[Tarusi Jain is a third year student at O.P Jindal Global Law School, Sonipat]
On 16 June 2022, the Competition Commission of India (‘CCI’) passed an order against Big Tree Entertainment Private Limited (‘BookMyShow’) and directed the Director General (‘DG’) to investigate the allegations of abuse of dominance by BookMyShow in the market for online intermediation services for booking of movie tickets in India. The order was issued following a complaint made by Vijay Gopal (‘Informant’), who is the founder of a rival online movie-ticketing portal ‘Showtyme.’
The Informant had alleged that BookMyShow had abused its dominant position under section 4 of the Indian Competition Act, 2002 (‘Act’) by (i) entering into ‘exclusive and refusal to deal agreements’ with certain multiplexes and standalone theatres in Hyderabad, Telangana, and (ii) charging exorbitant convenience fee from cine-goers for online booking of movie tickets.
On Relevant Markets
BookMyShow had suggested that the relevant market be defined as the ‘sale of movie tickets in India.’ However, the CCI noted that online modes of booking are not substitutable by other modes of booking offered by online sites of multiplexes or single screen cinemas or the BoxOffice. The CCI recognised that BookMyShow operates as a two-sided platform as it caters to two sets of user groups – cine-goers who use the platform to book movie tickets and the theatres or multiplexes that use the platform to sell their tickets. The CCI distinguished between the online and offline modes of booking on the basis of functionalities – like the ease of use, reduced search costs, convenience of booking, and the real-time ability to compare available movies and theatres alongside the available seats and ticket prices for a particular show. Based on the above analysis and BookMyShow’s pan-India operation, the CCI defined the relevant market to be the ‘market for online intermediation services for booking of movie tickets in India.’
The CCI’s recognition of BookMyshow’s multi-sided nature is important because it distinguishes online platforms, which are usually multi-sided markets, from other forms of online retail. By accounting for the role of indirect network effects, the CCI’s order is indicative of its growing recognition of multi-sided markets and is a step in building such trends and clarifying the existing decisional inconsistencies in defining the relevant market in digital markets.
On Bookmyshow’s Dominance
The CCI observed that the market share of the online platform needs to be considered along with its reach, scale, and the network effects that work in its favour. While determining BookMyShow’s market share, the CCI rejected the data given by the platform for being untenable and inconsistent. It instead relied on publicly available reports that reveal that BookMyShow’s share in online booking of movie tickets was 78%, followed by PayTM with a market share of 13%. The CCI also noted that BookMyShow’s ability to enter into exclusive agreements with several single-screen theatres and multiplexes reaffirmed its supreme bargaining power in the market. Considering the above factors, the CCI prima facie found BookMyShow to be dominant in the relevant market.
On Abuse of Dominance
In its analysis, the CCI noted that BookMyShow’s exclusive agreements with single-screen cinema theatres prohibit these cinemas from directly or indirectly engaging any entity for providing services similar to the services of BookMyShow or facilitating booking or sales of tickets through any online medium. The CCI observes that such provisions have the potential to foreclose or reduce competition in the relevant market, as they may make competitor intermediary platforms or new entrants incur significant additional costs to induce the cinemas to give up their exclusive contracts with the dominant platform with market power.
This observation adds to the recent set of CCI orders in the digital sector that shows the authority’s increasing inclination to direct investigations by passing section 26(1) orders on the mere likelihood of potential adverse effect on competition without having some evidence of foreclosure of competition at the time of ordering the investigation. While ordering such investigations, the CCI should not lose sight of the fact the commencement of an investigation under section 26(1) of the Act against an entity involves substantial and significant civil consequences for such entity. The Delhi High Court in Google Inc v. CCI held that an investigation against a public company tends to shake its credit and adversely affect its competitive position in the business world even though in the end it may be completely exonerated and given a character certificate. This inevitably causes serious prejudice to the goodwill, reputation, and prospects of the company. Any premature intervention is detrimental to the steady growth of e-commerce in India and will ultimately adversely affect consumer interests.
With respect to the security deposits made by BookMyShow to the cinema theatres, the CCI rejected the platform’s averments that its security deposit is towards payment obligations to its partner cinema theatres. It instead noted that specific clauses of the agreements specifying the quantum of deposit and limiting the number of rival intermediary platforms with whom cinema theatres can enter into agreements prima facie indicate an attempt to disincentivise and dissuade such exhibitors to associate with any platform other than BookMyShow. The CCI held that such exclusive and restrictive agreements with single-screen cinemas and multiplexes prima facie appear to have the potential of denying market access to competing platforms and new entrants further restricting the choice of alternate ticketing platforms available to both cinema theatres and cine-goers.
