are discussed in the previous Chapter and the issue is similar to that of Reliance order discussed above, it was held that EIMPA and Central Board of Film Certification are not enterprises within the meaning of section 2 (h) as they are not engaging in any activity and are
The objective of these associations such as Kerala Film Chamber of Commerce ,CCCA, MPA, EIMPA, NIMPA is to merely regulate the film industry and resolve their dispute matters so that all the members (producers, distributors, exhibitors) work in harmony40. Further, the associations are either registered under section 25 of the Companies Act or are registered under the societies Act which we have already discussed in the introductory Chapter.
Now, in the light of the nature and objective with which these enterprises are formed, we have to analyse whether this would fall under the ambit of enterprises as provided in section 2(h) of the Competition Act.
39 2012CompLR1178(CCI). 40 http://eimpa.org/about_us.php; indianmotionpictures.com/imppa/aboutus.html (last visited April 18th 2016 , 2:25 A.M).
47
CCI in its order have held that as these associations are not itself engaged in producing or distributing the film, therefore they are not directly engaged in any kind of economic activity. They were only providing the members who are engaged in economic activities with a platform to engage with other members engaging in the same entity.
It was contented that associations would be included under the definition of persons as defined under the Competition Act41and as per section 2 (h) of the Competition Act, a person who is engaged in any activity would be considered as an enterprise. The Commission upheld this contention and held that association is a person as per section 2(k) of thee Act, but all the persons could not come within the definition of enterprise and they specify that only those persons who are engaged in economic activity would be considered as enterprise within the said provision of Competition Act42. Also, while assessing dominance under section 4 of the Act, the factors under section 19(4) have to be considered which requires marker share of the enterprise43 and size and resources of the enterprise44, which needs that an enterprise should be engaged in an economic activity. But, if we analyse the said provision it says that any person engaged in any activity would be considered as an enterprise. The issue pertaining to person is clear, but regarding activity, the commission interpreted it in a narrower sense and constrained it only to an economic activity. But my apprehension is that if the provision specifically uses the term any activity, then the intention of legislature could not narrowed down and if the black letter law is clear then shouldn’t it be interpreted literally? What is activity is not defined by the Act properly and the explanation of section 2(h) only says that it includes occupation or profession. It therefore, we have to understand what this term means in common parlance, it means “any activity involving production, distribution, and consumption of commodities.45”
The term activity includes any business or occupation as per the explanation of section 2 (h) definition. If we consider a broader interpretation of the term, then it would also include a guideline, legal activity, regulation. Thus, section 2(h) directly include government department under its ambit and scope. But it is not necessary that a government department
41 Sec.2 (k), Supra note 2. 42 Supra note 34 at 66. 43 Sec.19(4)(a), Supra note 2. 44 Sec.19(4)(b), Supra note 2. 45 Gonzales v Raich, 545 U.S. 1 (2005)
48 should always carry on the business, and this view was held in the case of Hemant Sharma v. Chess Federation46 by the Delhi High Court.
The associations which work as a regulator in their regulations prohibit members to deal with non members, this is a mandatory prohibition and members would either be punished or boycotted if they don’t follow the rules. Therefore, members have no discretionary powers to decide whom they want to deal with.
In the minority opinion formed by R. Prasad in the Reliance47, Eros48 and Sunshine case49and S.N Dhingra in Maju Tharad case, discussed above, it was pointed that by imposing conditions on members, the association because o their position is able to deny access50 to its members for various reasons. Further, there shall be abuse of dominance, if the 51 enterprise “limits or restricts production of goods or provision of services ”
4.5 CASE ANALYSIS
In the case reliance film against KFCCC, the association discriminated in the screening of Kannada and non Kannada films, and kannada films were given more preferences while non kannada films screens were limited. The reason as formulated by association is that first, there is a need to promote local art and culture and second, bollywood and Hollywood films are big budgets films, they have market power and thus would control the market share, third, kannada films screening is only limited to the State of Karnataka or maybe some parts of other states in South India, while bollywood movies is national in nature. Thus, in the State of Karnataka their screening should be limited.
Associations have restricted the provision of services in the market as per provisions of section 4(2)(a)(i) and 4(2)(b)(i) of the Act, reasons may be to promote culture, but this cannot be done at the cost of other. Even the Constitution of India guaranteed no discrimination on the basis of caste, creed language52. If the association are keen to promote local films, then
46 Writ Petition no. 5770 of 2011 47 Supra note 34 48 Case no. 52 of 2010 49 Case no. 56 of 2010 50 Sec.4(2)(c), Supra note 2 51 Sec. 4(2)(b)(i), Supra note 2 52 Art. 15, Constitution of India, 1950
49 instead of restricting other market players in the industry, they should concentrate more on increasing the film quality etc53.
Another issue which is the common concern of the dispute between the association and its members is pertaining to the digital rights of a movie. As the movie life in theatres is for few weeks, then another mode of earning profits is from showing the movie on T.V, the details of the procedure of screening the movies is discussed in detail in the next Chapter.
