The Competition Commission of India (CCI) has begun its 

probe into the anti-competitive practices alleged

by actor-producer Kamal Hassan against certain film distributors and exhibitors. The probe has been
initiated in relation to the simultaneous direct-to-home (DTH) release of his latest blockbuster film,
Vishwaroopam. It all began in December last year when the actor announced his plans to release the film
through pay-per-view (PPV) on DTH platforms, a day before it’s theatre release. This hits directly at the
exclusive window of theatre owners for exhibiting films and this led the film distributors’ and exhibitors’
associations in Tamil Nadu to call for a state-wide boycott and even threatened to disrupt screening by
facilitating piracy. Acceding to mounting pressure, the actor held back his DTH release plans and
postponed the theatre release from 11th to 25th of January. In midst of this, the release landed in more
trouble with some Muslim groups objecting to certain portions of the film, which resulted in further delay by
a week. In his complaint before the CCI, the actor has alleged an abuse of dominance and cartelization
against the film distributors and exhibitors, resulting in the disruption of the DTH release. The final report of
the Director General (DG) on the alleged anti-competitive practices is expected very soon. 

This episode has served to highlight an unfortunate practice long followed in the Indian film industry. The
conventional practice in the industry is to first release movies in theatres, followed by a brief gap before the
release of the movie in other platforms such as satellite, home video, cable, video-on-demand (VOD), PPV,
DTH and online streaming. This practice has long been unquestioned to a large extent. Supposedly, this
initial exclusive window for theatre exhibition is perceived to exploit the initial consumer interest, a simple
economic theory of demand and supply. The approach has mostly been to limit access for increasing
consumer demand, and thereby increasing the per unit price. This post will explore the efficacy of such a
simultaneous release strategy, from both the consumers’ and producers’ standpoints. 

Untapped home entertainment market 

India is the largest producer of movies in the world with over 1,300 films released each year. With respect
to theatre density, however, India ranks poorly with 12 screens per million as opposed to 117 per million in
the US. As a result of this huge infrastructural deficit, an industry survey estimates a poor volume of 4
billion ticket sales each year across 12,000 odd theatres. For a country with a population totalling 1.2
billion, the volume of ticket sales vis-à-vis movies produced is abysmal. 

Fortunately, the duration of the exclusive window for theatre viewing has reduced considerably over the
years, primarily owing to explosion of content distribution channels and piracy. In fact, a trend has emerged
where film digital rights (such as satellite, home video, VOD, PPV, DTH and webcast) are being negotiated
and sold much ahead of the theatre release. Some movies have even realized their investments before the
release date! To get a better sense of the film market, the table below captures revenues generated by a
few films released in 2011 and 2012:

Movie Total Investment Satellite Home Video

Ek Tha Tiger 90 75 6
Dabangg 2 75 45 25
Rowdy Rathore 55 35 NA
Agneepath 65 41 5
3 Idiots 59 35 15

There is no shortage of alternatives to theatres and from the above, it is evident that there is no dearth in

consumption. With a rapidly growing market for home entertainment (largely due to the latest digital

technologies), the rationale for an exclusive theatre release doesn’t hold much weight. Although Kamal

Hassan’s plans failed to materialize to conclusively establish this, the simultaneous release strategy

appears to be well founded. The following statistics explain the sound economics behind his strategy: 

 A total of six DTH platforms (Airtel, Sun Direct, Videocon, Tata Sky, Dish TV and Big TV) share 50
million subscribers between them, which account for approximately 30% of the Indian audience. 
 Much of this subscription base consists of semi-urban and middle-class consumers. Their numbers are
estimated to be growing at 16% each year. Within this sizable subscription base, the current market for
PPV is estimated at 5-10%. With the analog sunset of cable television, this figure will increase
exponentially in the coming years.
 If news reports are anything to go by, Airtel has agreed to purchase PPV-DTH rights over
Vishwaroopam for a whopping 40 crores. Another news report has estimated that the movie will gross
 175 crores through the DTH stream. (Having said this, I am a little cautious in accepting these figures at
face value, for the specifics of the revenue sharing arrangement are unknown.) 
 Last but not the least, the comfort of a high quality viewing experience through DTH surpasses theatre
viewing for many, especially so in semi-urban and rural areas.

