COMPETITION COMMISSION OF INDIA

Case No. 97of 2016

In re:

K Sera Sera Digital Cinema Ltd.

Unit No. 101 A & 102, First Floor,
Plot No. B 17, Morya Landmark – II,
Andheri (West), Mumbai – 400053 Informant

And

1. Pen India Ltd.

Pen House, Bunglow No. 3, Asha Colony,
Juhu Tara Road, Juhu, Mumbai- 400049 Opposite Party No. 1

2. Bound Script Motion Pictures Pvt. Ltd.

4th Floor, Khair House,
Above Abhudyaya Bank,
Sherly Rajan Road,
Bandra West, Mumbai- 400050 Opposite Party No. 2

3. UFO Moviez India Ltd.

Valuable Techno Park,
Plot No. 53/1, Road No. 7,
Opposite of Akruti Trade Center, MIDC,
Marol, Andheri East, Mumbai- 400093 Opposite Party No. 3

4. Real Image Media Technologies Pvt. Ltd.

Aver Palza, B/13, 4th Floor,
Opposite of Citi Mall, Link Road,
Andheri West, Mumbai- 400053 Opposite Party No. 4
Case No. 97 of 2016 Page 1 of 9
CORAM

Mr. Devender Kumar Sikri

Chairperson

Mr. S. L. Bunker
Member

Mr. Sudhir Mital

Member

Mr. U. C. Nahta
Member

Appearances:

For the Informant: Shri Rachit Batra, Advocate; Shri Sushil Shukla, Advocate;
and Shri Babul Biswas, Advocate.

For OP 1: Shri Rishi Agrawala, Advocate; Shri Mayank Sapre, Advocate; and
Shri Rahul Mehta, Advocate.

For OP 2: None

For OP 3: Shri Gopal Jain, Sr. Advocate; Shri Karan S. Chandhiok, Advocate;
Ms. Kalyani Singh, Advocate; Ms. Chinmayee Chandra, Advocate;
Shri Aroon Menon, Advocate; Ms. Mahima Singh, Advocate; and
Shri Amit Thukral, V. P.(Legal Affairs).

For OP 4: Shri Bharat Budholia, Advocate; Ms. Anisha Chand, Advocate; Ms.
Smita Andrews, Advocate; and Shri Deepak Hirani, V. P.
(Corporate Affairs).
Case No. 97 of 2016 Page 2 of 9
 Order under Section 26(2) of the Competition Act, 2002

1. Under the provisions of Section 19(1) (a) of the Competition Act, 2002 (the
‘Act’), K Sera Sera Digital Cinema Ltd. (‘Informant’) has filed the
information in the instant matter against Pen India Ltd. (‘OP 1’), Bound Script
Motion Pictures Pvt. Ltd. (‘OP 2’), UFO Moviez India Ltd. (‘OP 3’) and Real
Image Media Technologies Pvt. Ltd. (‘OP 4’) alleging contravention of the
provisions of Sections 3 and 4 of the Act.

2. As per the information, the Informant is engaged in the business of digital

cinema exhibition services involving digital projection and screening of films
in India through a digital technology called ‘Sky Cinex Technology’ having tie-
up with as many as 320 cinema theaters across the country. It is stated that the
technology used by the Informant is at par with the other leading digital cinema
service providers across the world. OP 1 and OP 2 are stated to be the producers
and presenters of the movie ‘Kahaani 2’ which was scheduled to be released on
2nd December, 2016 in India and worldwide. OP 3 and OP 4 are engaged in the
business of digital cinema services in India. It is stated that, besides the
Informant, OP 3 and OP 4, there are three other digital cinema service providers
viz. United Media Works Pvt. Ltd, Interworld, and Prasad Extreme Digital
Cinema Network Pvt. Ltd. providing digital cinema services to Bollywood
movies in India.

3. The Informant has alleged that OP 1 and OP 2, being producers and presenters
of the said movie, and OP 3 and OP 4, being the digital cinema service
providers, have entered into an anti-competitive arrangement/ agreement with
a view to limit/ control the release of the movie ‘Kahaani 2’ and has denied the
same to other digital cinema service providers operating in the market. It is
averred that OP 1 and OP 2 have provided the content of the movie ‘Kahaani
2’ to OP 3 and OP 4 alone i.e. the competitors of the Informant. As per the
Informant, OP 1 had provided the contents of its earlier movies for release
Case No. 97 of 2016 Page 3 of 9
 through the Informant’s technology on several occasion in the past. However,
pursuant to an anti-competitive arrangement between the OPs, OP 1 and OP 2
had refused the Informant to supply the content of the movie ‘Kahaani 2’ and
had also directed distributors across India not to accept movie order from the
theatres associated with the Informant.

