Market Definition – Media Sector

Market Definition in The Media Sector


 Markets where the same content is sold through different platforms – take a Digital TV Broadcaster and Internet Service – both digitalized content. TV medium would get interactive and available on internet – with technology also converging – the difference may soon fade away.

So, is the Market of TV broadcaster Different from ISP or will be in the Near / Distant Future?

Market definition is playing a key enabler to analyze competition concerns or assess market power. The important thing is demarcation of market should be real and not dependent on superficial projections of trends – consistent with economic principles which the courts can rely on for legally interchanging and defining markets in such situations. Any Anti-competitive behavior is defined in a “market”. In practice, it’s a delicate test especially where services are tangible like in the media sector.

The above-mentioned example of the ISP and the TV broadcaster offers a classic illustration of the difficulties of delineating market boundaries in such an evolving sector. The same issue would arise in case of the on-line distribution of music vis-a-vis the classical “brick and mortar” distribution system.

The accuracy of a substitutability test and the necessity to properly identify dominance is all the more important in analyzing competition issues relating to content in the upstream market – different platforms of transmission will ultimately require access to analogous contents, the prices of which on the other hand seem to be rising significantly, especially as regards premium content.

This field of activity is currently going through an important concentration phase, thereby creating competition concerns. It thus appears that content is potentially becoming an upstream bottleneck for the players in the media environment, the access to which should be adequately regulated by competition law. For that purpose, a proper analysis of the market, the players thereon and their relationships (whether vertical or horizontal) is necessary.

Differences while defining markets in theory and in practice:

Some factors examined for defining product market (such as patterns of production costs, billing, and determination of price level in comparison with the price of the “production”, distribution and transport costs, advertising) may be ill-suited for services markets. Therefore, the difference between the number of possible market definition criteria that exist in theory and their practical implementation in case law shows that there may be a difference between competition law theory and practice.


CCI’s views so far

PRASAR BHARTI (BROADCASTING CORPORATION OF INDIA) (Informant) Vs TAM MEDIA RESEARCH PVT LTD (OPPOSITE PARTY) 

In this case the informant alleged that the OP was a sole and dominant television viewership measurement firm in India and it has abused its position of strength with respect to measurement of viewership in contravention of the provisions of section 4 of the Act.

Contention of Informant:

That the OP was owned and controlled by advertising agencies and thus had a vested interest in generating data which suited its owners. Thus, a vicious circle got developed resulting in a nexus between advertising agencies and the OP to the detriment of broadcasters like the Informant and others.

That as a result of the unfair practices adopted by the OP, its viewership was being largely under reported thereby causing great financial loss to it besides affecting its reputation.

The acts of the OP were not only abusive but also adversely affected competition in the market and were in contravention of the provisions of the Competition Act, 2002 , especially section 4(2) (b) (I) and (ii).

Findings of Commission

In this commission defined relevant market as –

The relevant market for the case is required to be determined keeping in view the provisions of section 2 (r), (s) and (t) read with section 19 (5), (6) and (7) of the Act.

The relevant market in the instant case would be a service market of ‘popularity evaluation of T.V. Programmes ’.
Popularity of a programme is directly related to the advertisement revenue a broadcaster can generate from the programme.

Programmes popularity rating, on a commercial basis, is being done mainly by the OP and, prima facie, the OP appears to be a dominant player in the above mentioned relevant market.

It is evident that TRP/TVR rating of a program declared by the OP was a tool to evaluate which television program was being viewed the most. On the basis of popularity of a program the advertisement rates for a program were decided by ad- agencies this was done on the basis of ‘people meter ‘which was installed in sample homes mainly in urban areas (cities with a population of one lakh or more.).

In India, within the Television Industry, about 34% of revenue comes from advertisements. The TRP generated by the OP was the basic criterion that indicated the popularity of a programme of broadcaster and assisted advertisers in determining their ad spend and ad placement.

