NCLAT set aside CUTS' petition seeking CCI probe in PVR INOX merger

The National Company Law Appellate Tribunal on Thursday dismissed a plea seeking an investigation by the fair trade regulator CCI over the merger of two leading multiplex operators PVR and INOX

The National Company Law Appellate Tribunal (NCLAT) on Thursday dismissed a plea seeking an investigation by the fair trade regulator CCI over the merger of two leading multiplex operators PVR and INOX.

NCLAT rejected the petition by Consumer Unity & Trust Society (CUTS) observing that the fair trade regulator has rightly observed that even if the merger is concluded, their dominance in the film exhibition industry per se is not anti-competitive.

CUTS had challenged an order by the Competition Commission of India which rejected its plea on September 13, 2022, for seeking an investigation into the merger.

However, during the pendency of the appeal the Mumbai bench of the National Company Law Tribunal (NCLT), approved the merger on February 16, 2023, sanctioned the scheme of merger by absorption of the Inox with PVR.

In its petition CUTS said transaction is exempted from the notification requirement under Section 5 of the Competition Act as it qualifies for the de minimus exemption.

It further submitted because of the Covid-19 pandemic, turnover of Inox was less than Rs 1,000 crore in FY21, otherwise, it would have mandatorily been notified for approval from the Commission.

CUTS alleged that the merger will result in significant market share in most relevant markets which will lead to consolidation of the film exhibition industry.

It will lead to a reduction in consumer choice, adverse impact on consumers in terms of high prices and deterioration in food and service quality, prevention of other cinema theatres from accessing movies from distributors and advertising content, high bargaining power of the combined entity that will likely to lead to onerous terms for distributors, especially for comparatively low-budget films and vendors.

However, NCLAT observed that as regards, as Section 4 of the Act is concerned, it is pertaining to the abuse of dominant position for which the Commission has rightly observed that even if the merger is concluded, dominance per se is not anti-competitive.