Korea's FTC rules against exhibitors

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SEOUL -- South Korea's corporate watchdog ruled against the nation's four biggest multiplex chains and five largest distributors Wednesday for "using their dominant business position" in a range of unfair practices.

The Fair Trade Commission ruled against top exhibition chains CJ CGV, Megabox, Primus and Lotte Cinema for prematurely ending the screening of movies, issuing excessive numbers of free tickets without the distributors' permission, and dividing ticket revenue differently between foreign and domestic films.

The FTC also criticized five of the nation's top distributors -- CJ Entertainment, Showbox, Sony Pictures Korea, UPI Korea and 20th Century Fox Korea -- for forcing small- and medium-sized cinemas to pay their ticket revenue earlier than the 30-45 days given the multiplexes.

The Korean theatrical market has grown dramatically since the first multiplex was opened in 1998, from $277 million to $1.1 billion in 2007. But despite that growth, many small- and medium- sized producers and distributors have complained that the market is dominated by the largest players, who use their size unfairly to control the movie market.

"These issues are critical, now and for the future," said Kevin Chang, secretary general of the Korean Film Producers Assn. "We will continue to press the FTC, especially over how revenues are split between producers and exhibitors."

In Korea, local films are split 50-50 between the exhibitor and distributor, while distributors of foreign film distributors get a 60% split in Seoul.

Primus was the worst offender for the early dumping of movies, unilaterally cutting off 140 films with less than one week's screening, followed by CG CGV with 29 counts, Lotte with 26 and Megabox with 16, according to the FTC ruling.

For the improper issuing of free tickets, CJ CGV was the top offender, accounting for more than 3 million free tickets (worth about $19 million) from January 2005 to July 2007, followed by Lotte with 764,000 tickets ($4.5 million), Megabox with 602,000 tickets ($3.5 million) and Primus with 402,000 tickets ($2.3 million).

"We respect today's announcement by the FTC, and later, when we get the official notice from them, our company will take the appropriate measures," said Lee Sang-gyu, a spokesman for CJ CGV. "However, those issues have arisen from the unique culture of the movie industry, which is different from the general distribution or manufacturing industries. We think it is a little unfair to be criticized for 'using our dominant position.' "

The top four multiplex chains in Korea accounted for 70.1% of ticket sales in 2006, the most recent year for which data is available.

The number of small-sized cinemas has dropped steadily since multiplexes were introduced to Korea in 1998, declining to 188 in 2006, down from 203 in 2005 and 233 in 2004.
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