Abuse of dominance in respect of DTH satellite rights is that there is no fixed period of holdbacks. Some associations keep this period within a period of three months of the release of the films other associations keep the period within six months of the release54 of the films but some others insist on a period of five years55. Now, in such cases, producers generally release the films before the decided time, commission reply back to the action by not allowing the subsequent movie of the defaulter producer to get released which could amount to denial of market access. There should be a uniform time period decided reasonably keeping in mind the interest of all the stakeholders, and what would be that reasonable time that would be suggested at the later part of this work.
Till now, disputes between the association and its members are a point of discussion, in the case of Producers guild association against multiplex association, the dispute is between the two associations. The informant is an association of producers and opposite party is the association of multiplex exhibitors. The primary issue is regarding the revenue sharing, association of producers have alleged that Multiplex association is in a position to deny access to producers to exhibit their films in the multiplexes56and they alleged that shareholding of multiplexes is upto 60% in the relevant product market of “Multiplex” only, therefore they are in a position to dominate. But DG in his report found no such result. The commission concluded that MAI was not itself dominant, and it enjoys power only through the collective power of its members57. The relevance of discussing this case is that in India we have no provision of collective dominance unlike U.S where they have58.
53 Case no. 25 of 2010. 54Rules, Motion pictures Association, Delhi. 55Rules, Bihar and Jharkhand Motion pictures Association. 56 Sec. 4(2)(c), Supra note 2. 57Sherman Act, 15 U.S.C §1,(1890) 58 Film & Television Producers Guild of India Against Multiplex Association of India (MAI), Mumbai, PVR Ltd, Inox Leisure Limited, Fame India Ltd, Reliance Media Works Ltd, Cinemax India Ltd. , Fun Multiplex Pvt. Ltd., HDIL Entertainment Pvt. Ltd., DT Cinemas, Movietime Cineplex Pvt. Ltd., Satyam Cineplexes Ltd., SRS Entertainment & Retail Ltd., AB Movies Pvt. Ltd., Velocity Limited, p. 88 Case no. 37/2011
50
4.6 POSITION IN UNITED STATES
American business leaders long prefer monopoly because it allows them to retain a degree of competition without ceding too much control. In US, the film industry is not much fragmented like Indian industry, and there are only few players including Paramount, Universal, MGM, Twentieth Century-Fox, Warner Bros., Columbia and RKO ruling the film market59. US film industry is controlled by handful of players. There are these few major distributors “the big seven” which constraints the entry barriers in the market60. In the famous Paramount case, the monopoly of the studios over the entire industry was challenged and finally after years of ups and downs in the litigation, the order of divestiture was passed.
Regarding the action against monopolization, section 2 of the Sherman Act shall be dealt with. It provides that “person who shall monopolize, or attempt to monopolize, or combine or conspire with any other person or persons, to monopolize any part of the trade or commerce among the several States, or with foreign nations, shall be deemed guilty of a felony, and, on conviction thereof, shall be punished by fine not exceeding $100,000,000 if a corporation, or, if any other person, $1,000,000, or by imprisonment not exceeding 10 years, or by both said punishments, in the discretion of the court”.
4.5 COMPARING INDIA AND UNITED STATES
If we read the bare provision of the Sherman Act, it uses the word person, while in Indian Competition Act, enterprise is used. The usage of the word person has a broader application of the law in comparison to enterprise which is restrictive in nature.. If the Indian Competition has used the term person, then the associations which work together in group could come under the ambit of section 4 which at present are beyond it, reason being the associations are not enterprises.
Further, in United States, while applying section 2 of the Sherman Act, even if the individual power of the firm is not there, and the firms are acting jointly to raise the prices and inhibit
59 Paramount Case, http://www.history.com/this-day-in-history/u-s-supreme-court-decides-paramount-antitrust- case (Last Visited May 23rd 2016, 3:08 A.M). 60 Supra note 4. at 20.
51 competitors, then they would be guilty of collective monopolization under section 25961, thus if this principle is applied in the Indian Competition law, the individual members of the association which on individual level do not hold any market, but when they join together and regulate the industry terms, then they are in the position to dominate the market. Thus, application of collective dominance would lead to broadening the horizon of antitrust principles.
61American Tobacco Co. v. United States, 328 US 781, 809 (1946).
52
CHAPTER FIVE
INTERFACE OF COPYRIGHT AND COMPETITION LAW
5.1 COPYRIGHT AND COMPETITION LAW: BASIC OVERVIEW
Copyright and Competition Law are two different branches of law. The interface of the two disciplines is a bit problematic as the two are in conflict with each other and this is the reason that in younger jurisdictions like India, Copyright Law is exempted from the application of Competition Law1. But, with the growth of the industry the two laws strive to achieve complementary goals, as they aim to enhance dynamic competition in the market. Still, when it comes to the question of application, Competition Law is relied upon to limit the exclusivity of the Copyright.
Copyright Law aims to protect the interest of the developers of the motion picture, book or any other copyrightable work and incentivise them for the new creation2. When any new work is developed or innovated, a lot of money cost is involved in the research and development, the objective of IP laws is that the owner would be in a position to recover the cost that is invested in the course of production; else the competitors would “free ride” and sell it at a low margin rate3. One of the objectives of Competition Law on the other hand is to promote consumer welfare4, by removing all kinds of market barriers and ensuring that there is multiplicity in supply of goods and services and the players effectively compete with each other.
