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News: Prime Focus wins battle against UFO Moviez, Scrabble Digital and Qube Cinema; Fine of Rs 2.69 crore levied for anti-competitive practices
The Competition Commission of India (CCI) has imposed a penalty of Rs 2.69 crore on UFO Moviez and its subsidiaries for unfair trade practices. Prime Focus is the beneficiary.
News: The Competition Commission of India (CCI) fined UFO Moviez and its subsidiaries, namely Scrabble Digital, and Qube Cinema Technologies, a total of Rs. 2.69 crore for unfair practices in India’s digital cinema market. The CCI found that the abovementioned companies broke rules under the Competition Act, 2002, by using tactics that hurt competition, like forcing cinemas to use their services exclusively and blocking other companies from supplying content.
The issue started in 2020 when Prime Focus Ltd. and film producer Ravinder Walia complained that UFO Moviez was disabling its cinema equipment if films weren’t processed by Scrabble Digital. They said this blocked other companies from competing fairly. After a legal case was dropped in court, the CCI ordered an investigation in 2021. The investigation showed UFO Moviez and Qube Cinema controlled 40 percent and 48 percent of the digital cinema equipment (DCE) market, thus giving them significant power over their competition.
The CCI found three main problems. The problems have been listed below:-
1. Tie-in Arrangements: UFO and Qube forced cinemas leasing their equipment to also use their content delivery services, even though these could be separate. This limited cinemas’ choices.
2. Exclusive Supply Agreements: Contracts with cinemas banned them from using content from other providers. This in turn gave no opportunity to the competitors to have a share in the pie.
3. Technical Barriers: The companies used firewalls in their equipment to reject content from rival providers. Film producers, including Viacom18, said they had to use UFO or Qube’s services because other providers’ content wouldn’t work on their equipment. The CCI noted such restrictions aren’t common in global markets.
These practices created barriers for new companies, pushed out competitors, and raised prices for film producers like Yash Raj Films and Zee Entertainment. They also limited innovation in the industry. The CCI clamed that these actions harmed competition and thus broke the law.
Besides the fines of Rs. 1.04 crore for UFO Moviez and Scrabble Digital, and Rs. 1.65 crore for Qube Cinema, the CCI ordered the companies to stop these unfair practices with immediate effect. They were asked not to sign new contracts that restrict cinemas from using other content providers. They have also been asked to modify existing contracts to remove the restrictions. UFO and its subsidiaries have a total of 60 days to pay the fines.
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