Vijay Gopal v. Inox Leisure Ltd. & Ors.

Name of the Case                       Vijay Gopal v. Inox Leisure Ltd. & Ors.
Case No.                                       29/2018 (Competition Commission)
Year of the Case                         2019
Plaintiff                                        Mr. Vijay Gopal
Defendant                                    OP-1     Inox Leisure Ltd.                                                        OP-2     Hindustan Coca-Cola Beverages
Act Involved                                Competition Act, 2002
Important Sections                   Section 3(4)(a), 3(4)(b),3(4)(c)

Abstract

The present case highlights the practice of charging an excessive price for foods in theatres, which is a critical question that has no definite answer this is so because no rule exclusively bars or entitles the multiplexes to charge higher prices for foods and beverages sold within its premises. The answer to this question can be appreciated by dissecting it into various components, as follows, and by analyzing the point that how multiplexes play along with foods and beverages that have untenable and extravagant prices.

Third-party contractors own most of the food points in multiplexes. They in an attempt to recoup their large sums of invested money, set exorbitant rates to their products along with restricting the movie watchers to carry their food articles, thereby impelling movie viewers to buy the expensive food kept at their outlets.

Introduction

Mr. Vijay Gopal filed a complaint against Inox Leisure Ltd., ( “OP 1”) and Hindustan Coca-Cola Beverages Private Limited (“OP 2”) alleging a contravention of the provisions of Section 3(4)(a), 3(4)(b), and 3(4)(c) of the Competition Act, 2002

The Informant who has claimed to be a social activist has alleged that many “Multiplex Malls” including OP-1 have colluded with “Beverage Companies” including OP-2, to sell water/beverages, within such multiplexes, at higher prices, with special packing, contrary to the price of the same brand available in the retail market.

Background

The informant went to watch a movie at one of the multiplexes operated by OP1 he was not allowed to carry his water bottles inside the premises of OP2 and water being an essential commodity, he had to buy it at the available price.

Besides this, he purchased certain beverages that were priced unreasonably high. Even though the packaging had a very minute difference as compared to that sold in the market. Moreover, the non-alcoholic beverages available for sale were only that of OP2 and none of its other competitors as a result, the Informant was left with no other option but to buy only the product of OP2 at the rates provided by him. Thus, he contended that OP1 and OP2 were guilty of engaging in anti-competitive activities in the market.

Facts

Mr. Vijay Gopal went to watch the movie INOX and purchased a water bottle from the ground floor of the mall. When they entered the cinema hall, the security officer asked him to leave the water bottle and could take it at the time of exit. Therefore, he contended that he purchased the bottle from the ground floor of the mall at Rs- 50 whereas the MRP was rs-20. After 30 minutes of an argument with the manager, they allow him to take the bottle.  He further contended that many “Multiplex Malls” and “Beverage Companies” collude together to sell water bottles and beverages at higher prices, so he filed a complaint at INOX movies management but got no reply to his email. The opposite party contended that the security officer did not enter him with a water bottle because of safety purposes. People used to mix sodium and potassium in water to make explosives. That is why they did not allow anyone with outside foods. They also provide free purified water at the cinema hall in paper cups. Further, he contended that the purchase after knowing the price voluntarily purchased. There was no coercion or unfair trade practice imposed on him. The price was fixed taking into consideration its maintenance cost, ambiance, capital investment, amenities provided in the mall. There was no unfair practice on part of them.

Issues

  1. Can OP1 and OP2 be held liable under Sections 3(4)(a), 3(4)(b), 3(4)(c) for being involved in anti-competitive agreements?
  2. Was there a violation of Packed commodity rules,2011 which prohibits sellers from selling through different channels, the same product but at different rates?

Related Provisions

Section-3(4) Competition Act,2002- Any agreement amongst enterprises or persons at different stages or levels of the production chain in different markets, in respect of production, supply, distribution, storage, sale or price of, or trade-in goods or provision of services, including-

(a) tie-in arrangement.

(b) exclusive supply agreement.

(c) exclusive distribution agreement.

(d) refusal to deal.

(e) resale price maintenance shall be an agreement in contravention of sub-section (1) if such agreement causes or is likely to cause an appreciable adverse effect on competition in India.

