PF Digital Media Services Ltd & Anr. And UFO Moviez India Ltd. & Others

Public Version Case No. 11 of 2020 Page 1 of 67 COMPETITION COMMISSION OF INDIA Case No. 11 of 2020 In Re: PF Digital Media Services Ltd. Building H, 2nd Floor, Mainframe IT Park, Royal Palms, Near Arrey Colony Goregaon, East, Mumbai-400065 Informant No. 1 Ravinder Walia 10th Floor, Menoti Mahal, Behind Being Human Showroom, Santacruz (West) Mumbai-400054 Informant No. 2 And UFO Moviez India Ltd. Plot No. 53/1, Road No.07, Marol MIDC, Andheri (East), Mumbai-400093 Opposite Party No. 1 Scrabble Digital Ltd. Plot No. 53/1, Road No.07, Marol MIDC, Andheri (East), Mumbai-400093 Opposite Party No. 2 Qube Cinema Technologies Pvt. Ltd. No.42, Dr. Ranga Road Mylapore Chennai-600004 Opposite Party No. 3 Public Version Case No. 11 of 2020 Page 2 of 67 CORAM Ms. Ravneet Kaur Chairperson Mr. Anil Agrawal Member Ms. Sweta Kakkad Member Mr. Deepak Anurag Member Present PF Digital Media Services Ltd. (Informant No.1) Mr. Ravinder Walia (Informant No.2) : Ms. Tarini Khurana, Advocate UFO Moviez India Ltd. (OP-1) : Mr. Arun Kathpalia, Senior Advocate Ms. Riddhika Dumane, Advocate Ms. Bhavika Chhabra, Advocate Mr. Avinash Amarnath, Advocate Mr. Tejveer S. Bhatia, Advocate Mr. Sanjay Jain, Head-Legal Ms. Diksha Gupta, Advocate Scrabble Digital Ltd. (OP-2) : Mr. Arun Kathpalia, Senior Advocate Mr. Rahul Rai, Advocate Mr. Binit Agarwal, Advocate Ms. Diksha Gupta, Advocate Ms. Riddhika Dumane, Advocate Ms. Bhavika Chhabra, Advocate Mr. Avinash Amarnath, Advocate Qube Cinema Technologies Pvt. Ltd (OP-3) : Mr. Sajan Poovayya, Senior Advoacte Mr. Bharat Budholia, Advocate Mr. Deepanshu Poddar, Advocate Ms. Vayshnavi Ganesh, Advocate Ms. Prathima S., Director- Legal Public Version Case No. 11 of 2020 Page 3 of 67 Order under Section 27 of the Competition Act, 2002 1. In the present case, an information was filed by PF Digital Media Services Ltd. (“PF Digital Media/Informant No. 1”) and Mr. Ravinder Walia (“Informant No. 2”) under Section 19(1)(a) of the Competition Act, 2002 (the “Act”) against UFO Moviez India Ltd. (“UFO Moviez/Opposite Party No. 1/OP-1”), Scrabble Digital Ltd. (“Scrabble Digital/Opposite Party No. 2/OP-2”), Qube Cinema Technologies Pvt. Ltd. (“Qube Cinema Technologies/Opposite Party No. 3/OP-3”), Globe Theatres Pvt. Ltd. (“Globe Theatres /Opposite Party No. 4/OP-4”), Imperial Cinema Pvt. Ltd. (“Imperial Cinema/Opposite Party No. 5/OP-5”), FICCI Multiplex Association of India (“MAI/Opposite Party No. 6/OP-6”) and Indian Film and TV Producers Council (“IFTPC/Opposite Party No. 7/OP-7”) alleging contravention of the provisions of Sections 3 and 4 of the Act. Subsequently, vide order dated 28.01.2021, Globe Theatres, Imperial Cinema, IFTPC and MAI, were deleted by the Commission from the array of parties since no allegations or any specific reliefs were sought against them in the Information. Brief Facts of the Case, as per the Information 2. The Informant No. 1, i.e. PF Digital Media, a listed company incorporated under the Companies Act, 1956, is a subsidiary of Prime Focus Limited (“PFL”) and is engaged in the business of Post-Production Processing (“PPP”) of cinematograph films. It converts cinematograph films from their traditional formats to digital formats. The Informant No.1 is now known as DNEG India Media Services Limited. 3. The Informant No. 2, i.e. Mr. Ravinder Walia, a producer, who produced a movie by the name “Roam Rome Mein”. He has been in the field of cinematograph films for more than 15 years and has produced many movies. PF Digital Media has carried out post- production processing for his film “Roam Rome Mein”. 4. Opposite Party No. 1, i.e., UFO Moviez, is a company incorporated under the Companies Act, 1956 and is, inter alia, involved in the supply of Digital Cinema Equipment (“DCE”) to Cinema Theatre Owners (“CTOs”). Public Version Case No. 11 of 2020 Page 4 of 67 5. Opposite Party No.2, i.e. Scrabble Digital is the wholly owned subsidiary of UFO Moviez and does the same work as PF Digital Media. It has been stated in the Information that as per the statement of Scrabble Digital, available on its website, it controls almost 90 per cent of the post-production activities in the country. Hereinafter, OP-1 and OP-2 are collectively referred to as “UFO”. 