TaxTMI 
TaxTMI 
2013 (4) TMI 161
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....is a company incorporated under the Companies Act, 1956 and engaged inter alia in the business of production and distribution of cinematographic films. The opposite party Nos. 1, 2 and 4 are the associations of film producers, distributors and exhibitors acting as regulatory bodies for production, distribution and exhibition of films in their respective territories. The opposite party No. 3 is an association of distributors engaged in import and export of Indian films/TV programmes. The opposite party No. 5 is a company engaged inter alia in the business of production and distribution of cinematograph films. 3. It is alleged by the informant that the opposite party associations make it compulsory for every film distributor to become their member and/or register his/its film with them before the exhibition of such film. A distributor who refuses to become a member and/or refuses to register his film with them is not allowed to distribute and exhibit his/its film in the territory which is governed/regulated by the respective opposite party association. The opposite party associations enforce such compulsion on distributors by threatening their members of serious consequences for exh....
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....he provisions of section 3 and section 4 of the Competition Act, 2002. 6. After considering the information and the material available on record, the Commission on 15.09.2011 directed the Director General (DG) to conduct an investigation into the matter and to submit a report. Accordingly, on completion of the investigation, the Office of the DG submitted its report to the Commission on 05.03.2012. 7. The DG in the report concluded that the allegations relating to infringement of the provisions of the Act were found to be correct against the opposite party Nos. 1, 2 and 4. It was noted that the bye laws and conduct of these opposite parties were restrictive in nature and controlled the film distribution business. In an effort to regulate the film distribution and exhibition in their respective territories, they have crossed the limits of the activities of an association and have hampered the process of free competition. The tools adopted by these associations to settle the disputes between the affected parties were not found to be in conformity with the law. Instead of creating a legitimate mechanism to settle the disputes, it was found by the DG that these associations were coer....
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....nformant. It has been submitted that as an association it is the duty of KFCC to attend to the complaints filed by its members and resolve the disputes and it is in connection with the complaint received by one of its members that KFCC issued a letter requesting the informant to be present for the arbitration proceedings in order to resolve the dispute between the informant and its member. 12. KFCC has not issued any direction regarding the release of the film 'Mausam' by the informant in its letter. Objection is taken to the finding of the DG to the effect that KFCC pressurized the producer of the film 'Mausam' by issuing circular/letters for not dealing with the film or threatening to settle the outstanding payments of the member and/or taking decision to not deal with the film unless the dispute is resolved. Thus, it is urged that there was no basis of the finding of the DG. 13. The letter was issued by KFCC only with the object to resolve the dispute amicably and there was no other intention behind issuing the letter which is clear from the fact that no adverse directive was made by KFCC even though the informant did not attend the proceedings initiated by it. It is further s....
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....t even considering the fact that the issues involved in those cases were completely different from the one that has been raised in the present case. The DG proceeded to report his finding on the issue regarding restriction on dealing with non-members even without considering that it is not the issue involved in the present case. 17. It has been further submitted that the finding of the DG to the effect that KFCC is an exclusive association of producers, distributors, exhibitors etc. and enjoys market control and ensures non-participation of the non-members in the territory is baseless as there are many non-members who are carrying on business in the State of Karnataka without any restriction. Further, the very fact that the informant which is a non-member as has been admitted by its director in his own statement before the DG has released its films in the State of Karnataka makes it crystal clear that the finding of the DG is baseless and erroneous. 18. It has been submitted that the DG has blindly followed the orders of the Commission passed in previous cases and no proper investigation has been conducted on the issues involved in the present case. The DG has neither appreciated....
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....as neither issued any directive nor has it made any decision not to deal with the informant/the film 'Mausam' and therefore when no directions were issued by KFCC, the question of the informant agreeing or not agreeing does not arise. Further, there are no documents to substantiate the findings of the DG that KFCC imposed any restriction on the release of the film or that KFCC made a decision not to deal with the said film. 22. The report also does not substantiate the appreciable adverse effect caused due to the acts of the opposite party associations. Referring to the applicability of section 3 of the Act to the present case, it has been submitted that no such agreement as mentioned therein was found by the DG. It has been submitted that section 3(3) of the Act is very clear that what is prohibited is the agreement between enterprises or associations of enterprises or persons or associations of persons or between any person and enterprise. Therefore, there has to be an agreement between the association and in the present case there is no such agreement entered into by the KFCC with any other person or enterprise or any other association. 23. Further, the byelaws of the associat....
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.... actors of film themselves have given press-statements that the delay in release of the film was due to the delay in getting the NOC from the IAF and also due to certain changes that were required to be made as per the conditional NOC given by the Indian Air Force. Further, the IAF while giving the conditional NOC had also asked for the film to be reviewed again by CBFC after the changes are made. This is also clear in the documents produced by the informant itself. Thus, the release of the film was delayed for the reasons stated above and not due to any act of opposite party associations as alleged in the information and the report. It is argued that the DG has failed to appreciate these aspects in the report. 28. In support of its contentions, KFCC has filed print outs of the excerpts from the press statements of the producers and actors of the film published in online portals. 29. In sum, it is the case of KFCC that the delay in the release of the film was due to the above factors and not due to any act of KFCC and hence the DG has erred in coming to the conclusion that KFCC acted in violation of the provisions of section 3(3)(b) of the Act. 30. Lastly, it has been submitted ....
