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Who runs your cinemas? The legal battle for control over Indian cinema screens

Vineet John Samuel

The clash between D-Cinema and E-cinema doesn’t seem to be ending any time soon, and nothing could be more illustrative of this conflict than that between K Sera Sera Digital Cinema Ltd (KSS) and Digital Cinema Initiatives, LLC (DCI). KSS has alleged that the DCI has been operating like a cartel by imposing extremely strict standards that compel cinema owners to install expensive DCI compliant equipment, if they wish to screen Hollywood films such as ‘Avengers: Age of Ultron’ and ‘Fast and Furious 7’. In its defence, the DCI has responded by highlighting the difference in quality of DCI compliant projections and regular E-cinema variants. It has further gone on to argue that DCI compliant formats are also less susceptible to piracy and how this is crucial in protecting the intellectual property of producers who insist on screening their films in this format.

This conflict first went to the Competition Commission of India (CCI) when KSS, alleged a violation of Sections 3 and 4 of the Competition Act, 2002 (the “Act”), that deal with Anti-competitive agreements and the Abuse of dominant position respectively. In its complaint, KSS has argued that the standards set by the DCI are such that it cannot screen certain films without purchasing DCI approved equipment, which in turn excludes them from their equal participation in the market place. The DCI in turn brought to the Commission’s notice, section 3(5) of the Act, that allows them the right to set standards to protect their intellectual property and hence had the case dismissed without the CCI calling for an investigation by the DG.

This was then appealed by KSS, at the appellate tribunal, where it pleaded that ‘standards’ cannot lead to the elimination or the pushing out of competition. By arguing that the complex standards set by dominant players could lead to a “tyranny of standards”, the appellate tribunal decided to set aside the previous order and remit the case back to the CCI.

After the CCI once again ruled in favour of DCI, KSS appealed once again to the tribunal and had it set aside the second CCI order as well. The COMPAT stated that though DCI may not qualify as a cartel, arguments from the respondents that installing DCI equipment was voluntary, while simultaneously stating that cinema houses may not screen certain Hollywood films without it, pointed towards a barrier to entry into the market place. It further noted that as time passed the role of technology has grown extremely vital to maintain a competitive marketplace and hence such cases must be examined in depth.

What it means for the ordinary movie-goer?     

This particular case has seen the inside of the CCI as well as the Competition Appellate Tribunal (COMPAT) where it was remitted back to the CCI, back to the Tribunal and back to CCI again. This ping pong match between the informant (KSS) and the DCI becomes relevant when we delve into what the outcome of this case could mean for cinema-goers in the country and the kind of experience they enjoy when watching both Hollywood and domestic cinema.

At present, Indian movie goers can enjoy both the D-cinema and the E-Cinema experience across the country, with the key difference in both being the kind of equipment being used to project the movies. Those with DCI approval, fall into the D cinema category, and those without, into the E-cinema category. The current scenario however, is one where Hollywood film houses insist on the use of D-Cinema equipment for their screening, leaving a lot of cinema houses unable to screen these films unless they clear the existing standards. Clearing these standards has proved to be a costly affair for a lot of houses, and has turned into a cost that is often borne by the end-consumer.

For Indian movie-goers, this would mean that watching Hollywood movies would become more expensive and cinema houses that want to screen Hollywood films would end up being coerced into purchasing the new servers and equipment required to clear DCI norms. Till the purchases aren’t made, Hollywood films will be screened only by a handful of cinema houses that have cleared these norms.

Yet another dimension to the dilemma emerges from the perception, that with this case, Indian norms are presently being determined and controlled by a US based entity like the DCI and its 6 stakeholder partners that are six largest US movie production houses. At a time when India looks to protect its domestic interests, and grows assertive over its economic clout, there is a case to be made for allowing degrees of leniency to houses like KSS and UFO that primarily screen in the E-cinema category but want to carve out a share of the market place, currently dominated by the few cinema houses that have DCI approval. To achieve this without contravening Section 3(5) and endangering the intellectual property of foreign production houses, may prove to be quite a dilemma for lawmakers in the country, but maintaining Indian control over the 138.2 billion Rupee industry is certainly a goal to strive towards.