Profitable simultaneous release strategy 

In a similar vein, it is interesting to note the results of a study conducted by American Marketing

Association in 2007. It found that a simultaneous movie release in rental DVDs and VOD, followed by DVD
retail after 3 months, could result in as much as a 16% increase in revenues. Simultaneous release
undoubtedly has a positive impact on consumer access, as it controls prices by introducing competition
between competing distribution channels (in this case, the theatre owners and DTH services).

Affordable pricing 

The market for entertainment is more than what meets the eye. Several non-economic factors affect movie
success, and losses claimed by producers cannot be attributed solely to bad release plans. Having said
that, a question that must be asked is whether there is a compelling argument against increasing access
through simultaneous releases? One might argue that simulations release could enable easy piracy, which
would eat up revenues from legitimate streams. This view fails for the simple reason that consumers of
‘pirated’ (for lack of better word) goods do not appreciate pricing mechanism of the legitimate market.
Between picking up a DVD at a street corner for a mere fifty rupees, and purchasing it from an authorized
dealer (if there is one in their town) for five times that amount, how many consumers would bother
purchasing an original disc? A study conducted by Lawrence Liang and Ravin Sundaram as part of ‘Media
Media Piracy in Emerging Economics’ argues that the problem of piracy stems from ‘a failure of affordable
access to media in legal markets’. The report demonstrates the wide disparity in cost of pirated discs and
legitimate copies. 

Furthermore, the report, in great detail, elaborates on the success of Moser Baer in the home video market
by emulating the pirate market; i.e., cheap, quick and wider access to movies. Moser Baer entered the
market in 2006 by selling original DVDs at very affordable Rs. 34, a price comparable to pirated discs.
Consequently, many other companies followed suit, which greatly reduced the price, while at the same time
increasing revenues through higher sales. In a nutshell, the success of the simultaneous release strategy
would seem to be heavily dependent on pricing. 

Before the CCI: Creators before distributors 

To conclude, the simultaneous release strategy is beneficial for producers, as it puts a check on the
monopolistic behavior of film distributors and exhibitors. Instances of distributors and exhibitors arm-
twisting producers and vice-versa are nothing new. In fact, the CCI is examining a volley of complaints
between them. Needless to say, the tussle is predominantly over distribution of revenues. In Hassan’s
complaint however, the distributors and exhibitors were unwilling to let go their initial exclusive window. The
distributors’ and exhibitors’ associations did eventually succeed in deferring the DTH release with their
threats to boycott screening. This decision to boycott is likely to violate the following provisions of the
Competition Act: 

1. Refusal to deal: The threat of the distributors has an effect of restricting the ‘classes of persons to
whom goods are sold or from whom goods are brought’ which is prohibited under sub-clause (d) of
Section 3(4). 
2. Denial of market access: Section 4(2)(c) prohibits dominant entities from indulging in ‘practices
resulting in denial of market access in any manner’. It is likely that the DG might find a valid claim
against the associations which control theatre distribution in Tamil Nadu for denying home-video market
to the actor. 

