Case No.45/2010

                                                                                                                            

Filed by:         Reliance Media Works Ltd

Against:          The Karnataka Film Chamber of Commerce (KFCC)

Allegations:

KFCC enjoys the position of dominance in the area of exhibition of films in the State of Karnataka and has more than 4000 members who belong to various chains of film industry including producers, distributors and exhibitors. By virtue of dominance, KFCC makes it mandatory for every film exhibitor in the state to become its member and abide by its decisions and directions. It also imposes restrictions on the exhibitors and distributors of films from time to time.

It is alleged that earlier the opposite party imposed undue restrictions on the exhibition of the film ‘Raavana’ which were challenged before the Commission and aggrieved by that move of the informant, the opposite party has adopted further vindictive measures to stop the supply of print of films to the informant due to which the informant is not able to exhibit films in the state of Karnataka.

The informant has specifically alleged that by stopping the supply of films, seizure of prints and withholding the revenue share, the opposite party is abusing its dominant position which restricts and undermines and violates its fundamental rights to carry trade and profession. Further, the informant has stated that the opposite party has issued letters to various Kannada film distributors directing them to stop supply of Kannada films to the informant party.

DG Report:

Relevant product market in this case is the market of services rendered by exhibitors in exhibition of feature films in cinema halls and relevant geographic market is the state of Karnataka.

KFCC is an association of film producers, theatre owners and distributors in the State of Karnataka.  It is also a regulatory body so far as production, distribution and exhibition of films by its members in the territory of Karnataka is concerned. Nearly 95% of the films in Karnataka are being released in accordance with the norms of the KFCC. The Association has issued directives that a non-Kannada film can be released in all cinemas in Karnataka provided it is released two weeks after release in other film territories. The association is adopting discriminatory behavior with regard to the release of regional and non-regional films in the State of Karnataka. Investigation reveals that, in reality, the film distributors are not allowed to release their films in the State of Karnataka unless they are members of the Association. Association collectively decides not to have any dealing with a person who does not agree with the directions of the Association. It tantamount to restricting the supply of materials in the market through collective intent of all members of the association coming together on one platform, unless enterprises/persons dealing with members of the association accept the terms and conditions imposed by the association. The Association may collectively decide not to have any dealing with a person who does not agree with the directions of the Association. As per the agreement, no film can be distributed or exhibited without registering it with the KFCC or without the membership of KFCC. Report also concludes that denial of market access to the film distributor by the KFCC reduce competition in the market. Some clauses of MOA of KFCC restrict freedom of trade in the market and it does not bring any efficiency defense or any other defense for keeping such conditions in the MOA. These conditions do not favor either immediate consumer or the end consumer.

AAEC Findings of DG Report:

1                    Prohibiting its members to deal with non-members

2                    Forcing the provision of mandatory registration of each film in their territory

3                    Enforcing restriction on the number of cinema halls for non-Kannada films

4                    Enforcing restriction on the number of multiplexes for non-Kannada films

5                    Enforcing restriction of maximum 5 shows daily of all non-Kannada films

6                    Not allowing dubbing in Kannada language of other language movies

7                    Imposing ban/boycott against the producers, distributors and exhibitors

8               Issuing letters to the theatres to withhold the share amounts of the producers/distributors

DG’s Conviction on KFCC:

The conduct of KFCC is in violation of Section 3(1), 3(3)(b) and 3(4) of the Act

Response to DG Report:

1          KFCC has stated that the membership of the association is voluntary With reference to para 12.1 and 12.2 that membership of KFCC is necessary is not correct and the process of registration of films was started on the request of distributors because earlier stolen prints were released and that used to cause loss to the producers.

2          There are six language films compete in limited number of theatres. Karnataka Films have miniscule presence and if the process of regulating the number of theatres is not done, the Kannada Film Industry will suffer. 

3          It is as per the Article of Association that the Members of KFCC will not deal with any non Members is their voluntary Decision and KFCC is just abiding and passing instructions to remind them of such obligation.

4          Any person who is not a member of the KFCC cannot insist that every member of the KFCC must necessarily deal with him. 

