India’s Competition Commission (CCI) has imposed a fine of Rs 2.69 crore on UFO Moviez and Qube Cinema for blocking competition in the digital cinema market. The companies were found guilty of unfair practices that hurt new players in the digital cinema equipment and post-production services market.
Anti-Competitive Practices By UFO Moviez And Qube Cinema
The decision followed an investigation into complaints filed by PF Digital Media Services (now DNEG India Media Services Ltd) and film producer Ravinder Walia. The inquiry revealed that UFO Moviez and Qube Cinema had signed exclusive deals with cinema owners. These deals prevented the owners from choosing digital content and post-production services from other companies.
The CCI’s 67-page report found that both companies had used their strong market positions to bundle digital cinema equipment leases with the requirement to use their post-production services and content delivery systems. This strategy limited the options for cinema owners and made it hard for smaller companies to compete, especially in areas like content replication and distribution.
The CCI stated, “These exclusionary supply agreements, refusals to deal, and tie-in clauses embedded within lease contracts significantly impede competition and restrict access to the market.” It added that these actions violated sections of India’s Competition Act of 2002.
Impact On Market Competition & Penalties
The investigation also revealed that UFO Moviez, along with its affiliate Scrabble Digital, had prevented cinemas from using content processed by other post-production houses. Qube Cinema had similar practices, using contracts and technical barriers to stop cinemas from using services from other providers without facing penalties.
With UFO Moviez holding 40% and Qube Cinema controlling 48% of the DCI-compliant Digital Cinema Equipment (DCE) leasing market, both companies were found to have abused their market power. The CCI concluded that their actions caused a significant negative impact on competition and made it hard for smaller competitors to enter the market.
Along with the financial penalty, the CCI has ordered UFO Moviez and Qube Cinema to stop their anti-competitive practices. The companies have been told to change their agreements with cinema owners to remove restrictive clauses.
UFO Moviez (along with its subsidiary Scrabble Digital Ltd.) has been fined Rs 1.04 crore, while Qube Cinema will pay Rs 1.65 crore. The total Rs 2.69 crore fine is based on the CCI’s Penalty Guidelines for 2024, considering the companies’ financial performance and market conduct.
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