In the context of this controversy, the distributors have stated that Hassan has violated an informal
understanding in the industry to release films exclusively on theatres. Even if this be the case, such
understandings are anti-competitive, and can hardly muster against anti-competitive charges under
Competition Act. In fact, Section 3(5) of the Competition Act excludes agreements made in furtherance of
exploitation of an IP right. As long as the terms of license are ‘reasonable’, IP owners are free to impose
any  measure. In other words, an informal pact for exclusivity in distribution of films does not stand valid
before a court of law. I would be surprised if the finding of the DG goes against the actor. 
1. 1. Dhanendra Kumar Principal Advisor, Indian Institute of Corporate Affairs & Chief Mentor, School
of Competition Law Ministry of Corporate Affairs, Govt. of India 1Views expressed are personal-
business decisions need professional advice
2. 2. !  COMPETITION LAW AND POLICY IN INDIA !  POSITION IN OTHER JURISDICTIONS ! 
CASES AND ORDERS OF CCI !  ACTIVITIES IN CONTRAVENTION OF COMPETITION ACT,
2002 2
3. 3. COMPETITION LAW AND POLICY IN INDIA 3
4. 4. 4 In common parlance, competition in the market means sellers striving independently for
buyers’ patronage to maximize profit (or other business objectives). A buyer prefers to buy a
product at a price that maximizes his benefits whereas the seller prefers to sell the product at a
price that maximizes his profit.
5. 5. 5 !  Competition is the best means to ensure that consumers have access to the broadest range
of services at the most competitive prices. !  Producers (of goods etc.) will have maximum
incentive to innovate, reduce their costs and meet consumer demand.
6. 6. 6 !  Unfair competition means adoption of practices such as collusive price fixing, deliberate
reduction in output in order to increase prices, creation of barriers to entry, allocation of markets,
tie-in sales, predatory pricing, discriminatory pricing, etc.
7. 7. 7 !  Competition Law and policy is defined as those Government measures that affect the
behaviour of enterprises and structure of the industry with a view to promote efficiency and
maximize welfare. !  There are two elements of such Government measures:- ◦  Competition
Policy: Set of policies, such as liberalized trade policy, relaxed FDI policy, de-regulation, etc., that
enhances competition in the markets. ◦  Competition Law: To prevent anti-competitive practices
with minimal intervention.
8. 8. 8 !  The Preamble states that this is an Act to establish a Commission to prevent anti-
competitive practices, promote and sustain competition, protect the interests of the consumers and
ensure freedom of trade in markets in India.
9. 9. !  CCI shall prohibit anti-competitive agreements and abuse of dominance, and also regulate
combinations (mergers or amalgamations or acquisitions) through a process of inquiry/
investigation. !  It shall give opinion on competition issues on a reference received from an
authority established under any law (statutory authority) / Central Government/ a State
Government. !  CCI is also mandated to undertake competition advocacy, create public awareness
and impart training on competition issues. 9
10. 10. !  An “agreement” includes any arrangement or understanding or concerted action entered into
between parties. It need not be in writing or formal or intended to be enforceable in law. 10
11. 11. !  An anti-competitive agreement is an agreement having appreciable adverse effect on
competition. Anti-competitive agreements include, but are not limited to:- ◦  agreement to limit
production and/or supply; ◦  agreement to allocate markets; ◦  agreement to fix price; ◦  bid rigging
or collusive bidding; ◦  conditional purchase/ sale (tie-in arrangement); ◦  exclusive supply /
distribution arrangement; ◦  resale price maintenance; and ◦  refusal to deal. 11
12. 12. !  Dominance refers to a position of strength which enables an enterprise to operate
independently of competitive forces or to affect its competitors or consumers or the market in its
favour. !  Abuse of dominant position impedes fair competition between firms, exploits consumers
and makes it difficult for the other players to compete with the dominant undertaking on merit. 12
13. 13. Abuse of dominant position includes: !  imposing unfair conditions or price, !  predatory
pricing, !  limiting production/market or technical development , !  creating barriers to entry, ! 
applying dissimilar conditions to similar transactions, !  denying market access, and !  using
dominant position in one market to gain advantages in another market. 13
14. 14. !  Relevant product market in movie exhibition cases has been "first run movie exhibition," that
is, exhibition of new, mass market films in movie theatres. ("First run is to be distinguished from
