The Competition Commission of India (CCI) has recommended that the film industry must devise self-regulatory measures for different stakeholder categories, noting that such a move could help contain its current anti-competitive practices and thereby limit regulatory interferences.

In its first-ever market study on film distribution chain in India, the competition watchdog has discussed the role of various associations in the chain, be it at the production, distribution, or exhibition level. 

The findings of this study were revealed on Friday. The study highlights some of the key competition issues in the film distribution chain, as identified by stakeholders.

The other issues highlighted in the study include 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; and tying and bundling arrangements at the exhibition level, etc.

MULTIPLEXES and PRODUCERS

CCI has suggested that tailor-made arrangements should be preferred instead of the current practice of having standard templates for contracting.  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, the CCI has said.

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Also, multiplexes should refrain from any restraint on trade in exhibition that may impinge on producers’ freedom of trade.

Multiplexes may also consider “fair and reasonable” terms to producers for promotions by sharing the costs of promotion, the competition watchdog suggested.

BOX OFFICE REVENUE COLLECTIONS

The film industry must adopt box office monitoring systems to generate, record, and maintain ticketing logs and reports, and 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, CCI has suggested.

DIGITAL CINEMA 

CCI has suggested that 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 clause be avoided.

CCI has recommended that 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, CCI has said.

STAKEHOLDERS ASSOCIATION 

CCI wants associations to refrain from engaging in bans and boycotts and prohibiting 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, CCI has said. Associations must also consider how alternative dispute resolution mechanisms such as mediation can be institutionalised to address any disagreement between stakeholders.

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

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