Explanation. —For this sub-section, –

(a) “tie-in arrangements” includes any agreement requiring a purchaser of goods, as a condition of such purchase, to purchase some other goods.

(b) “exclusive supply agreement” includes any agreement restricting in any manner the purchaser in the course of his trade from acquiring or otherwise dealing in any goods other than those of the seller or any other person.

(c) “exclusive distribution agreement” includes any agreement to limit, restrict or withhold the output or supply of any goods or allocate any area or market for the disposal or sale of the goods.

Related Cases 

  1. Multiplex Association of India v. State of Jammu and Kashmir, on Aug 10, 2018, the Supreme Court stayed the order passed by Jammu and Kashmir High Court, which directed multiplexes not to restrain cinema viewers from carrying their food articles and water inside theatres.
  2. In Rupasi Multiplex v. Mautusi Chaudri, the respondents were compelled to buy mineral water bottle priced more than its market price, by prohibiting them to take their water bottle inside the Multiplex. The NCDRC on Aug 8, 2015, observed that restriction to carry water bottle without providing free drinking water and making them buy highly-priced water bottle amounts to unfair trade practice and further slapped the multiplex to pay compensation of Rs 10,000 and cost of litigation of Rs 1,000 along with a direction to deposit Rs 5,000 as cost of an appeal.
  3. In the case of Zaika Bazar v. Hemant Goel, the view taken is contradictory to the view in the above case. The complainant was charged Rs 34 for a mineral water bottle, the MRP of which is Rs 12, by the appellants. On Oct 9, 2006, the court dismissed the appeal and imposed Rs 50,000 as fine on the appellants. It further proclaimed that no commodity at any place can be sold at a price higher than its MRP.
  4. Big Cinemas v. Manoj Kumar, the respondent was charged Rs 30 for a bottle of drinking water, the MRP of which is Rs 16. The NCDRC on Feb1, 2016, dismissed the revision petition filed by the multiplex, which challenged the orders of a District Forum and that of an SCDRC and affirmed the decision of the District Forum as well as SCDRC along with directing the multiplex to return excess money charged. It also slapped the multiplex with a fine of Rs 6,500 as compensation and also imposed further costs of Rs 5,00,000.
  5. In Cine Prakashalu Viniyoga Darula Sangham v. Hindustan Coca-Cola Beverage Pvt. Ltd., the court recognized the principle that different sales of medium will have different and therefore report between prices of food.

Judgment

It was noted that the purchase of beverages was not a prerequisite for watching movies at Inox, Coca-Cola’s market share was not significant enough to restrict competition and that Pepsi Co had also entered into similar agreements with a large number of multiplexes thereby ensuring intense competition between suppliers of non-alcoholic beverages, and finally that there were no exit barriers as the agreement could be terminated by either of the parties by giving a 60-day notice.

Moreover, the agreement between the OPs was made on a short term basis and could be terminated and other players had a wider coverage of markets than that of OP2, under similar exclusive agreements  Consequently, the CCI held that no violation of the provisions of the Act was made out against the parties as they did not have the potential to cause any appreciable adverse effect on competition. The impugned anti-competitive conduct manifested in the form of an exclusive supply and distribution agreement between Inox and its beverage partner Coca-Cola for the sale of water and beverages within multiplexes of Inox.

So, Conduct of multiplex malls in not allowing consumers to carry their eatables and drinking water inside their movie hall is not anti-competitive as there is no explicit condition that consumers have to necessarily buy these goods to watch the movie. Thus, it cannot be said that there exists a tie-in arrangement because the provision of movie screening is independent of the provision of sale of beverages by OP-1. Further, the Informant himself has submitted that people mostly visit OP-1 with intent and purpose to watch cinema and not with the sole intention to buy these beverages. These beverages are incidental and not the main driving force to visit the multiplexes of OP-1.

Conclusion

As no prima facie case exists complaint filed by the informant was dismissed and as the opposition party did not violate competition in the market, they were declared to be innocent.

Through this judgment, the CCI laid down the distinction between what is anti-competitive according to the Act and what the public perceives to be anti-competitive. Big institutions or corporations must not be bullied for carrying out their business in a certain way. They have the choice to select the traders to deal with unless they raise competition concerns. CCI was correct in finding that the OPs were not guilty of indulging in anti-competitive practices.

References

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