"sub run," or re-release of older films.) !  It is also being argued these days that the relevant market
must now include video tape rentals, television movie channels and/or television pay-per-view, or,
for that matter, non- movie television entertainment or even other forms of entertainment. 14
15. 15. POSITION IN OTHER JURISDICTIONS 15
16. 16. !  United States v. Paramount Pictures, Inc., 334 US 131 (1948) (also known as the Hollywood
Antitrust Case of 1948, the Paramount Case, the Paramount Decision or the Paramount Decree)
was a landmark United States Supreme Court antitrust case that decided the fate of movie studios
owning their own theatres and holding exclusivity rights on which theatres would show their films. It
changed the way Hollywood movies were produced, distributed, and exhibited. !  The Court held in
this case that the then existing distribution scheme was in violation of the antitrust laws of the
United States, which prohibit certain exclusive dealing arrangements. 16
17. 17. !  In a 1946 ruling involving RKO Radio Pictures, the United States Supreme Court held an
arrangement to be anti-competitive wherein a movie was distributed only among multiplexes
owned by parties to this arrangement who were then able to exclusively show those movies during
a certain ‘first run’ period before other multiplexes screen the same movie 17
18. 18. !  In another cases it was held that, the distributors could not engage in "block booking," or
conditioning the licensing of a desired film on the simultaneous licensing of other films, or in other
specified types of contractual arrangements that effectively bound a theatre or chain of theatres to
a distributor. [U.S. v. 20th Century Fox, 882 F. 2d 656 (2d Cir. 1989), cert. den. 110 S. Ct. 722
(1990)] 18
19. 19. !  Most of the decrees related to anti-trust law in the US contained a requirement that
defendants license their films "theater by theatre, solely upon the merits and without discrimination
... ." This language gave rise to much litigation under the decrees. 19
20. 20. !  Splitting was simply a form of horizontal market allocation. Groups of exhibitors in a market
met periodically and allocated ("split") among themselves those films that were coming up for
licensing. Subsequently, the members of the cartel negotiated for only those films that were
allocated to them. Splitting was conducted more or less openly, and was condoned by the antitrust
authorities in situations where the distributors acquiesced. 20
21. 21. !  United States v. Capitol Services, Inc., [568 F. Supp. 134 (1983), aff’d 756 F.2d 502 (7th
Cir.), cert. denied, 474 U.S. 945 (1985)] !  In this case it was held that splitting was indeed a per se
violation of the Sherman Act. 21
22. 22. !  Monopolies & Mergers Commission (MMC) Report on the supply of films: Focus of the
investigation was on various vertical links which existed between film distributors and exhibitors. ! 
The MMC concluded that two particular vertical relationships operated against the public interest:
alignment, the practice whereby a distributor normally offers its films to one only of the two major
circuits of exhibitors, and the imposition of long minimum exhibition periods. 22
23. 23. !  The MMC recommended the following remedies: i) Alignment: The practice should be
banned. They also recommended that the parties should submit information to the DGFT(Director
General of Fair Trading) to demonstrate compliance. ii) Minimum exhibition periods: These should
be restricted to two weeks for films on first release and one week for all others. The film could be
retained by the exhibitor at the end of the minimum exhibition period by mutual consent. 23
24. 24. CASES AND ORDERS OF CCI 24
25. 25. 25 Name of the Case Date of CCI Order FICCI – Multiplex Association of India v United
Producers and Distributors Forum 25th May, 2011 Reliance Big Entertainment v Karnataka Film
Chamber of Commerce and others; UTV Software Communications Ltd. v Karnataka Film
Chamber of Commerce and others (altogether 7 cases) 16th February, 2012 Eros international
Media Ltd. v Central Circuit Cine Association and others; Sunshine Pictures Pvt. Ltd. v Motion
Pictures Association and others 16th February, 2012 Mrs. Manju Tharad and M/s Manoranjan
Films v Eastern India Motion Pictures Association, Kolkata and CBFC, Kolkata 24th April, 2012
UTV Software Communications Ltd., Mumbai v Motion Pictures Association, Delhi 8th May, 2012
26. 26. Name of the Case Date of CCI Order Sajjan Khaitan v Eastern India Motion Picture
Association and Others 9th August, 2012 Ajay Devgan Films v Yashraj Films Pvt. Ltd. And Others
5th November, 2012 Film and Television Producers Guild of India v Multiplex Association of India,
Mumbai 3rd January, 2013 M/s Shri Ashtavinayak Cine Vision Ltd. v PVR Picture Ltd. and Others