Competition Law has both restrictive and proactive role with respect to the Copyright Law, it is restrictive as it restricts the use of exclusive copyrightable work, on the other hand it is proactive as it aims to establish and maintain competitive market for the production and
1 Competition Act (12 of 2003), Sec.3(5)(1)(2002). 2 Government Of India, Ministry Of Human Resource An Development, Handbook Of Copyright Law, http://copyright.gov.in/documents/handbook.html (Last visited 25th March 25, 2016 at 1 P.M), 3 OECD POLICY ROUNDTABLES, COMPETITION POLICY AND INTELLECTUAL PROPERTY RIGHTS¶ 2.15 (1997) 4 Preamble, Supra note 1.
53 distribution of work which indirectly means that it is supporting Copyright Law by creating incentives for innovation5.
The relevance of the inclusion of this Chapter in this work is that in the motion picture field both the laws are equally applicable. Copyright Law grants protection to the literary, dramatic, motion pictures work and thus allows the developer to fix royalty fees and charge prices for their work. While Competition Law does not allow any person or enterprise or association, holding a dominant position to charge excessive price from the consumers in lieu of the power they enjoy.
In this Chapter, the author would make an attempt to settle the scope and application of these laws when applied in a same field and would try to answer first, whether the nature and objective of Copyright Law are in complete conflict with the goals of Competition Law. Second, whether there is a need to exempt Copyright Law while applying Competition Law or if the two laws could work in harmony in the same field and how can Competition Law be applied in the matters pertaining to Copyright protection in film industry?
As every society strives for growth and development, and innovation is one of the primary factors that would ensure growth. Thus, it becomes important that the producer’s right shall be protected so that they are encouraged to produce more work. On the other hand, India being the welfare state6 could also not ignore the interest of the people at large who is the ultimate beneficiary of the creativity and state has the duty to secure the resources and distribute it to sub serve the common good for this Competition Law is enacted.7.
The application of Copyright Law is problematic as the Copyright holders enjoys state permitted monopoly8, on the other hand antitrust laws encourages competition. The advancement of technology in the entertainment industry9 often lead to the vertical integration and the owner of copyright exert pressure on the downstream entities of the distribution chain10.
5 MAX PLANCK INSTITUTE FOR INTELLECTUAL PROPERTY AND COMPETITION LAW IN MUNICH, COPYRIGHT, COMPETITION AND DEVELOPMENT REPORT (2013). 6 Art. 38(2), Constitution of India, 1950 7 Art. 39(b), Id. 817 United States Code § 106, Exclusive rights in Copyrighted Works, http://www.copyright.gov/title17/92chap1.html#106 (Last Visited April 12th 2016, 5:10 P.M) 9 Sony Corporation v. Universal City Studios. Inc., 464 U.S. 417 (1984) 10 Jonathan A. Mukai, Joint Ventures and the Online Distribution of Digital Content, 20 BERK. TECH. L.J 781, (2005)
54
The balancing of the rights of the creator and the society rights which is entitling to the work of the creator is a question. In the film making, producer who is the holder of the copyright has an exclusive right over the film and he has the right to feature his film in a public domain, make any number of copies of the film or any of the part image of the film and the right to sell the film or give it on rent is also vested with the producer11.
This chapter would specifically examine the triggering point of antitrust law in the matter of copyright protection in the motion pictures. Before that, it is important to identify the owners of the copyright in the industry and the extent of the rights conferred on them. First part would discuss the copyright owners of the film industry, second the antitrust provisions concerning the intellectual property would be dealt with and third part would be dealing with the interaction of the two subjects of law.
5.2 FILM INDUSTRY COPYRIGHTS
This law gives protection to the rights of the creators of different artistic works such as art, books, music, cinema; sound recording etc. and it provides protection in regard to the reproduction of the work, communicating the work to the public and adaptation and translation of the work. Work, in the Copyright Law includes cinematographic film12. Cinematograph film as defined in section 2 (f) of the Copyright Act is “any work of visual recording on any medium produced through a process from which a moving image may be produced by any means and includes a sound recording accompanying such visual recording and "cinematograph" shall be construed as including any work produced by any process analogous to cinematography including video films”13.
A film is protected where the arrangement or acting, forming a combination of incidents is representing and giving a work an original character and where the work is original, it is entitled to copyright protection even though it is made from an earlier work14. The Copyright Act indicates that the person at whose instance the film is made would be the first owner of the copyright and he has the right to exploit the cinematograph film15.
11 Copyright Act, sec. 17(b), 2(d)(v) (1957), Also see, SRINIVASAN IYENGAR, THE COPYRIGHT ACT, 201, (Dr. Ranbir Singh edt., 7th Ed., 2010) 12 Copyright Act sec. 2(y)(ii) (1957) 13 Id. 14Iyenger, Supra note 11. 15Copyright Act, supra note 11.
55
In a motion picture, there is only one right which is vested in the final product called film and all the holders of the different copyright such as the actors, directors, story writers, screenplay etc would be combined in one entity called the producer. Producer may be an individual person or the company who is the financer of the film and takes initiative and responsibility of making the work16 and the buyer of the copyrights from different holders.
