Amazon and Flipkart found violating Competition law in India-DG investigation report out
Here is another blow for the e-commerce giants operating in Indian markets. The fair market watchdog, the Competition Commission of India (“CCI/Commission”), has decided to inquire into the unfair market conditions allegedly prevailing in the market for online booking of movie tickets in India.
After directing investigation against MakeMyTrip and OYO , the CCI has now decided to inquire into the market conduct of another large and well known online platform for booking of movie tickets and other forms of daily entertainment programs across cities in India .
CCI, by an order dated 16/06/2022 , has directed investigation against Big Tree Entertainment Pvt. Ltd. (“OP-1/BookMyShow”) holding that there exists a prima facie case of abuse of dominant position in the market for online intermediation services for booking of movie tickets in India.
The information was filed by Mr. Vijay Gopal (“informant”) a social activist and founder of an online movie ticketing portal Showtyme, registered with the name ‘Vanila Entertainments’ alleging the following:
Allegations –
- BookMyShow is charging exorbitant convenience charge @ Rs25 per ticket on booking done on its platform and share 50% (up to Rs. 12-14 per ticket) with the multiplexes, and up to Rs. 6-8 per ticket in case of standalone/single screen theatres. Whereas the informant’s Showtyme, offered up to Rs. 5/- to the multiplexes and theatres out of Rs. 11/- to be charged by it and would keep the rest for running its operations. Despite this the multiplexes and theaters did not associate with the informant because of huge cash loans/ monetary deposits given by the BookMyShow.
- BookMyShow had signed exclusive contracts with the theaters which restrict the sale of tickets through BookMyShow only. Further BookMyShow had also signed refusal to deal agreement ranging 2-5 years with the theaters to ensure not selling of their movie tickets with any other online platform thereby controlling the complete market.
- That the convenience fee is paid to theatres and multiplexes monthly through monthly generated invoices which shows malicious intent on the part of BookMyShow which amounted to creating a cartel with theatres/ multiplexes and killing competition and maliciously entering exclusive contracts with them.
- That informant approached more than 30 cinemas, theaters multiplexes and some of them had confirmed that they could not sell their tickets on the informants’ platform as they have taken monetary deposit and had signed exclusive agreements with BookMyShow.
- BookMyShow with the theaters and multiplexes had formed an explicit cartel to thwart entry of any other online platforms to sell cinema tickets.
- Two cinema theaters, Asian Cinemas, having more than 100 screens in Telangana and Sudarshan theatre, which has allowed placement of more than 50% of tickets for sale through the online platform of BookMyShow, had signed agreements with BookMyShow by taking monetary deposit and had agreed not to sell their tickets through any other platform except BookMyShow. Further, that this was in violation of G.O. Ms. 47 of 2006 dated 10.03.2006 issued by Government of Telangana.
- Thus, BookMyShow holds 90% market share in movie ticket booking industry in India and is abusing its dominant position by imposing unfair and discriminatory conditions on the theatres/ multiplexes i.e., making them sign contracts for sale of 100% tickets on its platform.
- The agreements between BookMyShow and theaters are creating a hostile effect upon fair competition which is violation of Section 4(2)(a), 4(2)(b), 4(2)(c) and 4(2)(d) of the Act.
BookMyShow response –
Since this was the first such complaint in this sector of online bookings of movie tickets, CCI called for response from BookMyShow too. The response of BookMyShow was on expected lines that –(a) It was a mere intermediary platform facilitating bookings of movie tickets ( and other form of daily entertainment programs ) entitled to charge convenience fee from customers for facilitation of booking of tickets through its mobile app and website , (b) there was no separate “market” for only online bookings, (c) the market was too wide , comprising of the physical bookings windows of the cinemas/ theatres ( so called BoxOffice) , the websites of cinema multiplexes such as PVR, INOX, CINEPOLIS and other online Applications such as PayTm, justticket.com, ticket4u.com, TicketNew.com ( acquired by PayTm) , ( d) in the above wide market, BookMyShow was just another player with a market share not more than 20% in the last 5 years and therefore it was not in a dominant position hence no question of its abuse ,(e) The exclusive contracts entered with cinema theatres were required to penetrate the market as it was a new market player and in the absence of market power these were not capable of causing any appreciable adverse effects on competition (AAEC) in the relevant market in India, and (f) BookMyShow does not provide any monetary assistance in return for exclusivity. In certain cases, it only provides some security deposit to adjust the ticket price and revenue share to the cinema theatres. These arrangements exist even with cinema theatres with whom no exclusive agreements have been signed and these are purely in the nature of securing payment obligations for cinemas and not advanced to them to secure exclusive booking rights.
CCI Observations
The Commission however did not quite agree with BookMyShow on the economic analysis of the market and noted that though admittedly it may be entitled to charge fee for its services, yet it cannot claim that it was merely a small player in the market since there indeed exists a separate market for online bookings of movie tickets in which BookMyShow, is the most well-known and used platform.