It is to be noted that all exclusive agreements are not unlawful or anti-competitive per se. An agreement is anti-competitive only if it causes an appreciable adverse impact on competition in the market. The CCI assesses such agreements on a case-to-case basis by taking into consideration factors including the market share of the entity. The commission also weighs several other factors such as any economic justifications or competition-enhancing effects of the agreements and longevity of the agreements. In its recent e-commerce market study, the CCI acknowledges that exclusive agreements may generate efficiencies and promote inter-brand competition.
In the present case, BookMyShow had averred that this exclusivity has greater pro-competitive benefits than anti-competitive effects as it allows cinema theatres to make their tickets available online and therefore enhances distribution. BookMyShow has further stated that the duration of these agreements is short ranging, upon the expiry of which the parties are free to collaborate with other portals. Since the case is ongoing, it would be premature to evaluate the nature of such exclusive agreements. However, the ruling in the case would set an important precedent for entities seeking to enter into exclusive agreements in narrow markets.
Regarding data collection by BookMyShow, the CCI noted that although the agreements between the platform and the cinema theatres provide for sharing of data, BookMyShow has exclusively reserved the right of data collection, ownership, and storage and has denied the cinemas any right, title, interest to such data. The commission noted that such exclusivity relating to data ownership can bolster the platform’s bargaining power over time. It further acknowledged that data strengthens and entrenches the network effects limiting inter-platform competition implying that BookMyShow would earn monopoly rents, going forward. Owing to the above reasons, the CCI believed the dominant intermediary’s exclusive ownership of and access to data merits investigation.
The CCI’s observations are in line with several other recent orders by it against big tech companies that have highlighted the role that accesses to and accumulation of large amounts of data plays in shaping the market power of entities. The observations also contribute to a growing international jurisprudence on considering data as a factor for market dominance. In a recent section 26(1) order against Zomato and Swiggy, the issue of ‘data masking’ came up for consideration. The informant had alleged that the above platforms do not share critical consumer data with their restaurant partners while the same is used to launch and promote the platforms’ own cloud kitchens. In the e-commerce report, the CCI discussed the significance of consumer data to the service sector. Likewise, consumer information is valuable to single-screen theatres and multiplexes, as it helps them in understanding consumer profiles and getting direct feedback from customers. Consumer data (such as the likelihood of purchasing tickets for premium screenings, paying an upcharge for reserved and/or premium seating) is significant for theatres to understand their consumer base and expectations and perhaps launch or enhance their own online portals. The CCI could expand on data masking as a hindrance to competition while assessing exclusivity relating to BookMyShow’s data ownership.
The CCI’s observations on the importance of access to and ownership of data could prompt greater scrutiny of online platforms that are not generally seen as ‘data gatekeepers.’ Hence, moving forward, such entities may also need to review their data sharing and collection requirements.
Lastly, with respect to BookMyShow charging high charging fees from cine-goers, the CCI noted that it cannot determine the correct fee, as it is not a price regulator. However, it observed that the exclusivity agreements entered by BookMyShow and the resultant increase in its market power may disincentive it to lower such convenience fees in the future.
Conclusion
With the steady growth of e-commerce in India, the CCI has increased its scrutiny of e-commerce giants for anti-competitive behaviour. After the release of CCI’s e-commerce market study, the competition authority has initiated several probes against prominent online intermediaries in product and service sectors involving digital markets, with BookMyShow being the latest addition. The current order is administrative in nature and only directs the DG to further investigate the allegations. The final enquiry will reveal greater details about the nature of the exclusive agreements between the cinema theatres and multiplexes on the one hand and BookMyShow on the other, and whether the platform leveraged its dominant position to soften competition in the market. However, the commission’s discussion on exclusivity relating to the platform’s data collection, ownership, and storage and the delineation of online booking of movie tickets as the relevant market is in line with international jurisprudence on such matters. Although it is too early to predict the outcome of the litigation, the ruling will be significant in setting a precedent for the determination of narrow relevant markets, exclusive agreements in such markets, and the growing role of data in digital markets.
– Tarusi Jain