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13. Several requests have been made by individual producers over time, to remove the VPF charges. It has been stated that in 2019, Unilazer Ventures approached the Commission against PVR, INOX and Cinepolis, in Case No. 10 of 2019 ('Unilazer Case'), wherein all 3 exhibitors submitted that they were willing to discuss the VPF charges as well as a sunset clause. However, despite a period of 5 years having lapsed since, these 3 exhibitors continue to levy VPF.

14. Following the release on 14.10.2022, of the Commission's Market Study which had found the levy of VPF charges to have anti-competitive outcomes particularly for smaller producers in the ecosystem, the Informant requested its members to send their comments on the same. The Informant was requested by its members to engage in discussions on behalf of the producers with all DCE providers and exhibitors on the levy of VPF. Consequently, in May 2023, the Informant wrote several letters to the DCE providers and exhibitors to meet the Informant on the VPF issue. However, all attempts to end VPF were futile and the OPs were reluctant to even engage in discussions. A letter dated 04.06.2023 by OP-2 suggests that VPF should be continued indefinitely, while OP-1 and OP-3 continue to delay any resolution of the issue. At no point has it been suggested that VPF would be ended either immediately or within a defined period.

46. OP-3 has also reiterated that on an average, producers have earned more than __times the VPF they paid to OP-3 and that VPF spent on OP-3's theatres amount to merely __of the budget of a small/medium scale producer, based on the data provided by the Informant. OP-3 has stated along with evidence, that small/independent producers have earned a significant revenue from OP-3's theatres in exchange for miniscule sum of VPF. It has also averred that the Informant has failed to demonstrate any AAEC on producers in India or that levy of VPF has foreclosed the market for small/independent producers. It is stated that the Informant's allegation that producers are suffering/making losses due to the VPF charged by exhibitors is factually incorrect as producers have the ability to choose how much they want to spend on VPF by providing different tiered options and VPF is a negligible portion of the producer's expenses.

PUBLIC VERSION

73. Accordingly, the Commission is of the view that the alleged discriminatory conduct of OP-3 is prima facie in violation of the provisions of Section 4(2)(a) of the Act and needs to be investigated by the DG.

74. The Informant has alleged the conduct of OP-3 to be in contravention of Section 4(2)(b) of the Act as OP-3 is limiting and restricting the ability of producers, particularly small and medium size ones, in producing and exhibition of films due to the continued charging of VPF, in absence of which small and medium scale producers would have been able to release a film as widely as possible. As regards allegations under Section 4(2)(c) of the Act, the Informant has submitted that OP-3 by charging VPF to producers has attempted to deny the market to producers in terms of revenue generated and cost lost to VPF. The Informant has provided emails of some producers and specific instances in support of its allegations. OP-3 has stated that the Informant has misled the Commission by failing to disclose that in the last 3 years, the producers, whose grievances/email communications were provided by the Informant, have earned a total revenue of INR ____ from their films being exhibited at OP-3's theatres and have paid a VPF of only INR ___ to OP-3. It has also stated that on an average, producers have earned more than __ times the VPF they paid to OP-3 and that VPF spent on OP-3's theatres amount to merely __ of the budget of a small/medium scale producer. In addition, OP-3 has stated that small/independent producers have earned a significant revenue from OP-3's theatres in exchange for miniscule sum of VPF. The Commission however, notes that OP-3 has not specifically addressed the specific cases cited by the producers. It has instead based its response on aggregated data and/or averages relating both to revenues and costs of the producers. Accordingly, the Commission is of the view that the alleged conduct of limiting/restricting production/exhibition of films and denying the market access to producers by OP-3 is prima facie in violation of the provisions of Section 4(2)(b) and 4(2)(c) of the Act and needs to be investigated by the DG. The DG is directed to investigate, based, inter-alia, on more detailed and granular information with respect to exhibition of movies in multiplex theatres of OP-3.

75. In relation to the allegations raised under Section 4(2)(d) of the Act, the Informant has stated that the charge of VPF is not relatable to any service provided by OP-3, which is evident from the fact that Hollywood studios do not pay this charge at all for releasing PUBLIC VERSION English films in India. It is also stated that, for the purpose of releasing a film on theatrical screens, producers are compelled by OP-3 to agree to a supplementary obligation of paying VPF. OP-3 in its submission stated that VPF is a payment for the use of DCEs and accordingly, it is connected to the usage of DCE for exhibition of films. OP-3 has also justified charging of VPF for recoupment of the huge capital expenditure incurred for DCE. In this regard, the Commission observes that the cost of DCEs is one of the various costs of running a multiplex and a particular cost can either be charged separately from all other costs or in a composite form of revenue sharing agreements amongst parties. From the facts of the case, it appears that only the cost of DCE is charged separately in the form of VPF by OP-3. Charging a cost separately comes with the expectation of a separate service being rendered in exchange of consideration. However, in the present case, OP-3 has not been able to demonstrate as to what separate service is being rendered by it in exchange of VPF. Recoupment of cost of DCE alone does not establish provisioning of a separate service to producers. The Commission also notes that, based on the submissions made by the parties, certain producers, i.e., foreign/domestic, have either been exempted from paying VPF or are allegedly in the process of entering into agreements which will phase out the payment of VPF by a certain period. OP-3 has also stated that it is willing to negotiate the terms of VPF with producers individually. OP-3 in its submission also stated that Yash Raj and Viacom are eligible for a sunset clause only if they stop paying VPF to all other exhibitors/DCE providers in the country. The aforementioned information brings into question the necessity and justification of the practice of charging VPF. It is noted that if VPF, as stated by OP-3, is a charge for a particular service, then it would be charged from every producer and would not be contingent on fulfilment of certain conditions including the condition that producers should first stop paying VPF to other DCE providers. Putting such conditions on producers by OP-3 for exhibiting their films substantiate the allegation of not only imposing a supplementary obligation of charging VPF without any specific service to producers but also of imposing an unfair condition for exhibiting films. Accordingly, the Commission is of the view that the alleged imposition of supplementary condition on producers by OP-3, is prima facie in violation of the provisions of Section 4(2)(d) of the Act and needs to be investigated by the DG.