CCI in its order dated 24th July 2019 held that there could be no prima facie violation established against certain multiplex cinema theatre owners, and therefore closed the matter under Section 26(2) of the Competition Act 2002 (“Act”). It also said that the allegations made by the Informant were ‘general’ in nature and they do not fall under the ambit of Act.

The facts of the matter were one Unilazer Ventures Pvt. Ltd. (now referred as “Informant’) alleged that the PVR Ltd. (OP-1), Inox (OP-2), Cinepolix (OP-3) and Carnival Motion Pictures (OP-4) control 60 per cent of the multiplex film exhibition business in India, and through certain practices they are trying to curb competition in the said market. Their primary allegation was regarding levy of “Virtual Print Fee (VPF)” which came with a ‘sunset period’ clause to reduce the cost for producers and distributors. The said fee was to be paid by producers, prior to screening of a movie in a theatre, however in the specific case cinema operators kept on levying the fee even after mutually agreed sunset period clause. The Informant also alleged that FICCI (OP-5) was acting in concert with the said parties and it only prescribes terms which are favourable to their business.

While the overall order is well reasoned and grounded in facts, few observations made in the ruling require a closer look. The Commission while closing the said matter under Section 26(2) placed its reliance on NCLAT judgment in Reprographic India vs. CCI case (Case No. 09 of 2019), where the appellate tribunal held that the Informant has to ‘…demonstrate substance in the allegations…’ to warrant an investigation, and mere bald accusations would not prove a prima facie violation. Even though the Commission interpreted the said wordings as need to “…discharge the initial burden of proof…” on Informant’s part, neither it, nor the NCLAT, defined what would this discharging of proof, or ‘substantiated allegation’, look like.

A simple perusal of recent Section 26(1) investigating orders would suggest that the Informant wasn’t on a total dubious ground. In Maruti Suzuki case (Case No. 01 of 2019) the Commission received an anonymous mail alleging anti-competitive conduct by the said firm. In response it not only took suo moto cognizance of the said matter, but shifted the burden of proof on the opposite party by stating that the said company ‘…failed to mention reasons...’ in its correspondence for penalizing only violation of guidelines (read the full order here for context). Putting the said order in parallel with the Inox case, one may be inclined to believe that the Commission took diametrically opposite stand so as to find prima facie violation of the Act.

Another ancillary issue in the said ruling is the way the Commission has interpreted the term ‘agreement’. The CCI held that the question of having a ‘sunset period’ clause does not arise as the Informant has been unable to produce any written documents in support. However this doesn’t sit well with the definition of the said word under the Act. Section 2(b) defines agreement as ‘…arrangement or understanding or action in concert...’, irrespective of it being in writing or not, between the contravening parties. In Neeraj Malhotra case (Case No. 05 of 2009) it was held that the agreement can even happen by a ‘nod’ or ‘wink’. The rationale behind defining agreement in such a manner is, the colluding parties are most of the aware they are acting in contravention to the law, and therefore try to minimize the trail of evidence available in case of an investigation. Juxtaposing the said definition with the Inox case would suggest that the OPs were well aware of their anti-competitive practice, and therefore intentionally didn’t sign an agreement to leave an evidence behind it.

While the future of the case is still unknown and is majorly dependent on the willingness of the Informant to approach the Appellate Tribunal, time taken by the Commission to dispose the said case provides some relief. As per an analysis conducted by the CCLE, median time taken by the CCI to pass an order without investigation is 71 days, which is just six days lesser than what is being taken in this case (77 days approximately). This calls for a coherent competition policy delivering timely justice to the parties, thereby catering to the actual intent of the legislator.