Case Study of PVR and DT Cinema Combination

Case Study on PVR and DT Cinema Combination
Facts
• The merger between PVR Cinemas and DT Cinemas was one of the biggest consolidation deals in
the Indian cinema industry. Here is a brief case study of the PVR and DT Cinema combination:
• In 2016, PVR Cinemas announced the acquisition of DT Cinemas from DLF Group for
approximately Rs 500 crore ($75 million). The acquisition allowed PVR to expand its reach in
North India, particularly in Delhi and the National Capital Region (NCR). DT Cinemas had 29
screens across eight locations in NCR and Chandigarh.
• The combination of PVR and DT Cinemas created a formidable player in the Indian cinema
industry, with a total of 126 screens across 50 locations in India. The merger gave PVR a dominant
position in the Delhi and NCR market, where it now has a 65% market share.
• The merger was also expected to result in cost synergies for PVR, particularly in the areas of
procurement, advertising, and marketing. The consolidation of operations was expected to lead to
cost savings of around Rs 30-35 crore ($4.5-5 million) per year.
• However, the acquisition also faced challenges. The Competition Commission of India (CCI)
initially rejected the merger in 2014, citing concerns about anti-competitive practices and
dominance of PVR in the Delhi and NCR market. PVR appealed the decision, and in 2016, the
Competition Appellate Tribunal (COMPAT) overturned the CCI's ruling and allowed the merger to
proceed.
• Despite the challenges, the PVR and DT Cinema combination has been largely successful, with
PVR consolidating its position as the largest cinema operator in India. The acquisition has also
allowed PVR to expand its presence in new markets and diversify its offerings, with the addition of
DT Cinemas' premium and luxury cinema formats.
Facts-in-Issue
• The main issue in this case was whether the acquisition of DT Cinemas by PVR Cinemas would
result in a violation of competition law in India.
• The Competition Commission of India (CCI) investigated the proposed acquisition and found that
it was likely to result in an adverse effect on competition in the relevant market. The CCI noted that
the combination of PVR Cinemas and DT Cinemas would result in PVR having a dominant
position in the movie exhibition market in the National Capital Region (NCR) of India, which
could lead to higher prices and reduced choice for consumers.
Laws Relevant in Case
• In the PVR and DT Cinema combination case, the following sections of the Competition Act, 2002
were relevant:
• Section 5: Prohibition of certain agreements: This section prohibits agreements between enterprises
that have an appreciable adverse effect on competition (AAEC) within India.
• Section 6: Prohibition of abuse of dominant position: This section prohibits an enterprise from
abusing its dominant position in a relevant market in India.
• Section 20: Power to inquire into certain agreements and dominant position of enterprise: This
section empowers the CCI to inquire into agreements between enterprises and dominant positions
in a relevant market.
• Section 31: Orders by Commission after inquiry into agreements or abuse of dominant position:
This section empowers the CCI to pass orders after conducting an inquiry into agreements or abuse
of dominant position.
Judgment
• The PVR and DT Cinema combination case was approved by the Competition Commission of
India (CCI) in 2010. The combination was scrutinized under Section 6(1) of the Competition Act,
2002, which deals with the regulation of combinations.
• Under Section 6(1), any combination that causes or is likely to cause an appreciable adverse effect
on competition within the relevant market in India is prohibited. The term 'combination' includes
mergers, amalgamations, acquisitions, and any other form of corporate restructuring.
• In the PVR and DT Cinema case, the CCI evaluated the impact of the combination on competition
within the relevant market in India and determined that the combination would not have any
appreciable adverse effect on competition. The CCI also considered the potential benefits of the
combination, such as improved efficiencies and consumer benefits, before approving the
transaction.
• It is worth noting that the Competition Act, 2002 has undergone several amendments since its
enactment, and the specific provisions and regulations governing combinations have been subject
to change.

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