Thus, the rating generated by the OP has a great bearing on advertisement revenue of a channel. In such a situation any abuse of dominant position by the OP can have adverse consequences for broad-casters besides affecting the interests of the consumers.

AJAY DEVGAN FILMS (INFORMANT) Vs. YASH RAJ FILMS PVT LTD & ORS. (OPPOSITE PARTY)[2]

The present information has been filed by Ajay Deign Films (‘the informant’) under Section 19(1) (a) of the Competition Act, 2002 (‘the Act’) against Yash Raj Films Private alleging inter-alia contravention of sections 3 and 4 of the Act.

The informant is a sole proprietary concern of a well known Bollywood actor engaged in production of films.

As per the allegations, the opposite parties were dominant in the relevant market of ‘film industry in India’.

The informant’s grievance is that the opposite party released its mega starrer film Ek Tha Tiger on 15thAugust, 2012. At that time the opposite parties were contemplating to release another untitled film later named as Jab Tak Hai Jahan (JTHJ) at the time of Diwali.

The opposite parties before the release of Eke Tha Tiger had put a condition on single screen theatres that if they wanted to exhibit Eke Tha Tiger, they would have to simultaneously agree to exhibit the other film JTHJ at the time of Diwali. Any single screen theatre who did not agree to booking of his theatre for both the films would not get the right to exhibit the single film .Which amounted to abuse of dominance. The single screen theatres under compulsion had to enter into this contract. The informant alleged that this was violation of section 3 as well as section 4 of the Competition Act.

Findings of Commission

In this case there were two points for consideration.

1. Is there any contravention of Section 3 and is there any appreciable adverse effect on Competition?

It was held that,The guiding factors are stated under section 19(3) to assess whether any agreement is causing or likely to cause an appreciable adverse effect on competition. The factors are as follows:

  • creation of barriers to new entrants in the market;
  • driving existing competitors out of the market;
  • foreclosure of competition by hindering entry into the market;
  • accrual of benefits to consumers;
  • improvements in production or distribution of goods or provision of services;
  • Promotion of technical, scientific and economic development by means of production or distribution of goods or provision of services.

Hence the agreement has neither created entry barriers for new entrants nor drove existing competitors out of the market. Nor has there been any appreciable effect on the benefits accruing to ultimate consumers vis their views.

Because the Informant was free to exhibit its film on multiplexes and on those single screen theatres which did not enter into agreement with opposite parties. Moreover, the release of film can be proponed or postponed as per the availability of screens by a distributor.

2. Whether there was abuse of dominance by opposite party under Section 4 or not?

While inquiring whether an enterprise enjoys a dominant position or not under section 4, the Commission is required to consider all or any of the following factors stated under section 19(4), namely:—

(a) Market share of the enterprise;

(b) Size and resources of the enterprise;

(c) Size and importance of the competitors;

(d) Economic power of the enterprise including commercial advantages over competitors;

(e) Vertical integration of the enterprises or sale or service network of such enterprises;

(f) Dependence of consumers on the enterprise;

(g) Monopoly or dominant position whether acquired as a result of any statute or by virtue of being a Government company or a public sector undertaking or otherwise;

(h) Entry barriers including barriers such as regulatory barriers, financial risk, high capital cost of entry, marketing entry barriers, technical entry barriers, economies of scale, high cost of substitutable goods or service for consumers;

(I) countervailing buying power;

(j) Market structure and size of market;

(k) Social obligations and social costs;

(/) relative advantage, by way of the contribution to the economic development, by the enterprise enjoying a dominant position having or likely to have an appreciable adverse effect on competition;

(m) Any other factor which the Commission may consider relevant for the inquiry.

It was held that the informant did not place on record data either of market share or of economic strength to show how the opposite parties were dominant in the proposed relevant market on the basis of above stated guiding factors. And no enterprise can be considered dominant on the basis of big name. Dominance has to be determined as per law on the basis of market share, economic strength and other relevant factors stated under section 19(4) of the Act. There is prima facie no contravention of section 4 of the Act.

