Naveen Talawar

Introduction

In India, it is well established that dominance itself is not a cause for concern, but the abuse of such dominance is. The Competition Act (2002) of the country expressly prohibits the abuse of dominance in a relevant market. The Competition Commission of India (CCI) investigates allegations of violating the Act’s provisions. Such investigations can be carried out in response to a complaint or information received by the CCI. Recently, India’s fair market watchdog, the Competition Commission of India, decided to investigate alleged unfair market conditions in the market for online movie ticket booking in India.

In a significant decision, Vijay Gopal v. Big Tree Entertainment Pvt. Ltd. (also known as Showtyme v. Bookmyshow case) Coram of Ashok Kumar Gupta, Sangeeta Verma, and Bhagwant Singh Bishnoi, in light of the negative impact of exclusive and restrictive agreements between online ticketing platforms and single-screen cinemas/ multiplexes on the relevant market, held that there is a prima facie case owing to ‘BookMyShow’s conduct that necessitates an investigation by the Director General (DG) to determine whether their conduct violated the provisions of Section 4 (abuse of dominant position) of the Competition Act, 2002.

For an act to be regarded as ‘abuse’ in this context, it is necessary to understand the surrounding factors, such as the definition of a dominant position and the related relevant market, the various components that constitute a dominant position, etc. This article examines the abuse of a dominant position in competition law, as well as the case of Showtyme v. Bookmyshow.

The Concept of Dominance

Abuse of a dominant position is prohibited by Section 4 of the Competition Act of 2002 for any enterprise or group. A dominant position is defined in Explanation (a) of Section 4 of the Act as follows:

“a position of strength, enjoyed by an enterprise, in the relevant market, in India, which enables it to operate independently of competitive forces prevailing in the relevant market; or affect its competitors or consumers or the relevant market in its favour.”

A company with a dominant market position has the authority to impose trading conditions, set prices, and take other measures without regard for market forces. The term ‘abuse of dominant position’ refers to anti-competitive business practices in which a dominant firm engages in unlawful acts to prevent competition, eliminate genuine competition, or maintain or strengthen its market position.

Factors to determine the dominant position

Section 19(4) of the Act specifies the factors that the CCI must consider while determining the dominant position of the enterprise. Some of these factors include market share, the size and resources of the enterprise, the size and importance of competitors, the enterprise’s economic power, vertical integration, consumer dependence on the enterprise, the extent of entry and exit barriers in the market, countervailing buying power, market structure, and market size.

i) Relevant Market

A relevant market is one that the commission can identify based on the relevant geographical market, the relevant product market, or both markets, as per Section 2(r) of the Competition Act of 2002. The process for figuring out whether the defendant has the power to eliminate or lessen competition is to identify the relevant market. As a result, the relevant market must be identified and described from both a geographic and product perspective.

ii) The relevant product market

Its definition emphasises interchangeability. Given a small but significant non-transitory price increase, the smallest set of products (both goods and services) are interchangeable among themselves. The car market, for example, may be divided into separate relevant product markets for small, mid-size, luxury, and so on because they are not interchangeable based on a slight price difference.

iii) A relevant geographic market

It is defined as ‘the area in which competition for the supply of goods or provision of services, or the demand of goods or services, is homogeneous and distinguishable from conditions prevailing in neighbouring areas.’

In Saint Gobain Glass India Ltd. v. Gujarat Gas Company Limited, the CCI states that the following factors must be taken into account by the Commission while determining the ‘relevant product market’: the cost of the goods or services, the exclusion of internal production, the physical characteristics or end-user of the goods, consumer preferences, the presence of specialised producers, and the classification of industrial products in accordance with the provisions contained in the Act.

Abuse of dominant position

According to Section 4(2) of the Act, the following behaviours by dominant enterprises or groups of businesses are considered abuses:

Imposing unfair or discriminatory terms in the purchase or sale of goods or services, either directly or indirectly;
Directly or indirectly setting unfair or discriminatory prices (including predatory pricing) while buying or selling goods or services;
Restricting or controlling the market, the delivery of services, or the production of goods;
Preventing access to the market to the consumers in any way
Contracting under conditions that require other parties to accept supplemental obligations that, by their nature or in accordance with commercial practice, have no bearing on the subject matter of the contract ;
Utilising its monopoly in one relevant market as a means of entry or protection in another relevant market.

The Act aims to address two different kinds of abuse by a dominant enterprise ;

Exclusionary abuses: These include illegal attempts to deny rival businesses access to the market, refusal to cooperate, and other similar actions.
Exploitative abuses: These include imposing unfair terms on purchases or sales, limiting or restricting goods or services, and other similar actions. Although it is not stated explicitly, Section 4 is drafted broadly enough to cover both exploitative and exclusionary practices.

