How Cinema 21 group does business in Indonesia<\/p>\n
Abdul Salam Taba, Alumnus, School of Economics, University
\nof Newcastle, Australia<\/p>\n
A report that Monopoly Watch has sent to the Business Competition
\nSupervisory Commission (KPPU) regarding monopolistic practices in
\nthe screening of imported films by the Cinema 21 network,
\nparticularly films distributed by the Motion Pictures Association
\n(MPA), has led to controversy. On the one hand, the report is
\nallegedly true. The premiere of imported and box office films has
\nalways been dominated by the Cinema 21 network. Only when a film
\nhas been screened throughout the entire company's network will it
\nbe made available to non-21 network. On the other hand, the
\nreport is deemed to be baseless because it is actually the
\nlimited number of film copies that has made it impossible to
\nscreen the films at other cinemas at the same time.<\/p>\n
There is a strong indication that the 21 network has resorted
\nto monopolistic practices and unfair business competition, which
\ngoes against legal laws, particularly Law No. 5\/199 on the
\nprohibition of monopolistic practices and unfair business
\ncompetition.<\/p>\n
The law states that every citizen is entitled to equal rights
\nand opportunities to participate in a process of producing and
\nmarketing goods and services. The law also demands that
\nbusinesses should compete fairly and naturally and that they
\nshould prevent the concentration of economic forces in the hands
\nof certain business players only.<\/p>\n
However, the presence of the 21 network has not only limited
\nbut also killed business opportunities for rival cinema owners.<\/p>\n
Many non-21 cinemas in many regions have gone bankrupt owing
\nto the presence of the 21 network. Monopoly Watch reports that 19
\ncinemas in seven major cities have been closed down, including
\nKencana in Plaza Cipulir, South Jakarta, Nelayan in Jl. Tegal
\nAlur, West Jakarta and Johar Baru in Central Jakarta (The Jakarta
\nPost, July 19, 2992).<\/p>\n
The 21 network has nation-wide outlets and also controls the
\ndistribution rights of imported and box-office films.
\nEconomically, the 21 network becomes the market leader in the
\ncinema industry in Indonesia and at the same time it can
\n'dictate' the market and do whatever it wishes to non-Cinema 21
\nowners.<\/p>\n
As a result, non-Cinema 21 owners find it difficult either to
\ndevelop their businesses or are forced to declare bankruptcy.<\/p>\n
As a market leader in the cinema business, the 21 network can
\nset the ticket prices unilaterally, based merely on rent seeking,
\nwithout having to take market equilibrium into consideration.<\/p>\n
The result is economic concentration which hampers fair,
\nefficient and effective business competition.<\/p>\n
The 21 network business practices have particularly violated
\nsome articles of Law No. 5.<\/p>\n
First, Article 17 -- on monopolies -- prohibits a business
\nfrom controlling the production and marketing of goods and
\nservices in a way that will give rise to monopolistic practices
\nand unfair business competition. According to this article, the
\nbusiness of the 21 network could be classified as a monopolistic
\nbusiness.<\/p>\n
Why a monopolistic business? The reason is that the total
\nmarket share exceeds 50 percent. In some regions, it even
\ncontrols 100 percent of the market share. Research by Monopoly
\nWatch (The Jakarta Post, July 18, 2002) shows that the 21 network
\ncontrols 100 percent of the cinema market in Jambi, Batam,
\nBalikpapan, Samarinda and Manado. It also controls the cinema
\nmarket in some major cities like Jakarta (61 percent), Bandung
\n(77 percent) and Surabaya (91 percent).<\/p>\n
Second, Article 18 on monopolies prohibits business players
\nfrom controlling the supplies of goods and services or becoming
\ntheir sole buyers. The 21 network and PT Subentra Nusantara have
\nbecome both the importers and sole agents of foreign films.
\nAccording to Article 18 (2), the 21 network can be considered as
\nhaving monopolized supplies and acted as a sole buyer. It
\ncontrols more than 50 percent of the single-item or single-
\nservice market.<\/p>\n
Third, Article 19 on market control. This article prohibits
\nbusiness players from conducting activities which may lead to
\nmonopolistic or unfair business competition practices. The 21
\nnetwork's reluctance to screen MPA films simultaneously may be
\nconstrued as unfair business competition.<\/p>\n
Fourth, Article 25 on the dominant position. As a business
\ngroup or business player with a dominant position, the 21 network
\nshould not have made use of its dominant position to restrict the
\nmarket and hamper other business players. The 21 network has in
\nfact made use of its dominant position to limit the market and
\nprevent other cinema owners from maneuvering.<\/p>\n
It is expected that cinema goers criticize not only this
\nmonopolistic practice but also other unfair business competition
\npractices, which may lead to monopolistic practices and unfair
\nbusiness competition in the cinema and film business.<\/p>\n
As guaranteed by Law No. 8\/1999 on consumers' protection, all
\nlayers of the film-viewing community must monitor and be critical
\nso as to overhaul any monopolistic and oligopolistic structure of
\nthe market.<\/p>\n
There is still another way, though. A regional regulation
\nwhich bans monopolistic practices and unfair business competition
\nin the film and cinema areas may be stipulated.<\/p>\n
According to Law No. 8\/1992, the government shall delegate all
\nfilm matters to the region. This delegation is meant to ensure
\nthat the film business can preserve and also develop the nation's
\ncultural values.<\/p>\n
Efforts to issue regional regulations coupled with consistent
\nmonitoring and criticism by all layers of the film-viewing
\ncommunity will only intensify the competition in the cinema and
\nfilm businesses in Indonesia. These efforts will prevent
\n'squabbles' among cinema owners, and benefit the audience. In
\neconomic rationality, the higher the competition level goes, the
\nbigger the chances of the audience getting cheaper tickets
\nbecause, then, the viewing audience will have a large selection
\nto choose from. On the other hand, if the competition level is
\nlow, the tickets will become more expensive. The reason is that
\nthe number of cinemas is limited so that the cinema owners can
\nfreely determine the price of their tickets.<\/p>",
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