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AN ANALYSIS OF SOME COMPETITION ISSUES IN INDIAN FILM INDUSTRY

INTRODUCTION
Cinema is a vast field that contributes to the entertainment, cultural as well as the
social foundation of society. In this era, cinema is the most popular art form in the
entertainment industry is considered a cultural activity in most countries. India is one of the
largest producers of movies in the world with more than 1300 movies released each year.
There are innumerable classic works prevailing in the colossal universe of Indian cinema
since the beginning and is therefore considered as a field capable of changing perspectives
of people Godspeed.
The Indian Film Industry is not only of “Bollywood” as most of us know it, but
also incalculable cinemas made in regional languages. After completing more than 100
years in the entertainment world, Indian cinema has reached a critical point where it must
answer the questions regarding the competition, horizontal concentration, and vertical
integration.
Along with the growing industry comes greater competition and to confront this
competition, competition law was incepted from the year 2009. The main intention of the
law was to safeguard the competition in the market, stabilize it, and to ensure justice
towards the distribution, copyright issues in the industry. However, in certain scenarios, the
laws have been challenged but remains to be credible. The struggle to acquire dominance is
real and hence must be met with certain regulations for fair play.
In the following sections, we try to describe what competition is, why is it
necessary, and what unfair competition is. The article also tries to address the present
allegations against the Indian film industry regarding unfair competition, and the analysis of
these issues.

COMPETITION
In common patois, market competition can be defined as; self-reliant sellers
aiming for buyer’s aegis to maximize his/her profit. Competition is necessary for the market
because of its ability to provide the consumer with a wide variety of choices for goods and
services. The producers get the maximum impetus to reduce their costs, satisfy consumer
demands, and innovate on the goods and services.
Unfair competition can be described as the adoption of unfair means to drive
rivals out of business namely price-fixing, discriminatory pricing, restraints, or entry

AN ANALYSIS OF COMPETITION ISSUES IN INDIAN FILM INDUSTRY

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barriers, etc. The government has taken certain measures to prevent unfair competition and
to promote and sustain healthy competition in the market by implementing competition
policies and law.
The competition law was enacted by the Parliament of India in the year 2002 to
replace the Monopolies and Restrictive Trade Practices Act 1. The CCI2 was established to
prevent the activities that have an adverse effect on competition in India.

ALLEGATIONS AGAINST THE INDUSTRY AND THE ANALYSIS

There have been numerous allegations against the Indian film industry regarding
unfair trade practices and competitions by several individuals from the industry itself. Such
allegations are strong enough to be investigated under the Anti-competition laws.
There have been allegations regarding the theatrical distribution of films like
outrageous costs for the creation and transportation of prints, piracy, Refusal to deal, denial
of market access, etc.
1. Arbitrary standard non-negotiable Revenue Sharing Agreements
The allegation was that multiplexes like PVR, Inox, Carnival, and Cinepolis
under the patronage of The Federation of Indian Chambers of Commerce & Industry
(FICCI) have been conniving to put forward a standard non-negotiable revenue-sharing
agreement. It is generally practiced and is decided by an agreement between the
producer and the distributor. Corporate big shots have marked their territory, unlike the
single producer system which was practiced earlier. This tends to use cinema as a form
of a revenue generator.
The judgment was based on a previous case3. CCI observed that the revenue
sharing agreement was chosen with the consent of the producers and with due
deliberations between the distributors. Also, the informant could not prove the presence
of any unfair practice that occurred in this area.

2. Lack of transparency in the exhibition of trailers and promotions during intervals

The allegation was that there is a lack of transparency in the advertising policy set
forth by the multiplexes which tend to cripple the interests of the content creators. The

1
The Monopolies and Restrictive Trade Practices Act, 1969
2
Competition Commission of India
3
Re: FICCI- Multiplex Association of India v United Producers Distributors Forum and Ors

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revenue generated is supposed to be distributed equally between the producers and

distributors, but the efforts of the producers were neglected by drafting such policies.
It was held that the allegation of lack of transparency in the exhibition of trailers
and promotions do not fall within the ambit of the provisions of the Competition Act 4.
The Commission later closed the case under Section 26(2)5 of the Act.