CINERGY PICTURES PVT LTD, MUMBAI (INFORMANT) VS ETC NETWORK LTD, MUMBAI (OPPOSITE PARTY) 

As per informant ETC is an entertainment oriented channel which also provides information on movies and it is promoted by ZEE TV which is enjoying a dominant position in television entertainment channel market. So it has capacity to influence viewer’s opinion .It was alleged that informant did not advertise trailer of its movie “RANN” with Etc. Therefore opposite party in its programme “movie meter” rated the movie poorly and gave just 3 points out of 10 and gave higher rating to “ishqiya” which has given its trailer for advertisement .hence, has caused damage to informant by adopting vote meter method.

Hence, there is violation of section 4(2) c and 4(2)e of Competition Act.

IN this Commission found that due to absence of material on record it could not be established whether opposite party was enjoying dominant position in TV Entertainment channel market as to operate independently of its’ competitor’ or affect them or ‘consumers’ the ‘relevant market’. Because informant had made publicity of its film by advertising and it was free to avail other alternate forum hence neither market access was denied to the informant nor the ‘rating’ done by opposite party had limited or restricted the market in which the informant was operating.


CIRCUMSTANTIAL EVIDENCE OF MONOPOLY POWER

1. Market Share as an Indicator of Monopoly Power

In United States v. Aluminum Co. of America, Judge Learned Hand, writing for the Second Circuit after certification of the case from the Supreme Court, opined that 90 percent of supply “is enough to constitute a monopoly, it is doubtful whether sixty or sixty-four percent would be enough; and certainly thirty-three percent is not”.

Consistent with the Alcoa decision, courts have generally regarded the alleged monopolist’s market share as a very important factor in determining the existence of monopoly power. Thus, in United States v. E.I.duPont de Nemours & Co., the Supreme Court unanimously stated that control of 75 percent of a relevant market consisting of cellophane wrapping materials would have constituted monopoly power. The Court held, however, that there had been no monopolization because the properly defined relevant market consisted of all flexible wrapping materials, of which DuPont’s share was less than 20 percent. Subsequently, in United States v. Grinnell Corp., the defendants accounted for 87 percent of the accredited central station security service business. The Court noted that “the existence of such [monopoly] power ordinarily may be inferred from the predominant share of the market.” In Eastman Kodak Co. v. Image Technical Services, the Supreme Court held that a fact finder could infer monopoly power from an 80 percent market share.

A market share in excess of 70 percent generally establishes a prima facie case of monopoly power, at least with evidence of substantial barriers to entry and evidence that existing competitors could not expand output.

2. Other Evidence Relevant to Existence of Monopoly Power

Market share is not the only factor considered in determining whether monopoly power exists. Other factors may be determinative.

i. Barriers of Entry

Barriers of entry have been defined as either a cost that would have to be borne by an entrant that was not and is not borne by the incumbent or any condition that is likely to inhibit other firms from entering the market on a substantial scale in response to an increase in the incumbent’s prices. In evaluating barriers to entry, courts consider evidence regarding the frequency, magnitude, and success of entry.

Various barriers to entry identified by courts as impeding or preventing competitors from entering the market include- legal license requirements, control of natural advantages or supplies, markets too small for more firms, intellectual property rights, including exclusivity arrangements, and brand name or reputation (or other factors that entrench buyer preference),where there is evidence of high capital costs , “Network effects”[3]. The presence of any one of these barriers to entry may not, by itself, be sufficient to establish monopoly power.

.In United States v. Microsoft Corp the court concluded that “the applications barrier to entry protects a dominant operating system irrespective of quality.” According to D.C. Circuit, the network effects in the Microsoft case as a “chicken-and-egg” situation [that] ensures that applications will continue to be written for the already dominant Windows, which in turn ensures that customers will continue to prefer it over other operating systems.”

