CCI says film industry must devise self-regulatory measures for different stakeholder categories

New Delhi, October 15, 2022

The Competition Commission of India (CCI) has recommended to the film industry that, among other things, it devise certain self-regulatory measures for different stakeholder categories.

The recommendations have been made on the basis of a report relead by it on Friday, titled "Market Study on Film Distribution Chain in India: Key Findings and Observations", as well as under its advocacy mandate.

The study highlights some of the key competition issues in the film distribution chain, as identified by stakeholders. It discusses the role of various associations in the chain, at the production, distribution, or exhibition level; the superior bargaining power of some entities and the resultant imbalances; the bottlenecks that exist at various levels; unequal distribution of risks; revenue-sharing arrangements; newer technologies in cinema; tying and bundling arrangements at the exhibition level, and so on.

The CCI said that, for multiplexes and producers, in place of standard templates for contracting, tailor-made arrangements are preferred.

For revenue-sharing, aggregate agreements may be preferred over existing sliding scale arrangements, where multiplexes and producers can share the aggregate revenues generated by a film based on a pre-negotiated percentage split between the parties.

Fair and reasonable terms to producers for promotions, by sharing the costs of promotion, may be considered by multiplexes, it said.

Multiplexes should refrain from any restraint on trade in exhibition that may impinge on producers’ freedom of trade, the report said.

On reporting of box office revenue collections, the CCI called for adoption of box office monitoring systems to generate, record, and maintain ticketing logs and reports and said that the data collected by such a system should not be alterable by any stakeholder.

Producers should empanel independent auditors to check such monitoring systems and ensure that they are working properly and not being tampered with, it said.

The CCI said Virtual Print Fee (VPF) paid to multiplexes can be phased out first. VPF for single screens can be phased out more gradually, given their dependence on a VPF-driven lease model for digital cinema equipment.

Till the VPF sunset is decided and implemented, Digital Cinema Equipment (DCE) providers and producers should negotiate on mutually acceptable VPF charges and ensure that there are no disruptions in the exhibition of films on account of VPF.

For Stakeholders Associations, the recommendations said that they must refrain from engaging in bans and boycotts and prohibiting the industry from working with non-members. In addition, associations should not engage in any of the other conduct that has previously been found to be anti-competitive by the Commission.

Associations must consider how alternate dispute resolution mechanisms such as mediation can be institutionalised to address any disagreement between stakeholders, it said.

Associations were advised to conduct events educating their respective members about the awareness of competition law and the consequent need for competition compliance.

The CCI said that, for digital cinema, agreements that digital service providers enter with exhibitors or producers, as the case may be, should have scope for negotiations for reducing bargaining power imbalance. Also, long-term agreements with one-sided clauses should be avoided.

The CCI appreciated the cooperation extended by various stakeholders by giving their insights into the various aspects of the film production, distribution and exhibition. The CCI also conveyed its earnest hope that anti-competitive practices will be contained by the constituents in the best interest of all, thus limiting regulatory interference.

NNN