Advocacy group writes to CCI against PVR- INOX merger

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    Consumer Unity and Trust Society (CUTS), a public policy research and advocacy group, has filed an information with the Competition Commission of India (CCI), urging it to investigate possible anti-competitive effects of the proposed merger agreement between multiplex chains Inox Leisure Ltd and PVR Ltd.

    This March, the boards of PVR Ltd and Inox Leisure Ltd, India’s top two multiplex chains, approved an all-stock merger of the companies to create India’s largest film exhibition entity with a network of more than 1,500 screens. After the merger, Inox promoters will own a 16.66% stake in the combined entity, while PVR founders will own 10.62%. PVR’s chairman and managing director Ajay Bijli would serve as managing director of the merged entity, and Sanjeev Kumar Bijli would be executive director. The two companies had earlier emphasized that the merged proposal does not require CCI approval as both were shut for months during the pandemic, impacting their combined revenue that is less than Rs. 1,000 crore. 

    After the merger, the combined entity, PVR-Inox, will become the largest player in the film exhibition industry in India, eventually leading to them having a significant combined market share in most cities of the country, CUTS said in a statement. 

    PVR-Inox is likely to become the largest player in 43 cities, with market share in excess of 50% in at least 19 cities. Competition concerns arising from this, according to the group, include reduction in consumer choice, so consumers will have no effective option but to visit the multiplexes owned by PVR-Inox, high-ticket prices, and a possible deterioration in food and service quality. Besides, high bargaining power of PVR-Inox is likely to lead to onerous terms for distributors, food and beverage suppliers, technical equipment suppliers and so on.

    “The CCI has a duty to prevent and eliminate practices having an appreciable adverse effect on competition, promote and sustain competition, and protect the interest of the consumers,” Pradeep S Mehta, secretary general, CUTS said in a statement.

    Had it not been due to covid-19 lockdowns, the PVR-Inox deal would not have qualified for exemption from mandatory merger review by CCI, said CUTS which has approached the CCI to investigate the matter. The information was filed on 27 July 2022 and the group awaits to hear from the CCI. Further, in the last 12 years, the film exhibition industry has witnessed gradual consolidation as a result of several merger and acquisitions, thereby bringing down the total number of major players from 11 in 2009-2010 to only five namely, PVR, Inox, Carnival Cinemas, Cinepolis and Miraj Cinemas in 2022, it pointed out.

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