FICCI Multiplex Association filed information to CCI,
claiming that film producers and distributors under the umbrella of United
Producers and Distributors forum are refusing to deal with multiplexes to
release their film. Multiplex can show only feature films in their theaters. So
an essential input is denied to multiplexes. It is anti-competitive under
Section 3 of Competition Act 2002 (hereinafter Competition Act). Director General
under Competition Act investigated in the matter and found that prima facie there is possibility of an
anti-competitive activity.
Further UPDF member argued that they have not formed
cartel. Multiplex owners have formed a cartel and there was an anti-competitive
activity under Monopolistic and Restrictive Trade Practices Act. It was held
restrictive trade practice by Monopolistic and Restrictive Trade Practices
Commission. They further argued that UPDF is efficiency increasing joint
venture. Joint venture in form of horizontal agreement is exempted from being
anti-competitive if they are increasing efficiency.
During this
case sub judice before CCI, UPDF
filed a case in Bombay High Court alleging that CCI does not have jurisdiction
in matters involving film, which is subject matter of copyright. The case is in
name of Amir Khan Pvt. Limited v.
Competition Commission of India. Copyright
owner has the right to release the work to public or not do so under Copyright
Act 1957. If there is any concern of interested parties regarding copyrighted
material. The obvious remedy under Copyright Act 1957 is compulsory licensing
of copyrighted material. The petitioner argued that CCI does not have any
jurisdiction to deal with issues involving Copyright. It further alleged that
CCI has formed an opinion through Director General Report that there is
anti-competitive activity. Honorable Bombay High Court held that CCI has power
to decide jurisdictional issues except the question relating to its own
establishment under Competition Act. Investigation by Director General is not
formation of opinion. The remedy available under Competition Act is in addition
to other laws and not in derogation.
Competition Act has overriding power over other legislations.
C.
Issues
1.
Whether
UPDF is a Cartel or not?
2.
Whether
feature film has blanket exemption under Section 3(5)(i) of Competition Act
2002 from being anti-competitive agreement?
D.
Order
Cartel is a horizontal activity.
Competition Act 2002 provides inclusive definition of cartel. So there is
legislative intent to make definition of cartel broader. “"cartel"
includes an association of producers, sellers, distributors, traders or service
providers who, by agreement amongst themselves, limit, control or attempt to
control the production, distribution, sale or price of, or, trade in goods or
provision of services” Use
of word or before service providers indicate that it includes horizontal
agreements only.
In present case UPDF is an association of producers
and distributors. Producers and distributors are market players at different
level of business. Producers are involved in making of film. On the other hand
distributors only distribute films to multiplexes and single screen theatre.
However there is trend of integration of production and distribution in Indian
film industry to some extent. Whether this vertical integration of film
industry makes UPDF a horizontal arrangement is a question to be analysed.
CCI in its order said that UPDF is involved in Cartel
like activity under Section 3(3) of Competition Act. Horizontal agreements are
dealt under Section 3(3) of Competition Act. It
is to be noted that UPDF has both producers and distributors as its members. CCI
in its order describes at many places that this is a vertical arrangement.
CCI stated that there is no explanation is given on
reasonableness under Section 3(5)(i) and there is no judicial precedent on this
concept. In order to interpret Section 3(5) CCI pointed out two factor test to analyse
whether it falls under exemption or not. First, whether the activity is to
restrain infringement. Second, whether the activity in question is reasonable
conditions imposed under IP laws. Infringement of IPRs depends upon the
specific rights under IP laws. So CCI discussed the rights under Copyright Act 1957
in detail.
For cinematographic
films there is right make copies, to sell or give on hire, to communicate the
film to public. Copyright is subject to other provisions of Copyright Act and
other laws as well. Other laws may include Competition
Act also. Thus
cumulative reading of all these provisions makes it clear that copyright is a
statutory right subject to the provisions of the Copyright
Act, 1957. It is not an absolute right. There is no right which the copyright Act does
not expressly create. It cannot be inferred or claimed under the said Act. The
legislative intent of Copyright Act was to grant a higher
protection to pure original artistic works such as
paintings, sculptures etc. and lesser protection to design
activity which is commercial in nature. The legislative intent is, thus, clear
that the protection accorded to a work which is commercial
in nature is lesser than and not to be equated with the
protection granted to a work of pure Art.
CCI
stated that multiplexes do not want to infringe the Copyright of films of UPDF
members. They want to get license which is essential and sole input of their
business. So there is no question restraining the infringement by restricting
the supply of feature film in the present case. Regarding the reasonable use of
IPRs CCI said that there is no question of exercise of Copyright under the
present case. So exemption under Section 3(5)(i) is not available under this
case.
Regarding
efficiency increasing Joint Venture CCI said that UPDF has not provided any
data relating to increase in efficiency in this case. CCI said Joint Ventures
do not have blanket exemption under proviso to Section 3(3) of Competition Act
2002. In case of efficiency increasing Joint Venture it gets exemption from per se rule. Generally horizontal
agreements are per se
anti-competitive. However, in case of efficiency increasing Joint Venture the
rule of reason approach will apply.
CCI
considered the six factors under Section 19(3) of Competition Act 2002 which
are necessary to determine anti-competitiveness of a business activity. First
three factors are related to entry barriers. CCI held that there were potential
entry barrier existed. Last three factors are related to scientific
development, consumer interest and improvement in production which were not
present in this case.
CCI
referred to US and European jurisdiction cases. CCI referred to four foreign
cases on the similar issues. Citing United
States v. Microsoft
CCI said that copyright does not provide immunity from general law
including anti-trust law. Similar stand was taken by CCI in this case. Otter Tail Power Co. v. United States,
the court held that essential facilities should be provided at non
discriminatory basis. Here in this case feature films are essential facility to
multiplexes.
In the
present case there was no issue of emerging of new product in market. But CCI
cited ECJ decision in Maggil (Radio
Telefilms Eireann) (RTE) and Independent Television Publication Limited ruled that
refusal in this case amounted to preventing a new product in market which had a
potential consumer demand. Twentieth
century Music Corp. v. Aiken US 151, 156 (1975), the objective of our copyright law is to provide fair
return for creative labour.
CCI held that it is an anti-competitive activity. UPDF
was refrained from indulging in anti-competitive activity and penalty of one
lakh each was imposed on 27 UPDF members.
E. Analysis
If an act or practice of intellectual property owner
is to avoid infringement or IPRs owner is exercising right specifically
provided under IP laws. It will be exempted under Section 3(5)(i) of
Competition Act 2002. Otherwise there is no exemption to IPRs. Exemption
provision in its present form does not provide clearly about relation between
competition law and IPRs. If this provision would not be there CCI could pass
the similar order in this case. CCI rightly pointed the need to include
explanation to reasonableness under Section 3(5)(i). Not only explanation to
provision but there is need of comprehensive guidelines to deal with patent
pooling, standard setting, grant back, cross licensing etc.
