CCI:Internal restrictions on film distribution within the country are illegal

Indian government has ruled that some of the internal restrictions on film distribution within the country are illegal and must be dismantled.The ruling came from the Competition Commission of India, which had been petitioned in 2010 by in a complaint against regional distributor associations including the Karnataka Film Chamber of Commerce and Bihar and Jharkhand Motion Pictures Association concerning the film Kites. The studio was subsequently joined by two other industry giants UTV Software Communications Ltd and organisations Eros International Media Ltd, and by the FICCI Multiplex Association of India.CCI (Competition Commission of India) India's trade practices regulator has penalised 12 state film associations across the country for taking anti-competitive decisions, including discrimination against Hindi films and forcing producers to become their members.

The (CCI) has asked film associations of Karnataka, Andhra Pradesh, Tamil Nadu, Bihar and Orissa, among others, to pay 10% of their annual income to the different petitioners, after clubbing all similar cases filed by different producers against different associations.

Producers such as UTV, Reliance Entertainment, and Eros called it a landmark judgment that will change the dynamics of film business, while officials of some state film associations said they will challenge the order in higher courts.

The CCI imposed a fine on the associations equivalent to 10% of their past three years revenues.The decision favours those groups which want to build nationwide releasing and exhibition operations, where India was previously an amalgam of states each with different rules and regulations for cinema. UTV said that the regional associations put restrictions on the number of screens a film from outside its region could occupy; that the distributor was obliged to register its films with the regional associations; and that the associations set release holdbacks that meant the film could not be exploited on satellite TV or in home entertainment sectors.

In 2010, 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.

They 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.

 CCI 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. 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; (e) Compulsory registration of films as pre-condition to release to be done away with.

The CCI ruled five kinds of behaviour to be illegal:

Compelling the producers/distributors/ exhibitors to become their members as a pre-condition for exhibition in their territories;

Discrimination between regional and non-regional films and imposing discriminatory conditions against non-regional films;

Screen restrictions based on language or manner of exhibition of a film;

Holdbacks on satellite and home video, with studios free to decide such holdbacks;

Compulsory registration of films as pre-condition to release.

"This order will pave way for opening up business opportunities, increased revenues for filmmakers and will remove the intermediaries and extortionists once for all," said Sanjeev Lamba, CEO, Reliance Entertainment "This judgement by the CCI will stand out as a landmark event in the history of the Indian film industry. It unshackles producers and distributors from the draconian and archaic bylaws of defunct associations, driven by vested interests," said Siddharth Roy Kapur CEO, UTV Motion Pictures. "It is a huge step forward in ensuring that the rules that govern the Indian movie business are reflective of current business practices, and not those practised in the last century."Media agencies