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CCI, by its order dated May 04, 2016, has approved acquisition of DLF’s film exhibition business, subject to modifications. The proposed combination relates to acquisition by PVR of DLF Utilities Limited (DUL) film exhibition business comprising of 39 screens (29 existing and 10 upcoming) as a going concern on a slump sale basis.
PVR is engaged in the business of developing, operating and managing cinema theatres across India. It has 467 screens in 43 cities across India. DUL, part of DLF Group, is engaged in, inter alia, operating and maintaining cinema. At present DUL has 29 screens in Delhi, Gurgaon and Chandigarh and is in the process of developing 10 more screens in Delhi and Noida.
The CCI considered that the proposed combination is likely to cause appreciable adverse effect on competition (AAEC) in the markets of (i) Gurgaon, (ii) South Delhi, (iii) North, West and Central Delhi, (iv) Noida, and (v) Chandigarh. PVR was accordingly asked to publish details of the proposed combination to bring to the knowledge of the public and persons affected or likely to be affected by such combination.
As regards the relevant product market, the CCI considered that multiplexes and single screen theatres do not compete with each other as the multiplexes have the advantage of offering greater choice of films to the consumer. Multiplexes also cater to higher paying customers, and offer additional facilities such as shopping area, fast food centers and recreational facilities. However, high-end single screen theatres like PVR Rivoli, PVR Plaza, Delite Cinemas, M Cinemas, and DT Savitri offer some facilities of multiplexes and at comparable price to multiplex theatres. As such, they provide some competition to multiplex theatres. Thus, for the purposes of the said combination the relevant product market was considered as the “market for multiplex theatres and high-end single screen theatres”.
As regards the geographic market, the CCI observed that the consumer prefer to view films in nearby areas and would choose among the available nearby theatres. Thus the Delhi NCR market can be divided into the following distinct geographic markets. Viz. South Delhi, North, West & Central Delhi, East Delhi, Gurgaon, Ghaziabad, Faridabad, NOIDA and Greater NOIDA.
Assessment of AAEC
- Chandigarh
The CCI noted that in Chandigarh, the post combination market share would be 36.7% with an increment of 6.7%. When upcoming market entries are taken into account, the incremental market share is only 5.2% which is not significant. Further, there are a number of competitors with significant market share in Chandigarh. Hence the proposed combination is not likely to have AAEC in the market of Chandigarh.
- North, West and Central Delhi
The CCI noted that in North, West and Central Delhi, the post combination market share would be 53.3% with an increment of 6.6%. When upcoming market entries are taken into account, the incremental market share is 5.1% which is not significant. Further, there are a number of competitors with significant market share in Chandigarh. Hence the proposed combination is likely to have AAEC in the market of North, West and Central Delhi.
- NOIDA
The CCI noted that in NOIDA, the post combination market share would be 53.6% with an increment of 10.1%., which is significant. Further, the next biggest competitors have a market share of 14.5% and 13%, respectively, and hence may not constitute adequate competitive constraint. Further, any efficiencies being claimed through the combination are not because of the combination. There is a likelihood that the combination would result in sustained/significant increase in competitive prices in the absence of effective competition. The CCI was of the view that the proposed combination is likely to have AAEC in this relevant market.
PVR submitted a commitment that it shall terminate its agreement with International Recreation Parks Pvt. Ltd. For the development of a multiplex with 15 screens in Garden Galleria Mall, NOIDA which is scheduled to be completed by 2017. PVR shall also not acquire any direct or indirect influence/ownership over Garden Galleria for a period of five years from the date of termination of notice as above. PVR shall not open any new screens for a period of 3 years from the date of completion of the proposed combination in the market of NOIDA.
Following the commitments, the CCI was of the opinion that the competition concerns in the relevant market would be adequately alleviated.
- Gurgaon
The CCI noted that in Gurgaon, the post combination market share would be 63.2% with an increment of 21.1%., which is significant. Further, the next biggest competitors have a market share of 16.4% and 14.8%, respectively, and hence may not constitute adequate competitive constraint. Further, any efficiencies being claimed through the combination are not because of the combination. There is a likelihood that the combination would result in sustained/significant increase in competitive prices in the absence of effective competition. The CCI was of the view that the proposed combination is likely to have AAEC in this relevant market.
PVR submitted a commitment that it shall terminate its agreement with Reach Promoters Pvt. Ltd. For the development of a multiplex with 7 screens in Airia Mall, Gurgaon which is scheduled to be completed by 2017. PVR shall also not acquire any direct or indirect influence/ownership over a Airia Mall, Gurgaon for a period of five years from the date of termination of notice as above. PVR shall not open any new screens for a period of 3 years from the date of completion of the proposed combination in the market of Gurgaon.
Following the commitments, the CCI was of the opinion that the competition concerns in the relevant market would be adequately alleviated.
- South Delhi
The CCI noted that in South Delhi, the post combination market share would be 79.4%% with an increment of 41.2%., which is significant. Further, the next biggest competitor shall have a market share of 12.5%, respectively, and hence may not constitute adequate competitive constraint. Further, any efficiencies being claimed through the combination are not because of the combination. There is a likelihood that the combination would result in sustained/significant increase in competitive prices in the absence of effective competition. The CCI was of the view that the proposed combination is likely to have AAEC in this relevant market.
PVR submitted behavioral commitments such cap on ticket prices, cap on food and beverage prices, quality commitments, expansion freeze and commitment with distributors. However, the CCI by its majority opinion held that the behavioral commitments offered would not adequate to alleviate competition concerns from this relevant market. Further, such behavioral commitments would be difficult to formulate, implement & monitor & run the risk of creating market distortions. The majority opinion of the CCI held that the competition concerns would only be alleviated if PVR is asked to divest the screens belonging to DUL.
The commitments accepted by the CCI include divestiture of DT Savitri and DT Saket assets from the scope of the proposed combination. PVR shall also not acquire any direct or indirect influence/ownership over DT Saket and DT Savitri assets for a period of five years. PVR shall not open any new screens for a period of 5 years from the date of completion of the proposed combination in the market of South Delhi. Following the commitments, the CCI was of the opinion that the competition concerns in the relevant market would be adequately alleviated.
The proposed combination has accordingly been approved, subject to the commitments as offered above. (Source:CCI Order dated May 04, 2016. For full text see CCI website)
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