French watchdog directs film distributors on ways to avoid competition breaches

Film distributors in France have pooled resources to organise their recovery from the Covid-19 crisis and agreed a regulated schedule for film releases in order to prevent the overcrowding of new films when cinemas reopen.

In February 2021, in accordance with the French Code of Cinema and the Moving Image, they referred the matter to the French Competition Authority (FCA) through the Cinema Mediator to provide an opinion on the potential competition concerns of their agreement. The opinion (No 21-A-03) was released on 16 April 2021.

Exemption conditions

The FCA considered that the four conditions that would allow eligibility for the individual exemption of Article 101 (3) TFEU and L.420-4 of the French Code of Commerce were:

• The contribution of the agreement to economic progress. The FCA suggests that "this type of agreement would improve the distribution of films, as a number of them might never be shown in cinemas because of the lack of an agreement".
• A neutral effect on consumers. The FCA commented that "it could be argued, for example, that such an agreement would allow spectators to have access to a diversified offer and to all types of films, despite probable constraints in terms of film rotation, limitation of screening times and sanitary capacity when cinemas re-open."
• The necessity of the agreement to achieve efficiency gains. The FCA considers that "[the parties to the agreement] should in particular establish in concrete terms the inadequacy, in order to deal with the increased congestion of cinema screens as a result of the Covid-19 health crisis, of alternative options to consultation between distributors on a schedule for the release of films in cinemas."
• No elimination of competition. The FCA recommends the parties to the agreement to "clarify the content and scope of the agreement in order to demonstrate that competition would be preserved for a substantial part of the film distribution business, and that the players involved in this process would continue to compete on many parameters not included in the agreement. In this respect, the distributors could try to demonstrate that the concertation would only concern the date of release of the films in theatres and that, if need be, competition between them could remain on all the other parameters, such as the number of establishments in which the films would be shown, the number of copies of the films, the hours of screenings, the length of exposure of the films as well as the commercial negotiations with the cinema operators concerning both the choice of films and the economic parameters of the contracts. (…) Generally speaking, it would also be up to the distributors to demonstrate the exceptional and temporary nature of the planned agreement”.

OC comment

The FCA's approach is welcome. It agreed to respond in record time to urgent competition concerns of parties who could not have started negotiating without being reassured about the validity of their approach. The FCA gave precise recommendations to the parties on the justifications that they needed to provide in order to benefit from the exemption from the rules of competition law, thereby giving these companies greater legal security.

This is in addition to the European Commission's recent "comfort letters" sent to companies wishing to obtain approval before reorganising activities to deal with the Covid-19 crisis (see, for example, the Commission's recent comfort letter addressing the current slowdown in the production of Covid-19 vaccines).

It is also within the framework of the procedure put in place by the Commission in its communication of 8 April 2020 for assessing antitrust issues relating to business cooperation in response to situations of urgency stemming from the pandemic outbreak.