Competition Commission of India (CCI) has found Kerala Film Exhibitors Federation (‘KFEF’), an association of theatre owners, and Film Distributors Association, Kerala (‘FDA’), an association of film distributors, in contravention of Section 3 of the Competition Act, 2002 (‘the Act’). The Informant, Kerala Cine Exhibitors Association (‘KCEA’), had approached CCI alleging anti-competitive conduct by KFEF and FDA in not allowing screening of new films in the theatres owned by members of the Informant. 

Consequent upon detailed investigation by Director General, CCI concluded that the conduct of KFEF and FDA in agreeing on the number of theatres where the new movies would be released resulted in restricting/ limiting the release of new movies. CCI found that KFEF ensured that despite having necessary infrastructure and appropriate classification/ grading from the Committee appointed by the Government of Kerala, the theatres owned by members of the Informant were not getting fresh releases/ new movies. It was observed by CCI that any industry player who flouted the said mandate of KFEF was boycotted by the members of KFEF.

Accordingly, CCI held that by controlling and limiting the distribution of movies to pre-determined release centres in Kerala through an agreement, OP-1 and OP-2 have infracted the provisions of section 3(3)(b) read with section 3(1) of the Act. 

Further, CCI imposed a penalty of ₹ 56,134/- (Rupees Fifty Six Thousand One Hundred Thirty Four only) upon KFEF calculated at the rate of 7% of its average income. Keeping into consideration the mitigating factor that FDA succumbed to the diktats of KFEF to protect the commercial interest of its members, a penalty of ₹ 45,189/-  (Rupees Forty Five Thousand One Hundred Eighty Nine only) was imposed upon it, calculated at the rate of 3% of its average income.

CCI also found that during the period of contravention, the President and General Secretary of KFEF and FDA were actively involved in the affairs of their respective associations and as such they were responsible for the anti-competitive decision making by their respective associations. Accordingly, financial penalties were imposed upon them under section 48 of the Act.

The order of CCI was passed in Case No. 45 of 2012 and a copy thereof has been uploaded on the website of CCI at www.cci.gov.in

Anticompetitive distribution agreements restricting film release locations result in regulatory sanctions against associations and their leaders. The Commission determined that associations of exhibitors and distributors coordinated to limit new film releases to predetermined theatres and enforced compliance by boycotting non compliant members, constituting an agreement that restricted distribution and market access. The Director General's investigation found active involvement of association office bearers in the decision making, leading the Commission to hold the associations and responsible leaders accountable under the statutory prohibition on agreements that limit competition.