Karnataka Film Chamber of Commerce vs. Kannada Grahakara Koota & Ors.

Citation: Appeal No. 13/2016 with I.A. No. 08/2017

Decided on: 10.04.2017

Court: Competition Appellate Tribunal

Facts

Karnataka Film Chamber of Commerce (Appellant/ KFCC) filed an appeal against the order passed by Competition Commission of India (“CCI“). CCI had imposed the penalty on Appellant and other two associations namely Karnataka Television Association (“KTVA“) and Kannada Film Producers Association (“KFPA“). The three association had allegedly limited and restricted the market of dubbed films/serials in Kannada language and that was in contravention of Section 3(1) read with Section 3(3)(b) of the Competition Act, 2002 (“Act“). Further, CCI directed Appellant, KTVA and KFPA to cease and desist from indulging in practices found to be anti-competitive and to bring out a Competition Compliance Manual to educate their members about the competition law principles.

Furthermore, Kannada Grahakara Koota (Respondent No. 1) and Shri Ganesh Chetan (Respondent No. 2) alleged that Appellant had violated Section 19(1)(a) of the Act by conducting anti-competitive practices and cartelization within the Karnataka Film and television industry. The following associations KTVA, KFPA, Karnataka Film Directors Association (KFDA), Karnataka Chalanachitra Academy (KCA) and Karnataka Film Artists, Workers and Technicians Union (KFAWTU) along with the Appellant were collectively prohibiting telecasting of dubbed content of any other language into Kannada, and banned making, releasing and exhibiting of dubbed films. Specific instances of alleged blocking of the telecast of dubbed TV serials “Satyameva Jayate” and Rani Laxmibai of Jhansi and exhibition of film “Koffi Shop”, were cited in this context.

Issues

  1. Whether the Appellant being an Association of film producers, distributors and theatre owners were within the purview of Section 3 of the Act;
  2. Whether the conduct of the Appellant was to be evaluated only in regard to the film industry in Karnataka or in regard to the television industry as well;
  3. Whether there was sufficient evidence on record to establish that an ‘agreement’ was entered into or practice carried on or decision taken in contravention of Section 3, read with Section 3(3) (b) of the Act.

Held

Issue 1: Appellant was an association of producers, distributors, and exhibitors. These producers, distributors, and exhibitors were undeniably persons as defined in Section 2 (l) of the Act. Further, these persons were certain enterprises being engaged in activities as encompassed in Section 2(h) of the Act. The Appellant was, therefore, association of persons and its constituent members were enterprises operating in the same market.

Issue 2: Film and Television industry were not two entirely different product markets. The product market comprised of all products or services that were substitutable by the consumer. The suppliers of these products or services competed to get the consumers. Films and Television are products of the entertainment industry. The films were only exhibited in theaters but were also telecast on TV channels and film rights get sold to TV channels. Competition Appellate Tribunal (“COMPAT“) further stated that the television industry was also a route to monetize films. Films exhibited in the theaters and films telecast through the medium of television were certainly substitutable. Similarly, television shows could be adapted to a film format. Consumers seek entertainment and both films and television industry offer products to entertain, and consumers can make their choices based on their prices, characteristics etc. COMPACT then referred to CCI vs. Co-ordination Committee of Artists and Technicians of W.B. Film and Television and Ors. [Civil Appeal No. 6691 of 2014] wherein Supreme Court had held that the sweep of the action is to be considered while determining the market.

Issue 3: In order to define Section 3 of the Act (prohibition of anti-competitive agreements), it is necessary to define ‘agreement’, ‘enterprise’ and ‘person’ as provided under S.2 of the Act. Section 3(3)(b) of the Act creates a presumption that an agreement or practice carried on, or decision taken, which limits or controls production, supply, markets, technical development, investments or provision of services has an appreciable adverse effect on competition and is to be treated as a prohibited agreement in terms of Section 3(1) of the Act.

COMPAT observed that in regard to “Koffi Shop” Appellant had written the letter to the newspapers requesting them not to publish the advertisement pertaining to ‘Koffi Shop’, until they received instructions and same was repeated in the minutes of Emergency Executive Committee Meeting Hence, COMPACT held that as per the minutes of Emergency Executive Committee Meeting Appellant and the members had jointly and systematically opposed the dubbed content and violated Section 3 of the Act.

COMPAT observed that Aamir Khan, who was the producer of the programme and, the channel which had proposed to telecast the programme, had approached the Appellant and not KTVA directly. This also indicated the perception of the players in the market of television/film industries as to which entity could provide clearance for telecast of dubbed content. It was noted that Appellant was on the Dubbing Committee of KTVA which took a decision to oppose the telecast of dubbed content. If the Appellant had no role in the matter, it could have informed Aamir Khan of not having any authority in the matter or at best forwarded the letter to KTVA. Accordingly, COMPAT held that Appellant and KTVA acted in concert to counter dubbed content.

Penalty: The Appellants had argued that it was not a profitable organization and enjoyed exemption from payment of tax. Further, it was argued that its income was not from the business of film production, distribution or exhibition, but only from the collection of membership and rent accrued from the lease of its building. Therefore, they claimed that any penalty imposed on them is  unsustainable.

COMPAT in this case clearly held that the profitability or tax-exemption status of a person contravening provisions of Section 3 of the Act, are not the factors to be considered for determining the average of the turnover, i.e., receipts referred to in Section 27(b) of the Act, with reference to which the penalty is to be calculated. Accordingly, it held that since the conduct of the Appellant resulting in the contravention of Section 3 of the Act can be traced to the very existence of the Appellant as an association of enterprises, its receipts are the appropriate basis for determining the quantum of penalty.

Editor: Vivek Verma

Full text of the judgment is available here

Image from here

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