A movie is made up of different elements which include the idea or the basic storyline of the film, thereafter the storyline is executed by the actors who work in the film. In United States, Producers obtain a license from the owner of the idea of the film, and if the film is made out of the novel, the producer would hire the different players from the industry and thus their copyright would then be held by the producer17. Regarding the license of sound recording, a master use license is to be obtained by the record company who owns the copyright of the sound recording. The copyright owners generally sell their work and the subsequent copyright to the producer at a pre negotiated fixed price and in some cases, there might be a profit sharing agreement and that would be in the case of top notch actors and directors18.
In Unites States, the pattern is that the producer who is the ultimate owner of the copyright enters into agreement with the studios that distribute the film further for exhibition. The job of the studio is to enter into an agreement with the theatres and then theatres would show the film to the consumers and earn the box office revenue.19 As every week a new movie is released. So as the day passes from the day of the movie release, the revenue also decreases. Thereafter, studios enter into agreement with different pay TV companies such as Tata Sky, airlines etc., then to the TV company that shows the movie to the viewers with the ads, also license agreements are entered into with the cable networks20.
Producer is the only holder of the copyright of the film and once the performers have agreed for featuring their performances in a film, thereafter they would have no rights over their performance and all their rights would then be infused in the film21.Also, he has the first and foremost right over the film is to exhibit the film in theatres, but that has a time and territorial
16 Sec.2(uu), supra note 12. 17 th LAL’S, COMMENTARY ON COPYRIGHT ACT, 1957, 165, (Ajay Singh edt., 5 ed.). 18 William W. Fisher, Harvard Law School lectures, https://www.youtube.com/watch?v=fNMuzM- C14c&feature=youtu.be (last visited March 30, 2016 at 3:04 P.M). 19 Id. 20Id. 21Id.
56 limit. Now, there are other rights which the producers sell to video cassettes for home viewing and satellites and cable rights are also sold for showing the film in television.22
India
In the case of Indian performing right society v. Eastern Indian Motion pictures Limited23, the contention was that the copyright in the film shall not affect the separate copyright in any work. The Supreme Court held that section 13 considers cinematograph film as a distinct and separate class of work. There seem to exist a conflict between section 13(4) which gives sound recording a separate status and section 2(f) of the Act which includes sound recording in the definition of cinematography. If a copyright owner of the music agrees to give his right to the film, he cannot claim infringement of his right, if the cinema owner shows his work in the public and nothing contained in section 13 (4) could operate. This judgment was overturned by the amendment in the Copyright Act in 201224. The amendment meted out the unequal treatment that was given to lyricist and music composer so far by differentiating between the between musical work used for incorporation in the cinematograph film and other usage of the same work through independent means25.
The complete analysis of the act covering section 14(d) of the Copyright Act which deals with the exclusive right in case of film includes making copy of the film26, sell the film or hire it27 and communicate it to the public28 and section 2(d)(v)(f)(m)(y)(ii) along with section 17, provisio (b) and (c) and section 22 and 26 of the Copyright Act, makes it clear that exclusive right vests with the cinematograph film on its completion29. Producer of the film would be considered as the author of the work30and he is the person who is the initiator of the work and takes responsibility of making the same31. But his right is limited to the film and that would not affect the separate rights of the composer and lyricist.
22Ministry of Human Resource Development Government of India STUDY ON COPYRIGHT PIRACY IN INDIA,http://copyright.gov.in/documents/study%20on%20copyright%20piracy%20in%20india.pdf (Last visited April 3, 2016) . 23 AIR 1977 SC 1443. 24 The Copyright(Amendment) Act, No. 27 of 2012,Sec.17, provisio (2012). 25 Abhai Pandey, The Indian Copyright (Amendment) Act, 2012 And Its Functioning So Far, (October 23, 2014), http://www.ip-watch.org/2014/10/23/the-indian-copyright-amendment-act-2012-and-its-functioning-so-far/. 26 Sec.14(d)(i), Supra note 12. 27 Sec.14(d)(ii), Supra note 12. 28 Sec.14(d)(iii), Supra note 12. 29 Supra note 17 at 163. 30 Sec.2(d)(v), Supra note 12. 31 Sec. (uu), Supra note 12.
57
5.3 COMPETITION LAW ANALYSIS OF THE FILM COPYRIGHTS
Competition Law aims to promote competition by avoiding market barriers32. It can be used as a tool to ill effects of Intellectual Property control. In India this law is evolved very recently and at present is at a very nascent stage; therefore it becomes very difficult to apply this law in the field of intellectual property which is far more established.
There are different approaches that are followed by different jurisdiction with respect to the applicability of Intellectual Property Rights in their antitrust or Competition Laws. For example, in United States as per the report of the Department of Justice, antitrust principles would be applied in the same way on intellectual property as they are applied on other kinds of tangible property33 . In European Union also intellectual property is considered equivalent to other forms of property34.