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....M/s Big Bang Media Pvt. Ltd. are inter-connected undertakings through Sh. Madhu Mantena. It has been pointed out that the opposite party No. 5 i.e. M/s Big Bang Media Pvt. Ltd. accepted that it had some disputes with M/s Suresh Productions Pvt. Ltd. on account of outstanding payments. It is stated that as both the parties were members of the association, APFCC advised the said members to settle the issue amicably before the release of the film 'Mausam'. 35. It has been further contended that APFCC addressed a letter to the informant to settle the matter to avoid any inconvenience before the release of the film. It is urged that the word inconvenience can be interpreted either way. It is also averred that APFCC advised the release of the film in a smooth way and it did not impose any restriction or acted against any legal provision with regard to the exhibition of the film 'Mausam'. 36. It has been also pointed out that during the course of the investigations M/s PVR Pictures - the distributor of the film 'Mausam' was asked to furnish details of events relating to the present case and M/s PVR Pictures never mentioned name of APFCC in its letter nor did it complain of any contraven....
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....5 has also an interest, it was impleaded as a party in the present case. As no allegations against the opposite party No.5 were made by the informant nor the DG found any contraventions by it, the Commission is of the opinion that no further analysis is required to examine the conduct of the opposite party No.5 in the present case. 40. Similarly, as noted by the DG, the opposite party No. 3 i.e. IMPEX has no direct role in film distribution and exhibition. Further, no clauses were found in the rules and regulations of the opposite party No. 3 by the DG, it appears that the said association does not have the power to regulate the film distribution business in India or in the overseas market. In these circumstances, the Commission is of the view that no further analysis is needed to examine the conduct of this opposite party as well. 41. In view of the above, the following points fall for consideration before the Commission: (i) Whether the opposite party Nos. 1, 2 and 4 have contravened the provisions of section 3 of the Act? (ii) Relief, if any. Whether the opposite party Nos. 1, 2 and 4 have contravened the provisions of secti....
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....e dispute with Sh. D. Suresh Babu, the informant filed the instant information before the Commission on September 13, 2011 against the opposite parties and also postponed the date of release of the film from September 16, 2011 to September 23, 2011. The Commission vide its interim order dated September 15, 2011 restrained the opposite party Nos. 1 to 4 from imposing restrictions, direct or indirect, to prevent any distributor/exhibitor in relation to exhibition of the film 'Mausam' in the respective territories of their operation if the exhibitors/theatre owners are willing and desirous to exhibit the said film. 46. The Commission has perused the information, report of the DG and the replies/objections thereto filed by the opposite parties as also the material/submissions available on record. 47. It appears that a dispute was pending between M/s Suresh Production Pvt. Ltd. (which was a member of the opposite party associations) and M/s Big Bang Media Pvt. Ltd. i.e. the opposite party No.5 herein in connection with the film 'Rann'. In order to secure the alleged claim of M/s Suresh Production Pvt. Ltd. which was a member of the opposite party associations, letters/circulars were i....
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....3)(b) of the Act. By virtue of the provisions contained in section 3(3) of the Act, any agreement entered into between enterprises or associations of enterprises or persons or associations of persons or between any person and enterprise or practice carried on, or decision taken by, any association of enterprises or association of persons, including cartels, engaged in identical or similar trade of goods or provision of services, which (a) directly or indirectly determines purchase or sale prices; (b) limits or controls production, supply, markets, technical development, investment or provision of services; (c) shares the market or source of production or provision of services by way of allocation of geographical area of market, or type of goods or services, or number of customers in the market or any other similar way; (d) directly or indirectly results in bid rigging or collusive bidding, is presumed to have an appreciable adverse effect on competition. 53. Thus, in the case of agreements listed in section 3(3) of the Act, it will be presumed that the agreement has an appreciable adverse effect on competition. Though, the presumption is rebuttable, the opposite party associations....
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....her, it was noted by the DG that in the instant case also, the allegations are similar to the allegations made in Case No.52 of 2010 and 56 of 2010 where the associations threatened the producers to make the payment of the outstanding amount of their members lest the film should not be released in their respective territories. 57. The Commission is of the view that in the case of KFCC and TTFDA, it had already been established that they restrict its members to deal with the non-members and therefore, the detailed discussion and the statements of various parties recorded need not be noted again in the light of the order of the Commission passed in Case Nos. 52 of 2010 and 56 of 2010. 58. So far as the opposite party No.4 association i.e. APFCC is concerned, it may be noted that this association was not the subject matter of the investigation in previous similar cases. Thus, it may be necessary to examine its memorandum in the present case. In the reply filed by APFCC before the DG, the association denied that it is compulsory for the film producers, distributors and exhibitors of Telangana and Nizam area to become its member for carrying out their business activities. However, fro....
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.... of Association, rules and regulations to remove the condition of compulsory registration of films as a pre-condition for release of any film and as such it is not necessary to pass such directions again in the present case. So far as APFCC is concerned, since it was not a party in previous cases and accordingly, it is directed to suitably modify its articles, rules in the light of the findings noted by the Commission against it in this order. Hence, the directions issued by the Commission in Case Nos. 52 of 2010 and 56 of 2010 (as noted in para 55 above) shall also apply to APFCC mutatis mutandis. 64. The Commission is also of the opinion that the impugned acts and conduct of the opposite party Nos. 1, 2 and 4 warrant imposition of penalty to ensure effective functioning of the market. As per provisions of section 27(b) of the Act, penalties for anti-competitive agreements are to be imposed either on turnover or profit. In this connection, it may be pointed out that KFCC was a party in Case No. 25 of 2010 where its by-laws prohibiting members from dealing with non-members; making registration of film compulsory before release; observance of hold back period for exploitation of fi....