ACCESS TO THE MOVIE THEATRE MARKET (Advisory opinion)
PRESS RELEASE
The Italian Competition Authority submitted an advisory opinion to Parliament and Government in order to highlight distortions of competition deriving from Section 9 of Law no. 153/94, which provides for urgent measures on behalf of cinema.
The aforementioned Section provides that the construction, transformation and adaptation of buildings for use as movie theatres, as well as the widening of movie theatres already running, are subject to the authorization of the Department for Entertainment, created within the Presidency of the Council of Ministers.
In its advisory opinion, the Authority, in order to ensure an effective operation of the market and to better meet consumers needs, suggested to remove such a Section, given that the liberalization of market access could eliminate a distortion of competition in the movie theatre market.
According to Law no. 153/94, special enactment decrees adopted by the Prime Minister define the authorization requirements. A first decree was adopted in September 1994 and was partly amended by another decree on May 13th, 1996. In December 1994, the Authority expressed an opinion on the first decree, considering that the authorization requirements limited new operators' entry into the movie theatre market and, therefore, reduced competition substantially.
The amendments made by the Prime Minister Decree of May 13th, 1996, concern both the authorization requirements to open movie theatres and the authorization proceeding. As regards the first aspect, such amendments provide for:
(a) a reduction by halves of the minimum distance from the nearest operating movie theatre (from 3 to 1.5 km. from the nearest single or two-screen movie theatre and from 5 to 2.5 km. from the nearest multiscreen theatre - with at least three screens), in order to be authorized to open a single screen or a multiscreen movie theatre within municipalities unprovided with movie theatres;
(b) a reduction of the distance from the nearest operating theatre, and, in addition, a doubling of the ratio between number of movie theatres running in the single municipality and resident population, in order to be authorized to open new movie theatres within municipalities provided with them;
(c) broader possibilities to increase the capacity of the place and facilitations to construct multiscreen movie theatres within co-ordinated projects, in order to be authorized to open new multiscreen movie theatres or to transform single screen into multiscreen theatres.
With respect to the authorization proceeding, the Prime Minister Decree of May 13th, 1996, provides that the Department for Entertainment avails itself of a special advisory Commission for opening movie theatres, so as to carry out its own authorization activity. Such a Commission is also made up of the representatives of the associations of the cinema industry and, in particular, of the movie theatre market.
Despite these partial amendments, the Authority, in its advisory opinion, emphasised distortions of competition in the movie theatre market deriving from the legislation concerning both the aforementioned aspects, as referred to in Section 9 of Law no. 153/94 and the two subsequent enactment decrees. The Authority pointed out that there are no economic grounds to justify a structural regulation of the supply of movie theatres, given also the current stage of development of the market, which is characterized by a merger process aimed at establishing movie theatre circuits in nearly all major cities heading the movie distribution zones.
In this sense, if the opening of new movie theatres or the transformation of those already running depends on non-competitive criteria, the growth of the movie theatre market might slow down, so as to prevent the creation of multiple circuits within the same local area and, therefore, to reduce competition in this market.
In addition, the existence of uniform quantitative parameters set forth at a national level by the legislation, and on which the regulation of the location of the movie theatres in different zones is based, hinders the structure of the movie theatre market from meeting the different consumers needs in the various zones.
A uniform regulation at a national level affects notably the autonomy of the local administrations with regards to the location of the production activities, in such a way as to limit the power vested in the Municipalities of managing their city-planning schemes.
Lastly, the Authority highlighted that the presence of representatives of the associations of the cinema industry in the Commission for opening movie theatres contributes to create unnecessary conflicts of interest, as well as to strengthen the anticompetitive aspects of the legislation, since operators already present in the market can prejudice the entry of competitors.