Barriers to expansion of existing firms (or their absence) also are relevant to the monopoly power inquiry. Control over output and prices – the essence of market power – depends largely on the inability of competing firms to increase their own output quickly in responses to other factors.

ii. Market Structure and Performance

Courts also consider other structural characteristics in determining whether or not a firm has monopoly power, including the relative size and strength of competitors, economics of scale and scope, probable development of the industry, the elasticity of consumer demand, the homogeneity of products, dwindling market demand, and potential competition, firm’s ability to maintain its market share with products or service of comparable or inferior quality.

Courts trying to determine whether monopoly power exists also may consider evidence of market performance. This includes evidence of pricing trends and practices and stability of market shares over time. The consistent extraction of “supranormal” profits has been deemed evidence of monopoly power, although some court decisions have declined to consider this factor because of the complexity of measuring profits or the ambiguity of the inference to be drawn. Courts have also disagreed about the significance of evidence of high prices.

Other factors, including the ability to price discriminate can also prove monopoly.

iii. Regulation

The nature and scope of the existing regulatory control over the defendant or market may be relevant in evaluating the significance of market shares and entry barriers.

iv. Distinguishing Monopoly Power from Contractual Power

Since the Supreme Court’s decision in Eastman Kodak Co. v. Image Technical Services, the issue of whether a firm has monopoly power in an aftermarket rather than merely contractual power limited by primary market competition has been the subject of substantial litigation. In Eastman Kodak, Kodak contended that, as a matter of law, its lack of monopoly power in the market for copiers precluded it from having monopoly power in the aftermarkets for the sale of parts and service for Kodak copiers.SC in this case precluded monopoly power in the aftermarkets, noting both (1) evidence of market imperfections, including the cost to customers of obtaining information about life cycle costs and the cost to current owners of switching to other brands of copiers; and (2) that Kodak had apparently changed its policy, first inviting customers to use independent service providers and then imposing the challenged tying arrangement to drive them out.

The Third Circuit, in Queen City Pizza v. Domino’s Pizza, rejected a Section 2 claim premised on a market confined to inputs “used in the operation of Domino’s stores.” The court distinguished Eastman Kodak on the ground that the “case arose out of concerns about unilateral changes in Kodak’s parts and repairs policies” while “plaintiffs here know that Domino’s Pizza retained significant power” to direct franchisees to purchase particular inputs. Reaching a different result based on the same rational the court in Subsolutions, Inc. Doctor’s Associates denied a motion to dismiss where the complaint alleged that the franchisor had changed its policy after “locking in” franchisees.

In Collins v. International Dairy Queen, the court found monopoly power in a market confined to soft serve ice cream franchisees because evidence of “excessive costs and potential losses associated with purchasing another franchise” effectively locked franchisees into their relationship with Dairy Queen. Other courts have looked at the ability of customers to forecast accurately the total cost of the contract (i.e., life cycle pricing), concluding that the requisite monopoly power may be shown where such costs cannot be forecast accurately.

Precedents are important to bridge the gap:

Case laws help in bridging the gap to some extent and where market definitions are analogous or identical to the ones relating to pending case, can be a useful reference.

Relying on precedents is certainly necessary but a market which was upheld in a given case may not be mutatis mutandis transposable to another case, particularly if the demand/supply relationship is not identical. Since, after the decision market may have some changing dynamics, technological evolutions which take place over small periods of time and should thus include the evolutions that may have appeared since the last precedent was rendered.


Contributor

Swarnmala Singh, Final year law student at Amity Law School, Noida.


Disclaimer

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[1] if an enterprise directly and indirectly discriminates in providing services to the customers or restricts technical development relating to services to the prejudice of the customers (section 4(2)(b)(i), section 4(2)(b) (ii)) or indulges in practice resulting in denial of market access in any manner to a customer (section 4(2)(c))

[2] Date 5-11-2012

[3] Network effects are present when the value of any product or service increases the more others use the same product or service. As a result, potential new entrants cannot compete unless their product is accepted by a crucial mass of users, but potential users will not accept the new offering until it is widely accepted. These effects can be found in actual networks, such as telephones or automated teller machines, or virtual networks such as credit cards, standardized tests, and computer software.


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