Libertatem Magazine

Kerala’s Cinema Trade Associations and their Office Bearers are penalized for Cartelization.

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In the series of its orders against trade unions/associations for anti-competitive agreements, starting in 2014 where on December 23, 2014, CCI passed an order against Film Distributors Association, Kerala (‘FDAK’), an association of film distributors in Kerala holding it guilty along with the office bearers and executive committee of Section 3(1) read with Section 3(3)(b) of the Competition Act. Earlier, CCI had initiated an inquiry on receipt of a complaint from an individual, Mr. B.V. Basheer Ahamed, who is Managing Director (MD) of M/s Liberty Distributors and is also the President of Kerala film Distributors Federation (‘KFEF’). CCI had bserved that FDAK had taken a collective decision pursuant to which a circular was distributed to all its members restricting the distribution of the films produced and directed by Mr. Kamal and Mr. Jayaraj, members of KFEF. This was seen as an agreement under Section 2(b)read with Section 3 of the Competition Act.

The CCI recently in 2015 found, on intensive search and enquiry, the arrangement relating to distribution of films for releasing between the Opposite Parties (Ops) namely, Kerala Film Exhibitors Federation (OP1), Kerala Film Distributors Association (OP2), and Kerala Film Producers Association (OP3) in violation of section 3(3)(b) of the Competition Act, 2002.

The Commission held that OP-1, OP-2 and OP-3 have transgressed their legal contours and indulged in collective decision making to limit and control the exhibition of films in the theatres other than the ones owned by the members of OP-1. The Commission did not see any rational justification for prescribing such criteria which is exclusionary in nature. It led to the formation of cartels which are anti- competitive practices.

It declared that the Competition Act condemns such decisions taken by the associations which limits/ restricts the supply of goods/ services and affects competition in the market. The Commission viewed that the collusion between the OPs without any logical basis was nothing but the manifestation of their anti-competitive conduct to benefit the members of OP-1 at the expense of other theatre owners and movie goers i.e., consumers.

It is found that the OP1 was the main culprit behind the cartel conduct and the members of OP2 succumbed to the restriction imposed by the OP1.  The Commission cleared that OP-2 is guilty of not distributing movies to the theatres of the members of the Informant and thus violating section 3(3)(b) read with section 3(1) of the act. However, OP3 was not found guilty because of its non-compliance with the arrangement between the Ops for limiting and restricting distribution, and boycotting release of films. OP3 was not found guilty of cartelization even though OP3 was signatory party to the agreement, because OP3 did not comply with the decision taken in the agreement and its conducts did not show that it (OP3) was against the wide release of the movies. This brings a new development in the competition law that section 3 will not attract if a party to an anti-competitive agreement is not acting upon it.

The Commission ruled that the office bearers of the OP1 and OP2 are liable to penalty under section 48. During the period of contravention, they were actively involved in the affairs of their respective associations and as such they are responsible for the anti-competitive decision making by their respective associations.

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