KFTC named Korea's four major multiplex chains - CJ CGV, Lotte Cinema, Megabox and Primus Cinema - as having violated fair trade practices by taking films off screens before their usual minimum of a one-week run, thus leaving distributors with the bulk of the risk and burden in marketing and p&a.
CJ CGV closed down 29 films early, while Lotte Cinema did the same for 26, Megabox for 16, and Primus Cinema for 140.
According to KFTC, the multiplexes, when extending certain films' runs, were altering normal profit-sharing rates to their own advantage, in violation of original agreements with distributors. Usually, exhibitors and distributors divide ticket sales revenue 50:50 for local films, 60:40 for foreign films in Seoul and 50:50 for foreign films in the provinces.
The Commission stated that the same exhibitors also issued free 'invitation tickets' without prior consultation with distributors, thus again creating a disadvantage to the latter. From Jan 2005 to July 2007, the four major multiplex chains issued a total of 4,774,000 free invitational tickets.
On the other hand, KFTC also named major distributors CJ Entertainment, Showbox Mediaplex, Sony Pictures Releasing Buena Vista Korea, Universal Pictures International (UPI) Korea and 20th Century Fox for abusing their positions to demand that mid to small-size independent exhibitors settle accounts on a daily or weekly basis instead of the originally agreed 30-day or 45-day basis.
Won-joon Kim, head of the Competition Law & Policy Enforcement Bureau at the KFTC, said: 'There's significance in this recent measure that it's the first time the Korea Fair Trade Commission has prosecuted the unfair trade practices of the major [companies] whose control over the market is growing stronger.'
In recent years, the Korean film industry has been voicing concerns over the growing power of vertically-integrated majors owned by conglomerates CJ Corp (parent company to CJ Entertainment and CJ CGV), Orion (parent to Showbox Mediaplex and until recently Megabox Mediaplex - which was sold off to a foreign owner but continues to be operated by Mediaplex) and Lotte Group (Lotte Cinema and Lotte Entertainment).
In addition to wielding considerable investment/distribution power and over 50% of screens, the conglomerate-owned majors also enjoy sister relationships with cablers and other ancillary media markets.