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India – CCI Fines Films Distributor Association, Kerala For Violation Of Section 3(3)(b) Of The Act.

16 February, 2015

 


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’).

It was alleged that the members of FDAK were behaving like a cartel and exploiting their collective bargaining position to coerce film exhibitors, including Mr. Ahamed to enter into extremely unreasonable revenue sharing agreements. From the sworn depositions of the office bearers of the FDAK and from the minutes of its meetings, CCI agreed with the findings of DG that FDAK was indirectly involved in directing, imposing and implementing the fixed uniform revenue sharing pattern in the market for Malayalam film exhibition among its members and multiplex film exhibitors in Kerala. DG, in its investigation report, had further identified 38 individuals who were found responsible under Section 48 of the Competition Act for attending meetings of the association wherein issues pertaining to revenue sharing pattern in respect of multiplexes was discussed.

Further the investigation revealed that FDAK had stopped the screening of all the movies in the theaters that did not accept its terms/directions of the revenue sharing pattern. Secondly, FDAK also asked its members to pay the contribution for violating the terms and conditions of business directed by it. Thirdly, FDAK by its impugned conduct fixed the prices for distribution/ exhibition of films in the state of Kerala and forced the Mr. Ahamed to accept such terms and conditions. Lastly, CCI noted that FDAK, being the single largest association of distributors in the state of Kerala, controlled and regulated the market of film distribution/exhibition.

CCI observed 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. Subsequently, FDAK suspended Mr. Ahamed for the violating the above directions. This agreement of FDAK was seen by CCI as an anti-competitive agreement and thus presumed to have an appreciable adverse effect on competition (‘Adverse Effect’) in India under the provisions of Section 3(1) and Section 3(3)(b) of the Competition Act.

CCI recognized that although the formation of trade association is not per se illegal, indulgence in such anti competitive conducts was required to be penalized to for the purposes of deterrence. For determining the amount of penalty, CCI took into account the mitigating factor of the new executive committee of the FDAK showing compliance and co-operation with CCI’s orders and processes and reinstatement of Mr. Ahamed to the membership of FDAK. In light of these facts and circumstances, CCI imposed a penalty of ₹ 75,315 on FDAK, equaling 5% of its average turnover for the years 2011-12, 2012-13 and 2013-14. In addition, CCI initiated separate proceedings under Section 43(a) of the Act for the conduct of FDAK and its then General Secretary for not cooperating with the investigations. In its order CCI, based on the investigation report of DG, asked the 38 identified individuals to file their respective reply and Income Tax Returns for 2011-12, 2012-13 and 2013-14.

AZB 

 

For further information, please contact:

 

Zia Mody, AZB & Partners
zia.mody@azbpartners.com

 

Abhijit Joshi, AZB & Partners 
abhijit.joshi@azbpartners.com

Shuva Mandal, AZB & Partners 
shuva.mandal@azbpartners.com

 

Samir Gandhi, AZB & Partners
samir.gandhi@azbpartners.com

Percy Billimoria, AZB & Partners 
percy.billimoria@azbpartners.com

 

Aditya Bhat, AZB & Partners 
aditya.bhat@azbpartners.com

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