Most of the claims in the States in which copyright abuse is involved would be covered under the ambit of section 2 of the Sherman Act. This section imposes a hefty penalty on those who monopolises or attempts to monopolise any trade and Court generally follow the approach of explicit price fixing, limiting and controlling the supply and would consider such practises under the per se analysis35.
Antitrust authorities follow two types of approaches in dealing the case which includes ‘per se’ and ‘rule of reason’. In rule of reason, antitrust authorities balance the pro competitive and anti competitive effects and if the pro effects of the activity is more than the anti competitive then there would be no antitrust violation36. In United States, the position is that all the cases would follow under the preview of per se analysis, if license is not involved. Therefore, per se approach would be applied in the copyright matters in film industry and the owners would definitely be liable if they are fixing the price or dividing up the market share37.
32 Carlos M. Correa, Exploring Some Issues of Relevance to Developing Countries, ICTSD PROGRAMME ON IPR AND SUSTAINABLE DEVELOPMENT, (October, 2007). http://www.iprsonline.org/resources/docs/corea_Oct07.pdf (last visited March 25th 2016, 8:10 P.M). 33 U.S. Department of Justice & Federation Trade Commission, Antitrust Guidelines For The Licensing Of Intellectual Property (1995), http://www.usdoj.gov/atr/public/guidelines/0558.pdf (last visited March 27th 2016, 4; 40 P.M). 34 John T. Cross & Peter K. Yu, Competition Law and Copyright Misuse, 56 DRAKE L.R 427 (2008) 35 Supra note 33 at 16. 36 Supra note 33. 37 Lexmark Int'l, Inc. v. Static Control Components, Inc., 387 F.3d 52929 (6th Cir. 2004)
58
India
Indian approach with respect to the application of antitrust laws on copyright matters is different from U.S, as Indian Competition Laws enacted in 2002 and enforced in 2011, exempt the application of antitrust law in the matters of copyright38. It declares that reasonable conditions are required for the protection of IPR and if there are no reasonable conditions then section 3 of the Competition Act (which talks about anti-competitive agreements) would be invoked. But the problem is that what the reasonable conditions are is not defined in the Act and thus would be dependent upon the decision of the Commission. 39
5.4 INTERFACE OF THE TWO LAWS
Copyright Law gives protection to the owner or the creator of the work, let us take the example of the producer of the film, as discussed above, he would be considered as the copyright owner of the whole film. The producer of the film would have exclusive rights over the film40, and would therefore be in the position to set the prices.
In United States, the interface of Copyright and Competition Law has been observed long back in the famous Paramount Pictures case41. In this case studios that act as the mediator between the producer and the exhibitor and is involved in the distribution of the films, had immense market power and they controlled almost all the theatres in the United States directly or indirectly or through the system of “block booking” (it means that the theatres could buy the films in blocks i.e. the number of films are set)42. Court regarded that each of the film in the block is a separate copyrighted work and regarded block booking as the tying antitrust activity and the inappropriate addition in copyright monopoly43. Further, they have also controlled the admission price of the theatre. Although the studios have not licensed the theatres through a joint venture, but the Court found that they have formed a cartel and also held that even though copyright owners have exclusive rights over their work but that does not mean that they could use their right to fix the price for the entire industry. Also, theatres
38 Sec. 3(5)(1)(a), Supra note 1 39Competition Commission of India, Intellectual Property Rights Under The Competition Act, 2002 http://www.competition-commission-india.nic.in/advocacy/Intellectual_property_rights.pdf (Last Visited 12th April 2016 at 2 P.M) 40 Sec.17(b), Supra note 12 41 66 F. Supp. 323, 340 (S.D.N.Y 1946) 42 IP AND ANTITRUST, AN ANALYSIS OF ANTITRUST PRINCIPLES APPLIED TO INTELLECTUAL PROPERTY LAW, WOLTERS KLUWERS LAW AND BUSINESS, (Aspen Publication second ed.) 43 United States v. Paramount Pictures, Inc., 66 F. Supp. 323, 340 (S.D.N.Y. 1946); Also see, Alexandra Gill, Breaking the Studios: Antitrust and the motion picture Industry, NYU J. L. & LIB.(2008) at 108.
59 are managed by the studios and the profit sharing was decided on the basis of pre determined amount which was held to be anti-competitive as then the studios would allocate the film only to theatres that would give them high returns44.
Authors are given exclusive rights over their work i.e. they can control and disseminate the work according to their wish, this power would lead to higher prices of the work, and if in such case antitrust law is invoked then it would lead the entire scheme of Copyright Law meaningless. But antitrust law is applied only in the case where because of the copyright protection firm is having a dominant market power45.
In India, the jurisdiction of Competition Commission was challenged regarding its adjudication on the matters pertaining to intellectual property. One of the first such challenge in the film industry cases was contented in the case of Aamir Khan Production Private Limited v. Competition Commission of India46 before the Bombay High Court.
In this case, producers have formed an association and have decided that they would not release their films in multiplexes, the reason that was stated was regarding the extraction of higher revenues. Multiplex Association thereafter filed information with the Competition Commission. Commission issued a notice to the production House. Thereafter, Aamir Khan Production house approached the Bombay High Court challenging the jurisdiction of Competition Commission of India. Their primary contention was that film exhibition is a subject matter of copyright and it is specifically excluded from the application of Competition Law as provided in section 3 (5)(i) of the Act47.