4. Further, in utter disregard to competition, the representatives of OP 1 circulated

the aforesaid discriminatory dictate to various distributors, bookers and theaters
stating that they would rule the digital cinema service market and kill the
business of other digital cinema service providers such as the Informant. In this
regard, the Informant has submitted an email dated 25.11.2016 which was sent
by OP 2 through its channel partner PVR pictures, purported to inform all the
distributors that the content of the said movie was not available with the four
digital cinema service providers including the Informant. It is stated that the
Informant had approached OP 1 and sought clarification for not providing the
content of the movie ‘Kahaani 2’, but OP 1 had blatantly refused to entertain
the same. It is also stated that the Informant had issued a notice dated
24.11.2016 to OP 1, OP 2 and other stakeholders of the said movie, but OP 1
and OP 2 neither replied to the said notice of the Informant nor gave any
justification for their anti-competitive practices.

5. It is alleged that OP 3 and OP 4 were the direct beneficiaries of the said act of
OP 1 and OP 2 and they had started poaching the theaters of the Informant for
installation of their technology/ equipment stating that they are the exclusive
supplier of the movie ‘Kahaani 2’. It is also averred that OP 3 and OP 4 have
assured the theatres that in future they would be the only exclusive service
providers to big budget Bollywood movies.

6. The Informant has averred that the conduct of OP 1 and OP 2 in providing the
said movie to select digital cinema service providers i.e. OP 3 and OP 4
amounted to unfair and illegal ousting of the Informant and other similar players
from the digital cinema service market in violation of the provisions of the Act.
Case No. 97 of 2016 Page 4 of 9
 It is alleged that the said arrangement amongst the OPs also resulted in limiting
and controlling the supply of movie to single screen theatres as compared to
multiplexes which have much higher ticket prices. Further, it is averred that the
aforesaid conduct of the OPs resulted in tie-in arrangement, exclusive supply
agreement and refusal to deal with the Informant. The Informant has alleged
that the OPs have not only entered into anti-competitive agreements in violation
of the provisions of Sections 3(3) and 3(4) of the Act but also individually
abused their dominant position in violation of the provisions of Section 4 of the
Act.

7. Based on the above submissions, the Informant prayed the Commission to

appropriately intervene in the matter for ensuring free and fair competition in
the digital cinema exhibition industry. The Informant has also requested the
Commission to inter alia impose penalties on the OPs for entering into anti-
competitive agreement and direct the OPs to discontinue their present practice
of refusal to deal with the Informant.

8. The Commission has perused the information and other material available on
record and heard the Informant, OP 1, OP 3 and OP 4 on 28.02.2017. The
Commission has also perused the month-wise numbers of cinema that are
associated with the Informant’s digital cinema service for the last four years
along with other documents submitted by the Informant as well as the written
submissions of OP 1, OP 3 and OP 4. Further, the Commission perused the
email dated 23.11.2016 sent by OP 1 to its distributors and associates informing
them that the contents of the movie ‘Kahaani-2’ was not available with the
Informant/ the cinemas which are using the Informant’s digital cinema service
and the email dated 25.11.2016, sent by OP 2 through its channel partner PVR,
informing all the distributors that the content of the movie ‘Kahaani-2’ was not
available with the four digital cinema service providers including the Informant.
The Commission observes that the Informant appears to be aggrieved by the
conduct of OP 1 and OP 2 in refusing to provide the content of the movie
‘Kahaani-2’ to the Informant but providing the same to OP 3 and OP 4 alone in
Case No. 97 of 2016 Page 5 of 9
 violation of the provisions of Section 3 of the Act and abuse of dominance by
each of the OPs in violation of the provisions of Section 4 of the Act.

9. The Commission observes that, during the preliminary conference with the
parties, OP 3 argued that there was no evidence to show any sort of anti-
competitive arrangement amongst the OPs or abusive conduct by OP 3 which
could attract any provisions of the Act. It was stated that the emails dated
23.11.2016 and 25.11.2016 had no relevance vis-à-vis OP 3. It was also argued
that since OP 1/ OP 2 and OP 3 are vertically related and not engaged in similar
or identical business, the provisions of Section 3(3) of the Act are not applicable
with respect to them. OP 3 further contended that it has no role in distribution
of the movies and that it is the complete discretion of the producers and
distributors. It was highlighted that the movie ‘Kahaani-2’ was not even
released on all UFO’s platforms of OP 3. It stated that quality and security as
the factors for deciding release of a movie and the Informant had caused
infringement of copyright in the recent past. It was also submitted that no
specific conduct was alleged to be abusive under the provisions of Section 4 of
the Act. OP 4 also argued on the same lines as those of OP 3. OP 1 enclosed
copies of a news article dated 11th January, 2017 carrying the news regarding
an FIR filed by the film producer Viacom18 of the movie ‘Force 2’ against the
Informant for online piracy. In the said news, it was reported that the movie
‘Force 2’ was released on 18th November, 2016 and the pirated version of the
movie was available in full length on various websites for unauthorised
download and streaming. Further, it was reported that Viacom18 had developed
an internal security mechanism, in the form of unique identifiers for each copy
of the said film before the digital content packages (DCPs) were distributed to
the digital integrators in order to tackle the menace of online piracy and to
identify the source of leak, if any. Further, it was reported that the investigations
conducted by Viacom 18 revealed that pirated copies had originated from the
copy that was sent to the Informant for digital integration.

