MALAYALAM FILM STRIKE :- BOYCOTT BY EXHIBITORS IS AN ANTI-COMPETITIVE PRACTISE

The Malayalam Film Industry is witnessing an unprecedented crisis now, in view of the tussle between the film producers and film exhibitors over percentage of revenue sharing. The association of single screen theatre-owners, Kerala Film Exhibitors Federation(KFEF), has demanded a share of 50% of the collection of first week of new releases, as against the present share of 40%. They demand parity with multiplex chains like PVR, Cinemax etc, who are given 50% share. The Exhibitors Federation has resolved not to exhibit Malayalam Films, until their demands are met by the Producers and Distributors. Since the Producers and Distributors are not ready to accede to the demand, a crisis developed. Resultantly, none of the Malayalam Films, including that of super-stars, was released during the Christmas season, causing huge disappointment to movie-goers.  

Let us examine the legality of the boycott called by Exhibitors Federation, in the light of the provisions of Competition Act 2002. Kerala Film Exhibitors Federation(KFEF) is an association of more than 300 single screen theatre owners out of nearly 500 theatres in Kerala. Most of them are classified as ‘A’ class theatres, eligible for getting fresh releases. KFEF is definitely a ‘cartel’ within the meaning of Competition Act. Section 2(c) sets out an inclusive definition of ‘cartel’, whereby an ‘association of producers, sellers, distributors, traders, or service providers, who, by agreement amongst themselves, limit, control, or attempt to limit or control the production, distribution, sale or price of, or trade in goods or provisions’.

Any agreement by a cartel, which limits or controls production, supply, markets, technical development or provision of services is an ‘anti-competitive’ agreement as per Section 3(3)(b) of the Act. Here, the decision of the KEFF to refrain from screening Malayalam Films is definitely limiting the provision of services. It is also pertinent to note that “service” is defined under Section 2(u), and it includes “entertainment”, and “amusement”, correlating to watching of movies. Therefore, it is clear that the boycott by KEFF is limiting the provision of services, rendering it an anti-competitive agreement.

Section 19(3) Act also enumerates certain factors, which the Competition Commission needs to look into, while inquiring whether an agreement is anti-competitive or not. They are :-

aa.    Creation of barriers to new entrants in the market

bb.    Driving out existing competitors out of market

cc.   Foreclosure of competition by hindering entry into market

dd.    Accrual of benefits to consumers

 e.  Improvements in production or distribution of goods or provision of services

f.f.     Promotion of technical, scientific, and economic development by means of production or production or distribution of goods or provision of services.

In the instant case, the decision of Federation has created barriers for market entry to new releases and has foreclosed competition by hindering entry into market. There is no accrual of any benefit to consumers; in fact, consumers are in the losing side, as they were deprived of movie watching experience.  The barriers are not intended for promotion of any technical, scientific or economic means of production or distribution. The barriers are erected for mere show of strength and bargaining.

There is no doubt that the said boycott by Federation falls foul of Competition Act. The Competition Commission can inquire into contraventions of the Act, either suo moto, or on the basis of any information received under Section 19(1)(a), or any reference made to it by Central or State Government or a statutory authority under Section 19(1)(b). As per Section 19(1)(a), a consumer can also make information to the Commission regarding anti-competitive practice. So, it should be open to an ordinary movie-watcher in Kerala to give information to the Commission. Further, the State Government can also make a reference to the Commission regarding the issue as per Section 19(1)(b). Even the Kerala State Chalachithra Academy, which is an state instrumentality existing for promotion of films in Kerala, can make reference under Section 19(1)(b).

It would be interesting to know that the very same Federation, and its President P.V Basheer @ ‘Liberty’ Basheer, were pulled up by the Competition Commission in 2015 for having adopted similar arm-twisting tactics earlier. There is another association of single screen owners of Kerala, namely Kerala Cine Exhibitors Association(KCEA), which largely comprises ‘B’ Class theatres. When producers and distributors started adopting the strategy of giving wide release to movies in the first week itself to rake in maximum collection during initial opening days, even ‘B’ class theatres under KCEA started getting fresh releases, along with theatres under the Federation. The Federation took objection to such practice, and demanded that only theatres under the Federation should be given fresh releases. The Federation threatened that the films of those producers and distributors who give films to theatres under KCEA would be boycotted by theatres under Federation. Buckling under the pressure of Federation, producers and distributors stopped giving fresh films to theatres under KCEA.  Even the film of Kamal Hassan, “Vishwaroopam”, which was initially planned for wide release in Kerala, could not withstand the pressure of Federation, and was released only in theatres of Federation. Aggrieved with the situation, KCEA approached the Competition Commission.

By order dated 23.06.2015 in CaseNo.45/2012, the Competition Commission held that the Federation had indulged in anti-competitive practices. It was found that there was illegal cartelization in the case.  The Commission passed a ‘Cease and Desist’ order against the Federation, and imposed penalty on it. The Appeal filed by the Federation was dismissed as per order dated 04.02.2016 in Appeal No.100/15 by Appellate Tribunal. The Appellate Order may be accessed here. http://compat.nic.in/compat-old-site/CAT-07-2013/upload/PDFs/judgement-orders-2016/FINAL%20ORDER%20-26%20Feb.%2016%20-%20A.%20100%20of%2015%20KERLA%20FILM%20EX.%20FED..pdf

However, the Federation seems to be not learning from the past mistakes. Instead of knocking the box office windows, it appears that the movie lovers will have to knock the doors of Competition Commission.

Published in Live Law as http://www.livelaw.in/malayalam-film-strike-boycott-exhibitors-anti-competitive-practice/