Further, producer is the owner of the Copyright in the film and he has the exclusive right to sell the film or give it on hire. Section 18 and 30 of the Copyright Act were relied on, the former deals with right of the copyright owner to assign his right to any person and later deals with the right of the copyright owner to license their work to the third party. Therefore, producers have the exclusive right over the film.
44 Paramount Pictures, id. 45 ERNEST GELLHORN & STEPHEN CALKINS & WILLIAM KOVACIC, ANTITRUST LAW AND ECONOMICS IN A NUTSHELL, (Thomson 5th Ed. 2004). 46 Writ Petition No. 358 OF 2010 47 ABIR ROY, INTELLECTUAL PROPERTY AND COMPETITION LAW IN INDIA: A PRACTICAL GUIDE, (Kluwer Law International 2016) at 293-315
60
Court rejected their arguments and held that Commission has the power to determine whether the matter would fall under the exemption clause of the Competition Act. Court reasoned that under section 3(5) of the Competition Act, CCI jurisdiction is not removed.
CCI in the case of Multiplex Association v. United Producers Forum48 has held that Intellectual Property does not override Competition Law and exemption that is provided under section 3(5) of the Competition Act is subjected to imposition of reasonable condition provided by the owner of the copyright and in this case the producers could not provide with any reasonable reason for not showing their films to the multiplexes. There should be a difference between protection and commercial exploitation, and DG in its report found that due to the conditions imposed by the producers association, the price of the tickets rose and that is to be beard by common man. CCI held that Copyright Act is a statutory right and not an absolute one49. Therefore, Competition Law would be applied when the antitrust provisions are violated
The exemption clause in Competition Act does not simply outset the jurisdiction of Commission from the matters of intellectual property. The exemption clause is inserted so that the owner of the copyright has the power to restraint the third party from infringing the copyright and to provide the owner of the copyright with the right to inflict reasonable conditions to protect his work. However, the major issue is that what is reasonable is not defined in the Act. But that ‘reasonableness’ is defined by the Commission from case to case basis. CCI has to follow a balancing test to see that the exclusive rights that are given to the copyright owner do not leave the market in a disruptive position.
Regarding the role of antitrust authorities in the matter of Intellectual Property, a scenario from the patent regime in U.S would be a very good reference and is referred for a clear and better understanding of the limits and role of the antitrust authorities.
In the motion picture industry, the patents issue was of the motion picture projector which was invented by many parties including Thomas Armat, August Lumiere, Francis Jenkins, Thomas Edison. Later on, Edison severed himself from the projector making and other inventors continued to sell their rights to the major motion picture studio. 50. In 1908, in order
48 Case no.01 OF 2009 49 K.D Raju, Inevitable Connection between Intellectual property and Competition Law: Emerging Jurisprudence and Lessons from India, J. IPR, (2013). 50 B. HAMPTON, HISTORY OF THE AMERICAN FILM INDUSTRY FROM ITS BEGINNING TO 1931 65.(1970)
61 to protect the patents on the projectors, major distributor and producers formed a trust called the Motion Picture Patents Company51. The members of the trust declared that no one would produce, distribute or exhibit the film unless it takes a license from the cooperation52. Its aim is to remove maverick producers from the market. 53When the members of the trust were fighting for patent infringement cases54, their members were charged with copyright violations55. The distribution arm of the patent company is the General Film Company which had strengthened the working of MPPC and orgainzed its operation systematically to control the entire pricing scheme of the whole industry56.
With the intrusion of antitrust laws in the patent regime, the demise of MPPC was observed. The first action was initiated by J. Hand in 1912 by invalidating the Latham patent because of which MPPC was in power57. By this time independent producers could use the projectors without license from the patent holders. But, New York Court was not accepting the antitrust claims as a defence to patent infringement58. In 1915 Court of Pennsylvania held that MPPC was violative of Sherman Act. There were three grounds on which MPPC sought a defence which negated by Courts thereafter. First is MPPC is trying to protect an art and not commerce, therefore it would not fall within the purview of antitrust law. Second, is that as the patent holder they have the right to license it or not and third is their intention was to benefit the art.59 Court rejected their claims and held that even though MPPC was promoting the art, but the trade in films in a commercial activity60 and secondly, if a contract imposed unreasonable restraints of trade, then the motive of the parties, no matter how innocent it was would be seen61. Court finally held that by patent pooling, the members were jointly controlling the trade and were violating section 1 of the Sherman Act62. Finally, the US Supreme Court in
51The Editors of Encyclopaedia Britannica Motion Picture Patents Company http://www.britannica.com/topic/Motion-Picture-Patents-Company (Last Visited May 16th 2016 at 4:13 P.M). 52 Id. 53 E. KATZ, THE FILM ENCYCLOPEDIA 835 (1979). 54 Motion Picture Patents Company v. Universal Film Manufacturing Company, 243 U.S. 502, 512 (1916). 55 Kalem Co. v. Harper Bros., 222 U.S. 55 (1913). 56 Barak Y. Orbacht Antitrust and Pricing in the Motion Picture Industry 21 YALE J. ON REG 317 (2004). 57 Motion Picture Patents Co. v. Indep. Moving Pictures Co. of America, 200 F. 411 (2d Cir. 1912). 58 Janet Staiger, Combination and Litigation: Structures of U.S. Film Distribution, CINEMA J., WINTER (1984). 59 United States v. Motion Picture Patents Co., 225 F. 800, 808 (E.D. Pa. 1915). 60 Id. at 803. 61 Id. 62 Id. at 810.
