Opinion The bigger screen
The film industry is no stranger to competition law challenges....
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When the Competition Commission of India (CCI) was operationalised after much delay in May this year,the very first complaint that landed before it was from the multiplex theatre operators against certain associations of film producers/ distributors alleging that these were functioning as cartels,out to impose unfair conditions and prices on the multiplex operators. According to recent press reports,the investigation carried out by the CCIs director-general has found the film producers guilty of infringements of the Competition Act. What next?
The CCI can order an investigation by the DG once it is satisfied that a prima facie case exists. On receipt of the DGs report,the CCI can proceed with the inquiry keeping in mind the principles of natural justice. The parties must be notified of the DGs findings,and be given a hearing. In this case,according to media reports,the DG has concluded that the producers and distributors formed a nexus and restricted the supply of movies to get more revenues from multiplexes,and they were acting in concert and collusion which affected the consumers at large as they could not watch movies due to the stand-off (The Financial Express,December18). Thus the film producers/ distributors must now defend their position before the CCI. (The writer is not privy to the specific facts of this case,and therefore cannot comment on the respective culpabilities of the parties.)
If the CCI inquiry finds the producers/ distributors guilty of acting as a cartel,the consequences under the act could be enormous. Each involved party can be fined up to 10 per cent of its annual turnover or three times its annual profit for each year of the cartel,and could face compensation claims,including class action,from injured parties. Recent cartels in the EU have been fined hundreds of millions of dollars. Under the act,any party to the cartel can apply as a whistle-blower,and if it makes a full,true and vital disclosure and cooperates with the CCI,it could become eligible for substantially lower penalty or complete immunity. This is a huge temptation for cartel members; recent successes against cartels have almost always involved a whistle-blower,for example,BASF in vitamins cartel,Virgin in the air cargo cartel,and so on.
Trade associations are legitimate bodies entitled to work for the growth of their industry,but they cannot become platforms for law-breaking,including cartels. Worldwide,vigilant competition authorities have dealt body-blows to culpable associations,for instance,associations of Belgian tobacco manufacturers,Swiss watch producers,lawyers/ engineers in the US,and the Dutch and British construction industries. Unfortunately,in India,some industry associations have got accustomed to easy ways and bad habits. These could now land them in deep trouble with the CCI. Instead they could learn from corrective steps taken by associations elsewhere,for example,fundamental reforms to the Dutch construction industry by their association,the Thai chambers comprehensive competition compliance programme,and studied avoidance by compliant-conscious associations of competition sensitive agendas.
The film industry,across many countries,has not been a stranger to competition law challenges. In the UK,Australia and Canada,the competition authorities found it necessary to undertake comprehensive sector inquiries into complaints of anti-competitive practices in the film industry.
Reportedly,after the extended stand-off between the film producers/ distributors and the multiplexes,the warring parties reached an accord. But that cannot be reason for closing the CCI case. The real harm from anti-competitive practices is inflicted on the hapless consumers (filmgoers),who paid higher prices for tickets and were deprived of legitimate choices during the summer holidays. The very fact that there was collusion,instead of competition,between rivals on issues such as pricing,restricting supplies,etc is enough to constitute a violation of the act.
The need for augmenting professional staff at the CCI has been stressed. In fact,the CCI is currently doing just that. Had the government given the green signal in good time (during 2005-2008),and shown the will then for effective enforcement of the act,recruitment and training of professional staff and mustering of other resources could have been completed by the CCI much earlier,enabling it to undertake inquiries speedily and effectively once the full complement of members was appointed. This delay has been to the detriment of the ordinary consumer.
The writer is a former chairman of the Competition Commission of India express@expressindia.com
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