2020 (3) TMI 1482 - AT - Law of Competition

Malayalam film industry associations lose appeal against anti-competitive conduct ruling under Competition Act Sections 3 and 4

Association of Malayalam Movie Artists, FEFKA Production Executive Union and Another, FEFKA Director’s Union and Film Employee Federation of Kerala & Ors. Versus Competition Commission of India & Ors.

Association of Malayalam Movie Artists, FEFKA Production Executive Union and Another, FEFKA Director’s Union and Film Employee Federation of Kerala & Ors. ... 1. ISSUES PRESENTED and CONSIDEREDThe judgment primarily revolves around the following core legal questions:Whether the Association of Malayalam Movie Artists (AMMA) and Film Employees Federation of Kerala (FEFKA) engaged in anti-competitive conduct in violation of Sections 3 and 4 of the Competition Act, 2002Rs.Whether the actions of AMMA and FEFKA constituted an informal or formal ban against the Informant, thereby limiting competition in the Malayalam film industryRs.Whether the imposition of penalties on AMMA, FEFKA, and their office bearers was justified under the provisions of the Competition Act, 2002Rs.Whether the actions of AMMA and FEFKA fall outside the purview of the Competition Act due to their status as trade unionsRs.Whether there was an appreciable adverse effect on competition due to the alleged anti-competitive practicesRs.2. ISSUE-WISE DETAILED ANALYSISIssue 1: Anti-competitive Conduct under Sections 3 and 4Legal Framework and Precedents: Section 3 of the Competition Act prohibits anti-competitive agreements, while Section 4 deals with abuse of dominant position. The Act defines anti-competitive agreements broadly, including formal and informal understandings.Court's Interpretation and Reasoning: The tribunal found that AMMA and FEFKA engaged in anti-competitive practices by imposing bans on members and non-members, limiting their ability to work with the Informant. The tribunal relied on evidence such as minutes from meetings, statements from industry members, and circulars issued by the associations.Key Evidence and Findings: Evidence included statements from producers and actors who faced pressure not to work with the Informant, circulars from FEFKA, and minutes from meetings indicating a coordinated effort to restrict competition.Application of Law to Facts: The tribunal applied Section 3(1) and Section 3(3)(b) of the Act, finding that the actions of AMMA and FEFKA were in contravention of these provisions by limiting the provision of services in the film industry.Treatment of Competing Arguments: The appellants argued that there was no formal ban and that any actions were due to union politics. However, the tribunal found sufficient evidence of a coordinated effort to restrict competition.Conclusions: The tribunal concluded that AMMA and FEFKA engaged in anti-competitive conduct, violating Section 3 of the Act.Issue 2: Imposition of PenaltiesLegal Framework and Precedents: Section 27 of the Competition Act allows for penalties on entities found to be in violation of Sections 3 or 4.Court's Interpretation and Reasoning: The tribunal upheld the penalties imposed by the Competition Commission of India, finding them justified based on the evidence of anti-competitive conduct.Key Evidence and Findings: The penalties were based on the average income of the associations and individuals involved, reflecting the severity of the violations.Application of Law to Facts: The tribunal applied Section 27, affirming the penalties as a deterrent against future anti-competitive practices.Treatment of Competing Arguments: The appellants contended that the penalties were unjustified, but the tribunal found them proportionate to the violations.Conclusions: The tribunal upheld the penalties, emphasizing the need to deter anti-competitive conduct.Issue 3: Applicability of the Competition Act to Trade UnionsLegal Framework and Precedents: The Supreme Court in 'Coordination Committee' held that trade unions are not exempt from the Competition Act.Court's Interpretation and Reasoning: The tribunal rejected the argument that AMMA and FEFKA were exempt as trade unions, citing the Supreme Court's precedent.Key Evidence and Findings: The tribunal noted that the actions of AMMA and FEFKA exceeded their legitimate trade activities, falling within the scope of the Act.Application of Law to Facts: The tribunal applied the Supreme Court's ruling, finding that the associations' actions were subject to the Competition Act.Treatment of Competing Arguments: The appellants argued for exemption under the MRTP Act, but the tribunal found this inapplicable post-repeal.Conclusions: The tribunal concluded that AMMA and FEFKA were subject to the Competition Act, rejecting claims of exemption.Issue 4: Appreciable Adverse Effect on CompetitionLegal Framework and Precedents: Section 19(3) outlines factors for determining appreciable adverse effect on competition.Court's Interpretation and Reasoning: The tribunal found that the actions of AMMA and FEFKA had an appreciable adverse effect, as evidenced by the restrictions on the Informant's ability to work.Key Evidence and Findings: Evidence showed that the Informant faced significant barriers due to the associations' actions, impacting competition in the industry.Application of Law to Facts: The tribunal applied Section 19(3), finding that the actions of AMMA and FEFKA hindered competition by limiting market entry and restricting services.Treatment of Competing Arguments: The appellants claimed no adverse effect, but the tribunal found substantial evidence to the contrary.Conclusions: The tribunal concluded that the actions of AMMA and FEFKA resulted in an appreciable adverse effect on competition.3. SIGNIFICANT HOLDINGSVerbatim Quotes: 'The Commission finds that OP-1, OP-2, OP-6 and OP-7 have indulged in anticompetitive conduct in violation of the provisions of Section 3 of the Act.'Core Principles Established: The judgment reinforces that trade unions are not exempt from the Competition Act and that anti-competitive agreements need not be formalized to be actionable.Final Determinations: The tribunal dismissed the appeals, upholding the findings of anti-competitive conduct and the imposition of penalties on AMMA, FEFKA, and their office bearers.The judgment underscores the applicability of the Competition Act to trade unions and affirms the importance of addressing anti-competitive practices in the film industry. The tribunal's decision highlights the need for compliance with competition laws to ensure fair competition and consumer protection.