62 the case of Motion Picture Patents Co. v. Universal Film Mfg. Co63held that a “patent owner could not extend the scope of the patent by restricting the use to materials necessary for the operation but forming no part of the patented invention”. Therefore, it is necessary that the scope of Intellectual Property is well defined.
5.5 ANALYSIS OF THE TWO LAWS
Now the primary reason behind the enactment of Copyright and Competition Law may seem to be conflicting as the former endangers competition while the later engenders Competition64. But, the application of the two acts cannot be bereft from each other as both are designed to encourage competition within their appropriate limits65. It is necessary to have a harmonious analysis of the Acts. If we take into consideration the Indian Context, there is a specific provision in the Competition Act of India that exempts its application in the matter of Copyright Law66. But the intention of that provision is not to exempt the complete application of the Competition Act rather the Competition Act would only be exempted when Copyright is either imposed and only when reasonable conditions are imposed by the creator regarding the use of his work. But as discussed above what is reasonable is a question that would depend on the judicial discretion.
The Goal of Copyright and Competition after analysing the cases above I would say are not in conflict as the intention behind the two laws is not to prevent the operation of the other law; it is simply enacted for the purpose of protection of its stakeholders. Therefore, the two laws can work in harmony.
The Commission while analysing the applicability of Competition Law in the matter of Copyright should see that the creator is taking the benefit of his labour only and is not taking any extra benefit, and this could be analysed by using the economic data such as the time consumed in creating the work, cost of the production, utility of the work etc.
63 243 U.S. 502 (1917) 64 th S.M DUGAR, COMMENTARY ON MRTP, COMPETITION LAW AND CONSUMER PROTECTION LAW,( Lexis Nexis , 4 ed.) (2002) 65 Robert Pitofsky, Challenges of the new Economy: Issues at the intersection of Antitrust and Intellectual Property, in THE LIBRARY OF ESSAYS ON ANTITRUST AND COMPETITION LAW, DOMINANCE AND MONOPOLIZATION, (Rosa Greaves, ed. 2012). 66 Sec.3(5)(ii), Supra note 1
63
Also, while deciding the question of reasonability, intention of the creator, in this case the producer is to be seen. For example, if the producer’s intention is to restrict and control the exhibition of movies, then his claim of copyright should not be entertained. Another case could be producer’s intention to tie and sell their products as happened the Ajay Devgan case67. In this case single screen theatre owners were bound by the clause of the Yash Raj production house; that in case they want to screen Ek tha Tiger on eid, then they compulsorily had to screen Jab tak hai jaan on diwali as a tie-in clause, but this case was rejected by the Commission. Informant here contended that such an agreement between the producers and theatres with regard to the exhibition of the two films together amounted to contravention of section 3(4)(a), 3(4)(b) and 3(4)(d) as well as contravention of section 4(2)(a) of the Competition Act, 2002. In this case commission rejected the contention of the informant as they did not place evidence of the economic strength of Yash Raj.
If we analyse this case in which producers imposed a clause that two movies are to be bought together, it amounts to tying. As two products in question are separate products. Each movie is a separate copyright work and cannot be tied and bundled merely on the fact that it is the product of one producer. In analysing such cases, it is important that intention of the producer is seen. Here, the intention of the producer as inferred from the limited facts available is to earn profit in both the festive seasons by selling the two movies one to be released on eid and another on diwali together. This unreasonable extension of Copyright Law would come under the purview of Competition Law. Thus, whenever the intention of the producer is to violate the Act and not to protect his own interest, then the antitrust law should be triggered in the matter of Copyright Laws.
Thus, we can conclude from above, that antitrust law can be applied in the cases of intellectual property rights holders wherever there is infringement of antitrust laws.
67 Case no. 66 of 2012
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CHAPTER SIX
CONCLUSION AND RECOMMENDATIONS
6.1 CONCLUSION
This research work is an attempt to compile and analyse the competition cases pertaining to the film industry specifically. Films are the subject matter of copyright and are covered under Copyright Act, 1957, as discussed in Chapter 5 of this work. The position in India is clear from the research that Competition Law is applicable in the film industry matters, even though it is a subject matter of copyright.
As Competition Law is only at the evolving stage in India with a lot to be achieved in the said field, the researcher has tried to contribute to the development process. Film Industry is an interesting area to work in and till now no prominent work has been done with respect to application of Competition Law to the working of the film industry. This research work concludes that there are several cases which are registered with the CCI on the issue of release of films, registration of films etc.
