COMPETITION COMMISSION OF INDIA
Case No. 66 of 2012
Dated: 05/11/2012
IN THE MATTER OF:
Ajay Devgn Films Informant
v.
Yash Raj Films Private Limited
ORDER UNDER SECTION 26(2) OF THE COMPETITION ACT, 2002
The present information has been filed by Ajay Devgn Films (‘the informant’) under
Section 19(1)(a) of the Competition Act, 2002 (‘the Act’) against Yash Raj Films Private
2. The informant is a sole proprietary concern of a well known Bollywood actor engaged
in production of films. OP No. 1 is a company incorporated under the Companies Act, 1956,
engaged in production and distribution of films. OP No. 2 to 6 are various other companies
associated with OP No. 1 engaged in distribution of films all over India. As per the
allegations, the opposite parties were dominant in the relevant market of 'film industry in
India'. The film business mainly involves three stages—production, distribution and
exhibition. A producer spends money during the making of the film. A film Distributor
acquires distribution rights from the producer of the film. The distributor then makes copies 2
of the film, spends money on publicity, advertising, marketing, cost of prints and other
distribution costs. The film distributors, either themselves or through sub-distributors, then
enter into agreement with the exhibitors (owners of the single screen theatres and
multiplexes) for screening of the films. The revenue generated at the exhibition stage is
shared by the producers, distributors and exhibitors as per their respective revenue-sharing
arrangements.
3. The informant’s grievance is that the opposite party released its mega starrer film Ek
Tha Tiger on 15
th
August, 2012. At that time the opposite parties were contemplating to
release another untitled film later named as Jab Tak Hai Jahan (JTHJ) at the time of Diwali.
The opposite parties before the release of Ek Tha Tiger had put a condition on single screen
theatres that if they wanted to exhibit Ek Tha Tiger, they would have to simultaneously agree
to exhibit the other film JTHJ at the time of Diwali. Any single screen theatre who did not
agree to booking of his theatre for both the films would not get the right to exhibit the single
film. While some theatres entered into agreement with the opposite parties for exhibition of
both the films, namely Ek Tha Tiger and JTHJ, some did not agree to this and did not enter
into the agreement.
4. It is contended by the informant that since Ek Tha Tiger was a big ticket film bound to
be a block buster and its exhibition was profitable for the single screen theatres, majority of
single screen theatres entered into agreement for exhibition of both the films because of the
big name and dominance of opposite party. Since there was a threat that the opposite parties
would not allow exhibition of even Ek Tha Tiger if the contract for exhibition of other film
was not entered simultaneously, it amounted to abuse of dominance. The single screen
theatres under compulsion had to enter into this contract. The informant alleged that this was
violation of section 3 as well as section 4 of the Competition Act. The informant submitted
that Ek Tha Tiger was released at the time of EID and JTHJ is to be released at the time of
Diwali. This grievance of the informant arose because the informant feared that he would not
get enough theatres for his own film Son of Sardar because of the agreement of single screen
theatres with the opposite parties at the time of releasing Ek Tha Tiger. The informant
contended that the agreement between the opposite parties and the film exhibitors for
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).3
5. The Commission has perused the information and heard the counsels for the
informant. The informant alleged contravention of sections 3(4) and 4 of the Act. Dealing
first with section 3(4), it may be noted that the agreements between the opposite parties and
single screen theatres are undoubtedly vertical in nature. The distributors and exhibitors
operate at different levels in the value chain of film business, and the impugned agreement
between them is vertical. The informant, inter alia, argued that this agreement is in the nature
of a tie-in arrangement prohibited under section 3(4)(a) of the Act. The Commission is not
convinced with the said allegation. There is a tie-in arrangement in this case whereby the
opposite parties tied its earlier release with its forthcoming release. However, as per the
scheme of the Act, tie-in arrangements per se are not violative of section 3(4)(a) of the Act.
Whether such an agreement is prohibited under the Act depends upon its actual or likely
appreciable adverse effect on the competition in India. The governing principle under section
3(4) is 'appreciable adverse effect on Competition in India'. The guiding factors are stated
under section 19(3) to assess whether any agreement is causing or likely to cause an
appreciable adverse effect on competition. The factors are as follows:
(a) creation of barriers to new entrants in the market;
(b) driving existing competitors out of the market;
(c) foreclosure of competition by hindering entry into the market;
(d) accrual of benefits to consumers;
(e) improvements in production or distribution of goods or provision of services;
(f) promotion of technical, scientific and economic development by means of production
or distribution of goods or provision of services.