6. Opposite Party No. 3, Qube Cinema Technologies, a company incorporated under the Companies Act, 1956 is also a supplier of DCE and is alleged to be under the control of UFO Moviez. It was stated that a merger of UFO Moviez and Qube Cinema Technologies was attempted but was withdrawn in terms of order dated 24.10.2019, passed by the Hon’ble National Company Law Appellate Tribunal in Company Appeal (AT) No. 48 of 2019. 7. It was alleged that OP-1 entered into anti-competitive agreements with CTOs to help and assist the business of Scrabble Digital, which is in violation of provisions of the Act. 8. The Informants were aware of only two equipment lease agreements executed between OP-1, Globe Theatres and Imperial Cinemas, which contain exclusivity clauses. Accordingly, only two CTOs were arrayed as parties in the information, which were subsequently deleted by the Commission vide order dated 28.01.2021. 9. As per the Information, the journey of a cinematograph film starts from its shooting at the locations, to its post-production processes in the laboratory, to distribution to the CTOs, to the ultimate public viewing. There are various entities involved at each stage of the journey of a cinematograph film. Due to the advent of technology, the distribution of a cinematograph film to various CTOs has transitioned to digital distribution from distribution through cinematograph film rolls. The digitally distributed cinematograph film can be played by CTOs only through a DCE, and only a digitised version is played. Such compatible digitisation is achieved through post-production processing by digital cinema laboratories like PF Digital Media and Scrabble Digital. 10. Digital distribution of cinematograph films could be achieved only if all the DCEs were to follow a particular international standard. To maintain a level playing field amongst Public Version Case No. 11 of 2020 Page 5 of 67 the various entities involved, standardisation of digital formats is necessary. In order to achieve standardisation, an association of all major producers formed an entity called Digital Cinema Initiatives (“DCI”), which consisted of seven motion picture studios, namely, Disney, Fox, MGM, Paramount Pictures, Sony Pictures Entertainment, Universal Studios and Warner Brothers Studios. This association was formed to establish uniform specifications for digital cinema. DCE, which is compliant with international standards dictated by DCI, displays every digital print of any cinematograph film in compliance with such international standards. 11. It was alleged that no person is entitled to tamper with these standards to claim a monopolised market. Accordingly, no fetter can be imposed by any party on such digital display of a cinematograph film through a software lock. Any such lock placed by the equipment supplier would defeat the purpose of digitisation and the efforts of DCI. 12. DCE can either be purchased outright or taken on lease. In view of the fact that DCE is an expensive equipment to be purchased by a CTO, it is usually taken on lease. UFO Moviez executed an equipment lease agreement with the CTOs if DCE is taken on lease from it. One such equipment lease agreement contains the following clauses: “E The Exhibitor, in consideration of the Lessor giving Equipment(s) on lease basis, irrevocably agrees to exclusively source the Content from the Lessor or its Affiliates and further permits and grants the right to Lessor or its Affiliates to exclusively collect and retain Virtual Print Fee (defined hereinafter), on the terms and conditions as enumerated herein below in this Agreement. 5.1 Throughout the Equipment Lease Term, the Exhibitor shall not do or prevent from doing or omit to do any act which may result in a failure of a Contracted Property to be DCI Compliant Property, if at the time of installation of the Equipment(s) in such Contracted Property is declared as a DCI Compliant Property (including, without limitation, uninstalling any Equipment(s) that has been installed by the Lessor. 5.2 During the Agreement Term, the Exhibitor shall not exhibit any Content other than Content provided by the Lessor or its Affiliates and shall use the Equipment(s) only for the purposes of exhibiting the Content supplied exclusively by the Lessor or its Affiliates. 7.1 The Parties agree that UFO shall have the exclusive right to provide the Content to all the Theatre Auditorium(s)/Screen(s) in the Contracted Properties