The basic problem which is identified in almost all the cases is that caused by the “film associations” of producers/ distributors/ exhibitors. The parties have raised allegations against the conduct of the associations; being restrictive in nature and hindering the free trade in the industry. What the researcher found from analysing the cases above is that there are two views, one is of the associations and other is of the producer or distributor on whose films restrictions are imposed. However, it is important to note that the films though have faced problems in the release because of the restrictions imposed by the associations, were released generally.
Now, coming to the concerns of the parties that the associations were formed for the purpose of smooth trade in the industry and to settle disputes between the parties so if there is a default in payment to any member, then there could be easy recovery of money which otherwise is not possible through the normal court proceedings, the reason being undue delays in the procedures of Court. Further, the movie business rotates and involves lot of money and if such huge amounts are stuck over a long period, then there would be huge losses to the players, which might force them to exit the industry. On the other hand, the
65 defaulter’s argument is that restriction in the release of movies is violative of section 3(3)(b) of the Competition Act which renders void the agreement between parties controlling or limiting the supply of production of services or goods.
The Commission in the cases referred in this work has held that associations are not enterprises as per section 2(h) of the Competition Act, as they are not engaged in economic activity. Therefore, they cannot be covered under the ambit of section 4 of the Act, as discussed in detail in Chapter 4 of this work. But, Commission noted that the film associations are the association of persons or enterprises, and therefore their acts would be covered under section 3 of the Act, as they limit the supply of movies. But, the problem which I have raised above in chapter 3 of this work is that the Commission has not clearly demarcated the business and roles of the members of the associations. The reason being that some associations are the combined body of distributors, producers and exhibitors and section 3 is applied to the associations engaged in similar business. This, according to me should be re-considered by the Commission.
As the associations are not considered as enterprises by the Competition Commission, therefore they are not dominant. But the fact that they are regulating the industry cannot be denied. Also, the associations have the power to settle the disputes between members and set the structure of the film’s release in a particular territory. Thus, researcher would conclude that the associations are dominant in the particular territory they are operating in. But regarding the question of ‘Abuse’, we have to look at the reason for the ban imposed. For example, if the ban is imposed because the movie producer owes certain amount of other party in the industry, then according to the researcher this kind of restriction is necessary as there is an absence of proper and speedy legal proceedings in the country.
This study on film industry would not be complete if we are not clear with the scope of the Competition Law and the extent it can be applied to the jurisdiction of other laws. From this research, researcher has concluded that in case of anti-competitive conduct, Competition Law can be triggered even if films are the subjects of Copyright Law. This also proves my second hypothesis correct.
Competition Law will be applied in every case where there is a conduct that hinders the growth of competition and imposes restrictions in free trade. Its ambit is very broad and is applied to associations of persons, an enterprise etc. and therefore is applicable to the acts of film associations and this proves my first hypothesis wrong.
66
6.2 RECOMMENDATIONS
As concluded from above that the whole competition issue in the matters of film industry is association centric and the cases are of similar nature, filed against the rules and regulation of association. The combined order of eight cases was delivered together and thereafter two more cases of the similar nature were registered. CCI repetitively had to study and conduct investigation of all the cases and then pass the orders. There are several cases registered with CCI and some cases are also upheld by CompAT.
1. According to the researcher, the foremost thing which should be done to solve this matter permanently and avoid the future reference of such cases to the commission, a set guideline should be formulated by a panel (comprising of competition law experts, members from the film bodies) which shall further be sanctioned by the concerned ministry. The guidelines should include the status of associations clearly as these associations are formed long back either under Companies Act 1956 or the Societies Registration Act of 1860 and with the changing time the dynamics of the industry has changed. For example, with the advancement in technology, the movies are now easily available on internet. Therefore, to keep long hold back periods of five years make no sense. Instead what is suggested that the panel should decide the fixed period of holdback (which can be up to four months) keeping in mind the interest of all the stakeholders. 2. It is to be considered that when these associations were formed, there was no provision of satellite DTH technology and the prints of the movies were to be distributed region wise. But with the advent of satellite, all the system is dealt electronically. Thus, after considering the present situation, I recommend that it is necessary to revise the rules and the objective of the associations. 3. The film cases are required to be dealt quickly as in maximum cases interim relief is sought because the films are to be released on the due date, else it would cause huge loss to the producers. In such matters the investigations is not done properly. Thus, we need a set code which would be applicable all over India. 4. In the Indian Competition cases, associations even though were regulating the industry but still managed to escape from the liability of section 4 i.e. abuse of dominance, as they were not ‘enterprises’ within the section. Now, if we adopt the idea of collective
67
dominance from U.S, then it would broaden the scope of application of abuse of dominance provision. 5. Associations are formed for the smooth trade of film business and to promote welfare of members; they impose ban on the film release to recover the money of the defaulters. The recovery process from the normal court proceedings is very slow. So, in this way associations are doing good job. But the issue is that such actions are not supported by proper legal backing. CCI interference in such matters is giving free escape to the defaulters. According to the researcher, CCI, apart from allowing the defaulters to continue with the release of the film should first settle the due amount which they owe. 6. Aim of any law is to render justice to its subjects, by allowing one party’s business to run freely and not clearing the dues of other is not ‘justice’ which any law should aim at.
68
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