Relevant market
With respect to relevant market, the Commission noted that the services provided by online intermediation platform for booking of movie tickets cannot be offered in the same manner either by online sites of multiplexes/single screen cinemas or even by the BoxOffice. A consumer can search for and compare an array of theatres and movies along with the ticket prices, other offerings and the seats available for a particular show by using the online intermediation services of the intermediary platforms on a real time basis. Such facilities are not comparable with the lesser features and less convenience coupled with high search costs that are entailed in other forms of booking of tickets. Thus, in the view of the Commission, the nature of services of such platforms appears to be that of online intermediation and hence Commission delineated the relevant product market as ‘market for online intermediation services for booking of movie tickets.
With regard to the relevant geographic market, the Commission noted that BookMyShow is available pan-India, and the platform faces similar competitive constraints and homogeneous conditions of competition throughout India and there is no evidence to suggest that the relevant geographic market needs to be restricted to a local area. Thus, the relevant market was delineated as ‘market for online intermediation services for booking of movie tickets in India’.
Dominance of BookMyShow
On the issue of dominance, Commission did not rely on the data provided by BookMyShow and considered the data available in public domain. The Commission considered Kalagato report[1] , according to which in Jan-Mar 2017, BookMyShow’s share in online booking of movie tickets, in terms of booking volume, was 78%, followed by PayTM with a market share of 13%. Further Commission also considered a media report[2] dated December 2018, according to which BookMyShow’s market share in movie ticketing was between 70%-75%.Further Commission noted that ability of BookMyShow to enter into exclusive agreements within India, shows the position of strength enjoyed by it and the various provisions in its agreements with cinema theatres/multiplexes, indicate its superior bargaining power in deciding contractual terms.
Based on these factors Commission held that, prima facie these factors substantiate the dominant position enjoyed by BookMyShow in the relevant market of “online intermediation services for booking of movie tickets in India”.
Abuse of dominance
On the abuse of dominance, the Commission considered various Agreements (agreements were granted confidentiality and are redacted in the public version of the order issued) signed between BookMyShow and the single screen treaters and multiplexes and noted that the exclusive agreements with single screen cinema theatres, do not allow these cinemas to directly or indirectly engage any entity for providing services similar to the services of BookMyShow or facilitating booking/sales of tickets through any online medium. Such exclusive agreements have the potential to foreclose or reduce competition in the relevant market, as they may make rival intermediary platforms or new entrants incur significant additional cost to induce the cinemas to give up their exclusive contracts with the leading platform with market power. Further , that the agreements with major multiplexes are also restrictive in nature, which not only curtail the freedom of these multiplexes but may also directly or indirectly incentivize exclusivity and/or restrict choice. The Commission was also not in agreement with BookMyShow on the issue that its security deposit is towards payment obligations to exhibitors with whom it has contracted for providing online intermediation service for ticket booking. Further it was also noted by the Commission that a perusal of the clauses of the agreements with single screen cinemas indicate that BookMyShow has reserved the right of data collection, ownership, and storage thereof without the cinemas having any right, title, interest to such data, though in the agreements that BookMyShow has with multiplexes, there is provision for sharing of data. This data ownership can increase the bargaining power of the platform over time and this aspect of exclusive ownership of and access to data by a dominant intermediary merits investigation
Thus , the Commission observed that exclusive and restrictive agreements prima facie appear to have the potential of denying market access to competing platforms and potential entrants. It restricts the cinema theatres as well as the cinegoers the choice of alternate ticketing platforms, during the working of the contracts that BookMyShow has with large number of theatres/ multiplex chains.
Lastly on the issue of charging high convenience fees, Commission held that though it cannot act as a price regulator to determine the correct fees but, exclusivity arrangements by BookMyShow may result in softening of competition and therefore bolster the market power of BookMyShow without any incentive for it to lower such fees in future.
Based on the above analysis and reasoning, the Commission was of the view that there exist a prima facie case against BookMyShow which require investigation and accordingly directed the Director General (DG) to cause an investigation to be made into the matter under the provisions of Section 26(1) of the Act.
COMMENT- Though this order is merely an administrative direction for the DG to investigate the allegations against BookMyShow and cannot predict the outcome of the litigation , yet the fine economic analysis made by CCI at the initial stage of forming a prima facie view assumes significance , as it clearly indicates an emerging trend of a hostile regulator ready to take on large online ecommerce players , be it Amazon, Flipkart , MakeMyTrip and now BookMyShow, more particularly . after its initial market study report on competition issues in the e-commerce released in January 2019, The determination of the online booking of movie tickets as a separate relevant market is quite in sync with a settled international jurisprudence on this important antitrust issue, which shows maturity, consistency and predictability of the regulator , which must be appreciated .
#BookMyShow
#Abuseofdominance #CompetitionAct #CCI
[1] https://thekalagatomedium.com/book-book-book-book-book-my-show-ee2125a7fbb1
[2] https://economictimes.indiatimes.com/small-biz/startups/features/bookmyshow-looking-beyond-the-box-office/articleshow/66980571.cms?from=mdr
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