5          The KFCC has also stated that it has received several complaints against the Informant (Big Cinemas) that they do not give shares to the distributors/producers, it suddenly terminates good running Kannada cinema, encourages non member dealings, demands money in cash as advance from dealers etc.

6          KFCC has never indulged in the anti competitive practices as charged under para 12.16. Further para 12.19, 12.20, 12.21 are factually incorrect.

7          In para 12.16 the DG has sought to support its conclusions on the interim orders passed by this Commission and such attempt by DG is unsustainable in law.

8          In para 12.29, KFCC deny that they have ever acted in violation of Orders of the Commission.

My views on the Case:

If Kannada films are competing with other non-Kannada films, this has to be under free market set up. Free market best decides what it wants. All the films should have equal opportunity for exhibition. There should not be any restrictions on number of screens, shows per day, forced delayed exhibition of non-Kannada films etc. Every exhibitor / distributor should be free to enter into individual agreements with any producers of films.

Protecting Kannada films from competition is in way accepting that they are incompetent. Under the threats of competition (free entry of non-Kannada films) and under the fear of exiting the market, Kannada film industry will be forced to be competent enough to compete and this will help the industry perform better in the years to come. This will provide a golden opportunity to Kannada film businesses to come out of glitches of incompetent way of movie making.

A language such as Kannada, having the most ‘Jnanpit Award’, the highest literary award in India, does not require films to protect it.

Allowing dubbing of non-Kannada films into Kannada language can be explored as an alternative as it serves one, more films will be in Kannada language; two, some of the best films beyond geographic boundaries-languages are made available in Kannada language.

          Telugu and Tamil Movies

In Andhra Pradesh, for instance, Telugu films compete with Tamil films; yet Telugu film industry is still coming out with lot of blockbusters. Similarly Tamil films also compete with Telugu films in Tamil Nadu. In fact, often, most of blockbuster films of both Telugu and Tamil are dubbed into their own language before releasing them in their respective states. Often most movies are bi-lingual or tri-lingual from the starting vertical chain of movie making.    

KFCC is a trade association composing members who are themselves enterprises and decisions taken at KFCC level has huge implications and ramifications for film businesses in Karnataka. Since no other competing platform such as KFCC is available for film businesses to operate, KFCC has to be taken as a single and dominant enterprise. KFCC is acting as a ‘Regulator’ by itself and hence has been resulting in anti-competitive conducts by a privately created regulator for film businesses.

In order for what is produced to reach the end consumers in the vertical chain of production- distribution-exhibition, the KFCC plays the role of sole platform (privately created) without which what is produced is left unconsumed given the fact that the product has less shelf-life.

KFCC, acting as a Regulator has presumed its terms and conditions to be revered and deviations from which results in expulsion of members, de-notification of films, ban / boycott of films for exhibition, non-supply of Kannada and non-Kannada movies to the non-member or non-compliant member. Hence the nature of violation attracts more of Section 4 than Section 3 of the Act.

The conducts of KFCC have violated the following Sections of the Act: 4(2)(i), 4(2)(b)(i), 4(2)(c) and 4(2)(d).

Circumstances under which conducts of KFCC can be justified:

Protecting Kannada films from competition is in a way accepting that they are incompetent. Providing level playing field for both Kannada and non-Kannada films, if deemed necessary and prudent, should be a function of the State, i.e., the Government of Karnataka and not KFCC.

Infant Industry Argument is applied on economies for the sake of correcting the distortions of short lived nature. According to this argument, the government protection to the industry holds good for a certain period of time and after that the market force is allowed to be in existence. The main motive behind Infant Industry Argument is to create a level playing field between a backdated industry and a highly advanced industry producing similar commodities. This argument has been observed to be followed more often by the developing or the under-developed countries which possess comparatively backdated and traditional industries. In such cases, if these industries are subjected to the international markets then their products would not be able to compete with the price offered by the highly mechanized and advanced industries producing the same output and probably better quality too. Keeping all these aspects and factors into mind, two economists named Alexander Hamilton and Friedrich List proposed an argument that came to be known as "Infant Industry Argument". They argued that in such uneven playing fields, the domestic, traditional, and backward industry would require government protection and backing either through tariff protection on a temporary basis or forwarding subsidy towards these industries.