Bollywood Gets A Taste of Copyright under the Competition Act
In early 2009, certain Bollywood producers got into a bitter dispute with multiplex owners on the ground that they were being denied a legitimate share in revenue. As a result, the release of several films was stayed. On the other hand, the multiplex owners accused the producers and lobbyists of ganging up against them and threatening them with antitrust suits.
As expected, the Competition Commission of India stepped in to resolve the dispute and passed an order that navigates antitrust as well as intellectual property rights issues. In its order, the Commission found twenty seven producers/distributors guilty of violating Section 3(1) of the Competition Act, 2002 which prohibits “enterprises or associations… from entering into an agreement in respect of production, supply, distribution, storage, acquisition or control of goods or provision of services, which causes or is likely to cause an appreciable adverse effect on competition within India. It imposed a penalty of INR 1,00,000 on each of the parties and ordered them to refrain from indulging in such anti-competitive practices in the future.
Revenue Sharing and Cartels
This table explains the revenue sharing arrangement between the multiplex owners and producers prior to the dispute in 2009:
Although this was the general practice, bigger producers often entered into independent arrangements with the owners based on a variety of considerations, including the cast, location, potential of the film, budget etc.
One of the main contentions was that the producers and distributors had colluded to limit the supply of films, in an effort to pressurise theater owners into reaching a compromise. The theater owners adduced evidence to prove that the supply of movies was deliberately cut short, resulting in higher prices, which amounts to cartel like conduct. Interestingly, they also claimed damages arising from lost food and beverage sales.
Given this alleged pressure tactic, it is not surprising that a new revenue sharing was reached between the producers and theater owners (fixed at 50%, 42.5%, 37.5% & 30% for the 1st, 2nd, 3rd and 4th week respectively), with an increase of 2% for the first week and even greater increments for the subsequent weeks. (Complete details of the revised arrangement can be found in 3.4.5 of the order)
Jurisdiction of the Competition Commission in Copyright Issues
The producers advanced certain arguments on the basis of the Copyright Act, which they claimed prohibited any intervention by the Competition Commission on this issue. Since cinematographic films are protected by copyright, they argued that they could exploit these films in any manner they deemed fit, including how or where to communicate a film to the public. Therefore, it is not for theater owners to demand that a film be released in a particular theater, or dictate the commercial terms for its release. Further, the Copyright Act itself contemplates compulsory licensing mechanisms, so it was inopportune for the Commission to intervene hear this matter. They also argued that Section 3(5) of the Competition Act allows copyright owners to exercise reasonable restrictions in order to safeguard their rights under the Copyright Act, making their actions valid under law.
Observations of the Commission
The CCI rejected these arguments by stating that the rights granted under the Copyright Act are not absolute and are subject to restrictions under various laws, including the Competition Act. While it is true that any demands by the theater owners as a matter of right would amount to compulsory licensing of the film, such that the Competition Commission would not have the requisite power to hear this dispute, the Commission pointed out that this was not a case of copyright infringement. The multiplex owners were merely facilitating the exercise of rights vested in the producers and not arrogating or infringing them in any way. Therefore, the producers cannot take shelter under Section 5(3).
Based on the evidence presented before it, the Commission concluded that the producers/distributors had colluded to determine the revenue sharing arrangements with multiplex owners and had also controlled the supply of films to them. This amounts to a violation of Section (3)(a) and (b) of the Competition Act. The Commission emphasised that intellectual property law does not override competition law, and the producers’ reading of Section 3(5) of the Competition Act was wrong in this instance. They failed to establish that their actions were ‘reasonable’ and hence no reliance could be placed on the exemption provided therein.
In conclusion, this case provides some useful guidance on harmonising the Indian Copyright Act with the Competition Act, despite the apparent contradictions. What the court made clear was that in the absence of any copyright infringement claim, the burden is on the defendant to establish that his or her actions were reasonable. While the copyright issues have been addressed in detail, the bigger question is whether it is worthwhile to engage in such an elaborate legal process for a marginal result.
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