 10th January, 2013 M/s Cinergy Independent Film Services Pvt. Ltd. v Telangana Telugu Film
Distributors Association and Others 10th January, 2013 26
27. 27. !  Reliance Big Entertainment v Karnataka Film Chamber of Commerce (along with other
cases) [Order dated:16 February, 2012] In this case, besides other disputes, UTV had filed a case
against distributor associations like KFCC (Karnataka Film Chamber of Commerce) for putting a
restriction on the number of cinemas to release a non Kannada film and BJMPA (Bihar and
Jharkhand Motion Pictures Association) for demanding unreasonable hold backs for registering its
films. It barred studios from exploiting satellite and home video rights in the respective regions and
compelled the studio to register films with the trade body and bend to their archaic rules. As a
result, this constrained the market access of the studio for unfettered distribution of its films on non
theatrical platforms. 27
28. 28. !  The CCI in this case ruled that the anti- competitive behaviour of any entity needs to be
condemned heavily for effective function of the market. Further, it said that the associations are
taking decisions and engaging in practices which are anti-competitive. Consequently, in Feb 2012,
the CCI has imposed a hefty penalty on these distributor associations; to be deposited with
immediate effect to the Commission. 28
29. 29. The order clarifies that the associations will have to stop: (a) Compelling the
producers/distributors/ exhibitors to become their members as a pre- condition for exhibition in
their territories; (b) Discrimination between regional and non- regional films and imposing
discriminatory conditions against non-regional films; (c) Screen restrictions based on language or
manner of exhibition of a film to be done away with; (d) Holdbacks on satellite and home video,
with studios are free to decide such holdbacks; 29
30. 30. The CCI has also directed the associations to: !  Not make any discrimination between regional
and non-regional films. !  The number of screens or the manner in which the film should be
exhibited shall not be determined by these bodies. !  Condition of compulsory registration of films
as a pre-condition for release shall be dispensed with. 30
31. 31. ACTIVITIES IN CONTRAVENTION OF COMPETITION ACT, 2002 [Section 3] 31
32. 32. !  Controlling the film distribution business by putting restrictive clauses in the Articles of
Association that the members can only deal with the members of the Association only and that
dealing with the non- members is prohibited by these Associations. !  These provisions create a
situation where all the businessmen engaged in the business of film distribution and exhibition
have to become the member of these Associations to conduct the business smoothly and also to
have access to all the films released in their territories. This situation leads to refusal to deal as per
the provisions of section 3(4) of the Act. 32
33. 33. !  Another method by which Associations are controlling the film distribution business is by way
of compulsory registration. !  Refusal to register the film hampers the release of film which results
in tremendous pressure on the producers. Therefore the producers are compelled to get their films
registered in each territory. 33
34. 34. !  Imposing certain conditions to regulate the business of film distribution and exhibition in their
territory is also found to be anti- competitive. !  The Associations are forcing the terms and
conditions for the business of film distribution which otherwise should be decided between the
producer and distributor. 34
35. 35. !  By issuing circular/ information among the members these Associations boycott a producer
and thereby pressurize him to accept the directions and orders of these Associations. This is anti-
competitive. 35
36. 36. !  These associations are also found to enter into joint agreement with other associations to
control the film distribution business in India. Their conduct indicates concerted action to restrict
the market and impede the competition by controlling the market. This is also prohibited. 36
37. 37. !  Scope of the business is to be left open to the option of the producers and exhibitors as their
own ends. !  Producers, distributors, exhibitors (multiplex owners + single screen owners) all
constitute trade associations among themselves and work on implied cartels. Care needs to be
exercised on this front. !  Associations should avoid coming together in large groups to carry on
anti-competitive agreements and abusing their dominant position. 37
38. 38. ( The views expressed in this presentation are entirely personal, and do not reflect the views of
the Organization to which he belongs. It is advised that professional advice may be obtained for
any business decisions) 38