6. Considering the effect of the impugned agreement on the touchstone of factors
elucidated under section 19(3), the Commission is of the view that the impugned agreement
is not affecting the competition in the Indian markets as such. The agreement has niether
craeated entry barriers for new entrants nor drove existing competitors out of the market, nor
is there any appreciable effect on the benefits accruing to the ultimate consumers viz. the
viewers. The single screen theatres were aware at the time of entering this agreement in July,
2012, that many other films were likely to be released during Diwali. At that particular time, 4
the single screen theatres took a business decision to screen two films of opposite parties (one
during Eid and other at Diwali, respectively) rather than screening any other film that may be
released. Some single screen theatres refused to enter into such an agreement and were free to
screen any film they wished to, including that of the informant. This is also a competitive
decision taken by the single screen theatres in their own interest. It was a legitimate
commercial decision taken by the parties to the agreement at that particular time. Also, the
agreements have not curtailed informant's right to screen its film altogether. Single screen
theatres, as per the eralier report of DG, contribute only 35% of revenue and multiplex
theatres contribute about 65% of the revenue. The multiplexes are not constrained from
exhibiting infromant's film. The Informant is free to exhibit its film on multiplexes and on
those single screen theatres which did not enter into agreement with opposite parties.
Moreover, the release of film can be preponed or postponed as per the availability of screens
by a distributor. The impugned agreement is purely commercial in nature between parties
promoting their economic interests and as such does not affect any particular market. The
impugned agreement, therefore, does not violate section 3(4) of the Act.
7. The act of booking theatres by a distributor for its two films simultaneously when the
theatre owners have the liberty either to agree or not to agree, is not a restraint on the freedom
of business of theatre owners. The theatre owners can wait for other films and can refuse to
book their theatres simultaneously for two films. Even otherwise the non significant position
held by the single screen theatres does not cause any adverse effect on the competition. As
per the information available with the Commission, even single screen theatres in some of the
states are further sub-divided in category A, category B and category C and the distributors
discriminate between these categories and do not allow release of new films in category B or
category C theatres and only choose category A theatres. Thus the market of exhibition of
new films on single screen theatres in the context of this case is not of enough significance to
cause an appreciable adverse effect on the competition. Even otherwise, the market cannot
be restricted to any particular period like Eid or Diwali and the market has to be considered a
market available throughout the year. If many high ticket mega starrer films compete with
each other to be released only on the occasion of festivals, the choice lies with the theaters
and each theatre is at liberty to book its theatre even in advance and it cannot be said that this
had appreciable adverse effect on the market. The subject of appreciability is of huge
practical importance for the competition. The Commission cannot issue restraint orders in 5
respect of agreements which are of minor importance. While issuing restraint orders, the
Commission has to keep in mind the overall exhibition market and not a particular period of
the market.
8. As far as section 4 is concerned, the informant alleged that the opposite parties were
dominant in the relevant market of 'film industry in India'. The informant however failed to
substantiate how 'film industry in India' was the relevant market and how the opposite parties
were dominant in this relevant market. While inquiring whether an enterprise enjoys a
dominant position or not under section 4, the Commission is required to consider all or any of
the following factors stated under section 19(4), namely:—
(a) market share of the enterprise;
(b) size and resources of the enterprise;
(c) size and importance of the competitors;
(d) economic power of the enterprise including commercial advantages over competitors;
(e) vertical integration of the enterprises or sale or service network of such enterprises;
(f) dependence of consumers on the enterprise;
(g) monopoly or dominant position whether acquired as a result of any statute or by
virtue of being a Government company or a public sector undertaking or otherwise;
(h) entry barriers including barriers such as regulatory barriers, financial risk, high
capital cost of entry, marketing entry barriers, technical entry barriers, economies of
scale, high cost of substitutable goods or service for consumers;
(i) countervailing buying power;
(j) market structure and size of market;
(k) social obligations and social costs;
(/) relative advantage, by way of the contribution to the economic development, by the
enterprise enjoying a dominant position having or likely to have an appreciable adverse
effect on competition;
(m) any other factor which the Commission may consider relevant for the inquiry.
9. The informant did not place on record data either of market share or of economic
strength to show how the opposite parties were dominant in the proposed relevant market on
the basis of above stated guiding factors. It was argued by the counsels for the informant that
the opposite parties were dominant because OP No. 1 was big banner production house and 6
had big name and had given several block buster films. No enterprise can be considered
dominant on the basis of big name. Dominance has to be determined as per law on the basis
of market share, economic strength and other relevant factors stated under section 19(4) of
the Act. The Commission is unable to accept such a narrow approach while determining the
relevant market. A large number of movies are released in India every year. As per the
information available in public domain, in Bollywood itself, 107 and 95 films were released
in 2011 and 2012 (till now) respectively. Out of this, the opposite parties produced only 2-4
films each year. This cannot be said to amount to dominance even in the Bollywood industry,
leave aside film industry in India. Therefor, the claim of the informant that opposite parties
were dominant players in the market 'film industry in India' cannot be accepted. There is
prima facie no contravention of section 4 of the Act.
10. In view of the forgoing, the Commission is prima facie of the opinion that there is no
contravention of the provisions of the Act in the present case. This case is, therefore, fit for
closure under section 26(2) of the Act.
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