Case No. 97 of 2016 Page 6 of 9

10. In this regard, the Commission notes that the Informant has neither refuted the
allegations reported in the aforesaid news article during the oral hearing nor
adduced any documents to rebut the same in their written submissions after the
oral hearing. The Commission observes that the complete silence on the part of
the Informant on the issue of online piracy as raised in the aforesaid news article
indicates that the allegation of OP 1 is not baseless and have some substance in
it. Thus, an objective business rationale to protect the commercial interest of
OP 1 and OP 2 cannot be overlooked in a proceeding under the Act unless the
same is shown to have exclusionary effects or is tainted with an anti-
competitive objective. The Commission also observes that the movie ‘Kahaani
- 2’ was released on 2nd December, 2016 which is 14 days after the release of
the movie ‘Force 2’. In such a situation, it would be counterintuitive for the
producers of the movie ‘Kahaani - 2’ to provide content of the said movie to
the Informant which was released within two weeks after the aforementioned
incident of piracy.

11. It is also observed that OP 1 and OP 2 are likely to have spent considerable
effort and money to develop their film ‘Kahaani – 2’ and have every right to
decide their business strategy to release the same. The producers of the movie
‘Kahaani 2’ has copyright over the content created by them and the same to be
protected from any sort of leak/ piracy and they must be entitled to take suitable
measures to protect their properties from being exploited illegally in the market.
The Commission observes that Section 3(5)(i)(a) of the Act clearly provides
that application of Section 3 shall not restrict the right of any person to impose
reasonable conditions as may be necessary for protecting any of its rights
conferred upon under the Copyright Act, 1957. The decision of OP 1 and OP 2
to refuse to exhibit their movies through the Informant’s digital service, with
whom other producers have had issues of piracy earlier, appear to be taken as a
precautionary step to prevent any loss due to piracy. The Commission further
observes that the producer of a movie/ content manufacturer availing the
services of digital cinema providers as a consumer has the right to decide the
digital cinema service providers of its choice to distribute its movies. It may be
Case No. 97 of 2016 Page 7 of 9
 noted that the very objective of competition law is to protect the interest of
consumers and the process of competition. It is not concerned with the harm to
the competitors unless that also leads to harm to the consumers. Thus, the
Commission is of the view that the alleged conduct of OP 1 and OP 2 in refusing
to provide the content of the movie ‘Kahaani-2’ to the Informant does not
appear to be unreasonable and anti-competitive.

12. The Commission also observed that nothing can be construed from the
Agreements of OP 2 with OP 3 and OP 4 that they had any arrangement to oust
similarly placed digital cinema service providers like the Informant from the
market. Further, it is observed that during the period between March, 2015 to
December, 2016 the number of theatres associated with the Informant has been
varying between 259 to 322 and the maximum number of the theaters i.e. 322
theatres associated with the Informant was in the month of June, 2016. In the
month of December, 2016, three new theaters joined the Informant. After
looking into the number of theaters associated with the Informant for last twenty
one months starting from March, 2015 to December, 2016, it is observed that
the switching of theaters among the various players of digital cinema service is
a common practice in the industry and it is not linked with the release of the
movie ‘Kahaani - 2’. Further, the Commission observed that OP 1 had produced
five Bollywood movies in the year of 2016 i.e. Mastizaade, Do Lafzon Ki
Kahani, Wah Taj, Shivaay and Kahaani 2 in which OP 1 had availed the
services of the Informant for three movies and the Informant has not asked for
the content of the movie ‘Wah Taj’. From the above, it appears that OP 1 has
been availing the services of the Informant before the issue of piracy raised in
the release of Viacom’s produced movie ‘Force-2’. Based on the above, the
Commission is of the view that there is no substance in the allegation of the
Informant that because of anti-competitive agreements with OP 3 and OP 4, OP
1 and OP 2 have refused to provide the content of the movie ‘Kahaani-2’ to the
Informant in contravention of the provisions of Section 3 of the Act.

Case No. 97 of 2016 Page 8 of 9

13. On the allegation of abuse of dominance, the Commission observes that the
Informant has made this allegation in a passing reference without divulging
anything specific regarding the abusive conduct by any one of them. Even, the
Informant has not provided any evidence to elaborate its allegation on abuse of
dominance by any of the OPs. Hence, the Commission is of the view that no
prima facie case of contravention of any of the provisions of Section 4 of the
Act is made out against any of the OPs in the instant matter.

14. In the light of the above analysis, the Commission finds that no prima facie case
of contravention of either the provisions of Sections 3 or 4 of the Act is made
out against any of the OPs in the instant matter. Accordingly, the matter is
closed under the provisions of Section 26(2) of the Act.

15. The Secretary is directed to inform all concerned accordingly.

Sd/-
(Devender Kumar Sikri)
Chairperson

Sd/-
(S. L. Bunker)
Member

Sd/-
(Sudhir Mital)
Member

Sd/-
(U. C. Nahta)
Member
New Delhi
Date: 21.06.2017

Case No. 97 of 2016 Page 9 of 9