The Vietnam Competition Authority is investigating an anti-trust lawsuit filed by six local cinema operators against their foreign invested supplier, who is accused of manipulating the competition with its pricing policies.
The investigation will focus on unfair practice and market-dominated abuse by Megastar Media Joint Venture Company against the six operators, including Galaxy Studio Company, Saigon Cinema Corporation, Cinema 212 Corporation, Saigon Media and Hanoi movies, said head of the authority Bach Van Mung in an official statement confirming the decision.
The case is the second investigation by the authority since the Competition Law took effect in Vietnam five years ago. The authority will issue its preliminary decision in June.
The complainants said Megastar, a venture between Vietnamese Phuong Nam Cultural Corp. and British Envoy Media (which holds a 90 percent stake), set up unreasonable business rules and prices on the operators and moviegoers alike.
The venture, which has won exclusive rights to distribute many foreign blockbusters in Vietnam, applied a minimum-per-capita policy which required the cinema operators to pay at least VND25,000 (US$1.30) on every ticket sold to a movie shown in their cinemas or 50 percent of ticket revenues if individual seats cost more than VND50,000, they said.
They said the double policies had put excessive financial pressure on them and moviegoers and their sales and revenues had dropped as a result. The situation will drive them to losses soon if the policies aren't changed, the operators said.
They reported drops of 25 to 50 percent in ticket volumes and revenues from the third quarter of 2009 through the first quarter of 2010.
About 90 percent of the movies shown are imported films, but Megastar is the main importer in Vietnam.
The country imported 103 films in 2008 and 106 movies in 2009, of which 40 to 47 percent were licensed to Megastar, according to the operators.
Thanh Nien Weekly contacted Megastar but failed to receive feedback on the case from the accused.
Duong Nguyen Y Linh, a legal representative of the operators, said Megastar was violating Vietnam's Competition Law by dominating the movie wholesale market.
Linh said they had raised the concern in the hope of reaching an understanding with Megastar.
But he said the giant had turned its back on them.
Linh said Megastar would be unable to avoid punitive measures if the market was in the European Union or the US.
Lawyer Nguyen Kieu Hung said the case had been of interest to the public as it was rare in the country. But for the same reason it would be difficult for the watchdog to issue a final decision on the matter.
Hung, managing director of Liberation Law Company said it would be difficult to identify the dominating position of the accused before considering whether or not it had abused its top position to pressure its competitors.
Vietnam's Competition Law states that a business which owns over 30 percent of the market is considered to be in a "dominant" position, said Hung.
"If Megastar is determined to dominate the market, it is violating the law with its recent policies," said Hung, who added that the case should be handled quickly to make an example for other businesses.
He said this was the best way to ensure the law's effectiveness. The regulation has already been heavily criticized for not protecting consumers and small businesses from being dominated and priced out by giants.
Vietnam's first anti-trust case was a dispute between Vietnam Air Petrol Company, or Vinapco, and Jetstar Pacific last year. Vinapco, an affiliate of Vietnam Airlines and also the country's air gasoline supplier, was accused of applying pricing pressures on Jetstar Pacific.
The authority investigated the case and decided to fine Vinapco VND3 billion and ask the supplier to stop the policy. The authority also split Vinapco from Vietnam Airlines.