Anti-trust watchdog fines UFO Moviez, Qube Cinema Rs 2.69 cr for anti-competitive practices

The Competition Commission of India (CCI) has imposed a collective penalty of Rs 2.69 crore on UFO Moviez India Ltd and Qube Cinema Technologies Pvt Ltd for engaging in anti-competitive practices that adversely impacted the digital cinema equipment and post-production services market.

Following a detailed investigation into complaints filed by PF Digital Media Services (now DNEG India Media Services Ltd) and film producer Ravinder Walia, the CCI found that the two companies had entered into exclusive arrangements with cinema theatre owners (CTOs), effectively restricting their ability to source digital content and related services from competing vendors.

The CCI, in a 67-page order, held that both UFO Moviez and Qube Cinema abused their dominant position in the market by tying the lease of digital cinema equipment (DCE) with exclusive provision of post-production services and content delivery. This bundling not only limited consumer choice but also foreclosed competition from other players, particularly in the cloning and delivery of digital cinema content.

“These exclusive supply arrangements, refusal to deal, and tie-in clauses embedded in lease agreements substantially hinder competition and restrict market access,” the Commission observed. It added that such conduct violates Sections 3(4)(a), 3(4)(b), and 3(4)(d) read with Section 3(1) of the Competition Act, 2002.

The CCI noted that UFO Moviez and its affiliate Scrabble Digital were involved in disabling digital cinema equipment leased to CTOs from accepting or playing content processed by rival labs. Similarly, Qube Cinema Technologies was found to have adopted comparable tactics through contractual clauses and technological constraints, making it difficult for theatres to use third-party services without incurring penalties.

UFO Moviez, with a market share of 40%, and Qube Cinema, holding 48% in the DCI-compliant DCE leasing space, were found to possess significant market power. The investigation concluded that both companies’ practices caused “appreciable adverse effect on competition”, erecting entry barriers and driving out smaller competitors.

In addition to the fine, the CCI directed both entities to cease and desist from indulging in such practices and to amend their agreements with CTOs to remove restrictive clauses.

"The Commission, under the provisions of Section 27 of the Act, directed UFO Moviez and Qube to not re-enter lease agreements with the CTOs imposing restrictions on supply of content from other parties. The Commission further held that the existing lease agreements with CTOs shall stand modified such that they do not impose restrictions on supply of content from parties other than UFO Moviez (and its affiliates) and Qube. The Commission, after considering nature and gravity of the contravention along with assessment of mitigating and aggravating factors, also imposed monetary penalty on UFO Moviez (along with its subsidiary Scrabble Digital Ltd.) and Qube, amounting to Rs. 104.03 Lakh and Rs. 165.8 Lakh, respectively," it was noted.

The fine of Rs 2.69 crore has been apportioned between the two firms based on their financials and market conduct, as per the CCI’s Penalty Guidelines 2024.