What were the allegations against PVR for abuse of dominant position? | Explained

The Competition Commission of India (CCI) in an order on January 3 rejected allegations that multiplex chain operator PVR engaged in abuse of its dominant market position.  

January 12, 2024 05:18 pm | Updated 06:12 pm IST

Image for representational purposes only.

Image for representational purposes only. | Photo Credit: Reuters

The story so far: Having found “no discernible competition concern,” the Competition Commission of India (CCI) rejected a complaint alleging that multiplex chain PVR had abused its dominant market position. Complainant Yogesh Pratap Singh, a film director, had accused the multiplex chain of according preferential treatment to films from large production houses over those by independent film makers.

The competition regulator‘s order held that there was no case of contravention of Section 4 of the Act (that deals with preventing abuse of dominant position) based on the facts, circumstances and allegations levelled in the case.

What were the allegations about? 

The primary allegation was that the multiplex chain, utilising its dominant position in the film exhibition market, had accorded preferential treatment to films of the “powerful and monetarily affluent production houses.” The complainant alleged thatthe multiplex’s actions constrained the entry of films by independent filmmakers. Mr. Singh also said that PVR engaged in cartelisation and vertical integration. He cited PVR’s foray into the business of film production; and actions relating to film distribution and film exhibition with big production houses.

In the context of film distribution, vertical arrangements entail agreements between entities at different levels of the production chain; that is, producer-distributor, producer-exhibitor and distributor-exhibitor. Respondents in a previously published market study (Aug 2022) by the regulator had argued that this integration was to increase efficiency, as bringing distribution in-house reduces costs.

Elaborating on his claim of discriminatory treatment, Mr Singh said that his first fictional Hindi film Kya Yahi Sach Hai (2022) and The Indian Supari Company (2022) suffered because PVR and the bigger production houses had allegedly created entry barriers for films by independent film makers. He also argued that an added motivation was the chain being involved in the production of certain films with its company, Starlight Pictures Private Limited.  

For example, as described by the complainant, Ranbir Kapoor-starrer Brahmastra’s multiple trailers would be played several times at screenings free of cost, huge banners were put up with LED displays, and the film was assigned an “overwhelming” number of screens. The last of it was “so much so that, except Brahmastra other films got almost no space in the first week of its release,” the complainant said. Another instance cited by the complainant was PVR temporarily rebranding to PVRRR for the promotion of director S.S. Rajamouli’s RRR. According to Mr Singh, the multiplex chain also accorded the same preferential treatment to actor Aamir Khan’s Laal Singh Chadha.  

Mr Singh also alleged that the screen allocation policy of the chain was “opaque” and “discriminated” against him. He had earlier elaborated on the potential of his film Kya Yahi Sach Hai, highlighting that the movie had garnered 1.30 million views on YouTube.  

The former IPS officer pointed out in his complaint that the film exhibition business is “extremely sensitive to the intellectualism of the nation as it influences thoughts of the people, which in turn, have a bearing on the growth of the nation,” and hence called for the intervention of the competition regulator.  

What was PVR’s response?  

PVR denied the allegations. It said that the allegations were not backed by evidence. Further, the chain argued that the purpose of the complaint was allegedly to “pressurise” it to exhibit his film, in the absence of any legal obligation to do so. About the tie-ups, PVR clarified that it has no special tie-ups or recurring/long-term arrangements. Further, the terms of agreement, including those of promotion, agreed upon with independent filmmakers were similar to those with larger production houses.  

More importantly however, the multiplex chain said that it was not in their interest to accord preferential treatment to a specific producer or distributor, and also that it does not offer any preferential treatment to its own films. It argued that a majority of its exhibition revenue is earned from films produced and distributed by third parties. 

PVR clarified that screen allocation is determined on “mutually objective criterion” — this primarily entails the revenue generation potential of the movie.  

What does the CCI’s order say?  

After examining the submissions of the multiplex chain, CCI concluded that there existed no perceptible concern about competition. Its order held that the commercial wisdom of the exhibitors is largely driven by consumer demand. Unless, harm to competition was apparent, any intervention on its part would only lead to “undesirable consequences,” it noted. This would amount to taking away the autonomy of the entities and substituting that with the decisions of the regulator. “...the Commission is of the view that there must be autonomy available to the exhibitors to deal with movies the way they want, in alignment with their business requirements and subject to provisions of the Act,” the order read. 

Specifically analysing the allegations about collections, CCI referred to the submitted data comparing collections of actor Shah Rukh Khan-starrer Don 2 (2012) and Kya Yahi Sach Hai. As per the data, the latter grossed Rs 3 lakhs in 90 allocated shows across 11 different locations.  

About vertical integration, the order held that it was not per se prohibited under the provisions of the Competition Act. Further, the complainant had not submitted any evidence to substantiate these allegations. About the alleged preferential treatment, it held that most of the agreed terms for both independent filmmakers and larger production houses were largely the same — including revenue sharing terms.  

Finally, upholding autonomy in screen allocation, the regulator concluded that the guiding factor for selection and allocation was maximisation of footfalls and revenue. The specific criteria involved include revenue generating potential of the movie, excitement/buzz around the film, marketing, advertising and promotions done, historical data (admission/box office revenue) of films of similar genres, previous review of the film maker, selection team’s estimate of box office collection, language of the film and cast & crew among others

Thus, the CCI observed that, all in all, there was no case of contravention of the Competition Act.  

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