3. Undue imposition of Virtual Print Fee (VPF)

VPF is the fee that producers agreed to pay for theatres to acquire digital cinema
equipment when the film industry moved from film reels to digital prints and is paid per
screen6. The allegation was that the VPF was agreed by the producers and distributors
for a certain period to cover the costs of the equipment but was still unduly charged.
The commission held that VPF was not alleged to be anti-competitive per se and
was against the undue imposition of the charges.

4. Delay in payments to content creators.

The allegation was that the multiplexes were not remitting the revenue from the
sale of tickets to the content creators/producers in time. The informant was again not
able to prove the presence of any unfair practice and hence the case was invalid.

5. Refusal to deal.
This was from the Raj Kamal Films during the release of the movie
‘Vishwaroopam’. It was alleged that there was discrimination against the distributors of
the movie. The threat of the distributors has an effect of restricting the ‘classes of
persons to whom goods are sold or from whom goods are brought’7 which is prohibited
under sub-clause (d) of S 3(4)8.

6. Denial of market access/ Restraint to trade

4
https://en.wikipedia.org/wiki/The_Competition_Act,_2002
5
The Director General shall, on receipt of direction under sub-section (1), submit a report on his findings within
such period as may be specified by the Commission.
6
https://www.thenewsminute.com/article/kollywoods-vpf-row-digital-service-providers-qube-and-ufo-say-
demand-unfair-137408
7
https://blog.ksandk.com/competition/competition-law-concerning-the-film-industry-in-india/#:~:text=Refusal
%20to%20deal%3A%20The%20threat,of%20Section%203(4).
8
Any agreement amongst enterprises or persons at different stages or levels of the production chain in different
markets, in respect of production, supply, distribution, storage, sale or price of, or trade in goods or provision of
services, including— (d) refusal to deal

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This was also regarding the DTH release of the movie Vishwaroopam when the
release was disrupted by certain people in the industry. However, the distributors
replied here that Mr. Kamal Hassan, producer of the movie had violated the informal
understanding in the industry that a movie should be released in the theatre first.
S 4(2) (c)9 prohibits dominant entities from indulging in ‘practices resulting in a
denial of market access in any manner’.

7. Disjunction between the intellectual property rights involved in films  and the anti-
competition laws.
Competition law and Intellectual Property Law, both have evolved as two
different bodies of law even though it is overlapping. Competition law has the objective
to enhance access whereas IP laws restrict it. IPRs by designating boundaries, within
which the competitors can exercise their dominance over their property, appear to be
against the competition law. This was also a matter of dispute in the case of the movie
Vishwaroopam.
S3(5)10 of the Competition Act excludes agreements made in furtherance of
exploitation of an IP right. If the terms of the license are ‘reasonable’, IP owners are
free to impose any measure.

CONCLUSION
The Competition Commission, the country’s watchdog, is duly empowered and
well equipped to direct investigations. It may take cognizance, especially while the
information related to dominance and cartelization within an industry 11. With the
Commission investigating and addressing the allegations of unfair trade in the film industry,
we can hope that the industry would be a safe place for like-minded people to create
innovative work which adds to our rich culture.

REFERENCE
1. https://www.scconline.com/

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(c) indulges in practice or practices resulting in denial of market access.
10
Nothing contained in this section shall restrict—the right of any person to restrain any infringement of, or to
impose reasonable conditions, as may be necessary for protecting any of his rights which have been or may be
conferred upon him under:
11
https://timesofindia.indiatimes.com/blogs/voices/is-bollywood-propagating-unfair-trade-and-uneven-
competition/

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2. CCI Finds No Evidence Of Cartelization Between Top Multiplex Cinema Theatre

Groups On VPF And Other Issues - Anti-trust/Competition Law - India
3. Competition Law and Policy – Film Industry
4. CCI slaps fine on cinema unions for imposing ‘ban’ on Vinayan- The New Indian
Express
5. Competition Law Concerning The Film Industry In India
6. Indian Competition Act: An Overview - Anti-trust/Competition Law - India
7. https://timesofindia.indiatimes.com/blogs/voices/is-bollywood-propagating-unfair-
trade-and-uneven-competition/
8. https://en.wikipedia.org/wiki/The_Competition_Act,_2002

AN ANALYSIS OF COMPETITION ISSUES IN INDIAN FILM INDUSTRY