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Competition

PR(03)33: EFTA Surveillance Authority accepts commitments in competition proceedings regarding distribution of films to cinemas in Norway and clears a new purchasing arrangement for smaller cinemas

12.11.2003

The EFTA Surveillance Authority has decided to close its proceedings regarding the so-called 2002 film rental agreements after having obtained commitments from the parties involved. The Authority has also decided to clear a new purchasing arrangement notified by Film&Kino which ensures that smaller cinemas, often located in remote areas of Norway, receive films at a reasonable price.

The 2002 film rental agreements

Following a complaint from Oslo Kinematografer AS, the Authority opened formal proceedings under Article 53 of the EEA Agreement against two associations, Norske Filmbyråers Forening (the Norwegian Filmdistributors’ Association) and Film&Kino (an association of Norwegian cinemas), in December 2002, and informed them of its objections to the agreements in question (PR(02)29). In particular the Authority objected to the exclusion of price competition in virtually the entire Norwegian market for distribution of films  to cinemas for theatrical exhibition.

After having examined the parties’ replies to its statement of objections, the Authority maintains that the 2002 film rental agreements infringe Article 53 of the EEA Agreement. However, the Authority considers that the commitments proposed by the parties adequately remove the competition concerns that have been identified in the present case.

Norske Filmbyråers Forening, the members of Norske Filmbyråers Forening and Film&Kino have all proposed commitments to the Authority. These commitments entail that the agreements objected to by the Authority are discontinued and that price competition is restored in the market.

Norske Filmbyråers Forening has undertaken not to engage in negotiations or consultations concerning film rentals. It has also amended a clause in its statutes in order to make it clear that it is not a task for the association to conduct negotiations with Film&Kino or other parties regarding film rentals, conditions etc.

Each active member of Norske Filmbyråers Forening has undertaken not to engage in joint negotiations or consultations together with other members of the association concerning film rentals.

The members of Norske Filmbyråers Forening have also undertaken to comply with a confidentiality obligation. This obligation concerns information regarding the level and structure of film rentals as well as the method of calculation of such rentals. Each member of Norske Filmbyråers Forening has undertaken to treat as confidential and not to disclose such information to any other film distributors active in the Norwegian film distribution market. However, the film distributors are not prevented from exchanging relevant information in the case of co-production or co-financing of particular films or other forms of co-operation which are in compliance with Article 53 of the EEA Agreement.

In accordance with the commitments proposed by the parties, the 2002 film rental agreements were discontinued on 1 October 2003 for cinemas with more than 200 000 visitors per year and on 19 October 2003 for cinemas with fewer than 200 000 visitors per year.

On the basis of the commitments and as the complainant has decided to withdraw its complaint as far as it concerns the 2002 film rental agreements, the Authority has decided to close the case.

The notified purchasing arrangement

In response to the Authority’s statement of objections, Film&Kino notified a joint purchasing arrangement intended to replace the 2002 film rental agreements. Under this arrangement Film&Kino would negotiate individually with each film distributor on behalf of all Norwegian cinemas with less than 200 000 visitors per year. This would have implied that only 11 of more than 220 cinemas in total would arrange their purchases outside the notified arrangement. Film&Kino would by far have been the largest buyer on the market for distribution of films to cinemas representing close to 40 % of this market.

Given amongst others the longstanding history of centrally negotiated film rental agreements in Norway and the prominent role played by Film&Kino in those negotiations, the Authority considered that the arrangement as notified might jeopardise the introduction of price competition in the film distribution market following the discontinuation of the 2002 film rental agreements. The Authority therefore asked Film&Kino to reduce the scope of the arrangement, to give cinemas eligible to take part in the arrangement freedom to choose whether to do so or not and the possibility for cinemas to withdraw from the arrangement at yearly intervals.

Film&Kino has agreed to make the necessary modifications to the notified purchasing arrangement. In particular, it has agreed to reduce the scope of the arrangement so that it only comprises cinemas with fewer than 130 000 visitors per year. This means that the 18 largest cinemas in Norway will have to organise their purchases outside the auspices of Film&Kino.

After these modifications, the Authority considers that the notification no longer raises any competition concerns. The Authority has therefore cleared the case under the EEA competition rules by way of issuing an administrative letter.

For further information, please contact Mr Amund Utne (tel.: + 32 2 286 1850) or Mr Tormod S Johansen (tel.: + 32 2 286 1841).

12 November 2003




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