The National Company Law Appellate Tribunal (NCLAT) has cleared the way for the merger of cinema giants PVR and INOX, dismissing an appeal against the Competition Commission of India’s (CCI) earlier order which refused to investigate the deal.
The combined entity is set to be called ‘PVR INOX Ltd’, positioning itself as a dominant player in India’s film exhibition industry with ownership of approximately 1,646 out of 3,200 multiplex screens in the country.
Consumer Unity & Trust Society (CUTS), a public policy research and advocacy group, had earlier initiated the information case with the CCI, questioning the merger’s possible anti-competitive implications. It also alleged potential anti-competitive agreements which might adversely impact the competition in the relevant market for ‘exhibition of films in multiplex theatres and high-end single-screen theatres in India’.
The CCI, however, concluded that apprehensions about potential adverse effects on competition by an entity that is yet to form cannot be a basis for inquiry under the Competition Act. The commission clarified that examining a likelihood of appreciable adverse effects arising from an agreement is different from examining the likelihood of the conduct itself. In simpler terms, until anti-competitive conduct is proven post-facto, there’s no ground for investigation.
Section 3 of the Competition Act provides for examination of likelihood of Appreciable Adverse Effect on Competition (AAEC) arising out of conduct in terms of an agreement, not a likelihood of conduct itself.
The NCLAT, upholding the CCI’s observation, stated, “It is apparent that both PVR and INOX have become a single entity post-merger and the application by itself is not in accordance with law.”
The Tribunal also pointed out that while dominance in the market is not anti-competitive by itself, any abusive conduct arising from such dominance can be investigated if brought to the commission’s notice.
It maybe recalled CUTS had challenged an order by the CCI which rejected its plea on September 13, 2022 for seeking an investigation into the merger.
Meanwhile, during the pendency of appeal before NCLAT, the Mumbai Bench of the NCLT approved the merger on February 16, 2023 and sanctioned the scheme of merger.