Case Study: Showtyme v. BookmyShow

Brief Facts

In this case, the online ticketing platforms are the parties in question. In November 2021, Showtyme, an online movie ticketing portal, was introduced to give moviegoers in Hyderabad (and later across India) another way to book their tickets online by paying a convenience fee of 11/- per ticket, which is allegedly 40–50% less than the competition. On the other hand, BookMyShow, a well-known Indian website for purchasing movie tickets, holds at least 90% of the market. The main claim made by Showtyme is that BookMyShow has organised a cartel and is acting in violation of the Act, putting obstacles in the way of other market competitors.

Contentions of Showtyme

According to the informant, BookMyShow forced theatres and multiplexes to comply with unfair and discriminatory conditions, such as signing contracts for the sale of 100% of tickets on its platform, which violates Section 4 of the Competition Act.
It was also argued that BookMyShow is entitled to charge consumers a convenience fee for online ticket booking; however, entering into agreements with theatres/multiplexes not to sell movie tickets online to anyone else; lending lakhs and crores of rupees at zero interest to the Opposing Parties; and selling more than half of all movie tickets online, such acts leave no room for new entrants to enter the market, thereby creating a monopoly.
The informant also stated before the Commission that he filed several complaints with licensing authorities and other authorities in the state of Telangana, as well as a representation to the Ministry of Consumer Affairs, Government of India.

This led Showtyme to assert that BookMyShow had violated Section 4 of the Act by abusing its monopoly status in the online ticketing market.

Contentions of BookmyShow

Firstly, BookMyShow stated that it conducts business using a standard form of contract. The terms, conditions, duration, and distribution of convenience fees are negotiated and tailored to the needs of the parties. Additionally, it provided details about its rivals in the market (PAYTM, websites like PVR, INOX, tickets4u, Justickets, and physical booking, among others), the percentage of tickets purchased through the platform, the agreements, and so forth.
Secondly, BookMyShow is free to choose the convenience fee accepted by Showtyme.
Finally, failure to comply with a Government Order does not constitute a violation of competition law. Showtyme claimed that as it was a new entrant in the online ticketing market, it was unable to establish itself because of BookMyShow. However, BookMyShow contended that Showtyme couldn’t have been a competitor in the first place.
Moreover, it was asserted that a complaint was filed on February 11, 2021, but a week later, the Showtyme website launched. The website doesn’t have enough market presence to assert that it faced obstacles as a new entrant. In light of its assertion that multiplexes and theatres refused to collaborate with them, Showtyme has also failed to provide any supporting documentation. Furthermore, it has not been proven that BookMyShow holds a 90% market share. On the other hand, BookMyShow claimed that because it was a new entrant in a market with strong competitors, it had to enter into short-term, exclusive contracts with multiplexes and theatres.

Observations of CCI

The CCI made the following observations in light of the aforementioned contentions.

The Commission disagreed with BookMyShow’s economic analysis of the market, pointing out that while it is legal for it to charge a fee for its services, it cannot claim that it is a minor player as there is a separate market for online movie ticket purchasing, of which BookMyShow is the most well-known and popular platform.
The Commission defined the relevant product market as ‘the market for online intermediation services for booking movie tickets’ because, in terms of the relevant market, it was noted that the services offered by online intermediation platforms for booking movie tickets cannot be provided in the same way by online sites of multiplexes/single screen cinemas or even by the Boxoffice.
While determining dominance, the Commission relied on publicly available data rather than data provided by BookMyShow. According to the Kalagato report (2017) and the media report (2018), BookMyShow’s share of online movie ticket booking in terms of booking volume was 78 % and 70 % – 75 %, respectively. Based on these factors, the Commission concluded that BookMyShow has a dominant position in the relevant market of ‘online intermediation services for booking movie tickets in India.’
Regarding the abuse of dominance, the Commission looked at several contracts between BookMyShow and single-screen exhibitors and multiplexes. It concluded that these exclusive contracts could potentially eliminate or lessen competition in the relevant market because they may force cinemas to terminate their contracts with the top intermediary platform with the largest market share.
The agreements with the major multiplexes were also found to be restrictive in nature, limiting not only the freedom of these multiplexes but also encouraging exclusivity and limiting choice.

Based on the above-mentioned analysis and justification, the Commission concluded that BookMyShow is the subject of a prima facie case that necessitates investigation. As a result, it gave the Director General (DG) the go-ahead to initiate an investigation into the matter in accordance with Section 26(1) of the Act.

Conclusion

The Competition Act states unequivocally that a dominant position is not inherently void, but no enterprise has the right to abuse its dominant position. As a result, ‘it is not dominance, but its abuse, that is prohibited by law.’ The Act was created in response to the demand to shift the emphasis from discouraging monopolies to promoting both internal and external competition. Thus, through its authorities, the Competition Act monitors the abuse of dominant position and other deceptive trade practices in the relevant market. Upon receiving any complaint, it takes the necessary actions, and on the basis of evidence supporting the claims, the defaulters are subject to the corresponding penalties.

References

Views are personal.

The author is currently interning with Desi Kaanoon as a Content Writer.