China passes law punishing companies for box-office fraud

China is trying to crack down on box-office fraud in the world’s second-biggest movie market by setting out punishments for companies that fabricate ticket sales and other data.

Under the country’s first film law, adopted by the Chinese parliament Monday, film distributors and cinemas that falsify ticket sales data will have their illegal earnings confiscated and be fined up to $74,000. If they illegally earn more than that, they will be fined up to five times the amount they illegally made.

They also face being ordered to suspend operations and having their business licenses revoked.

China’s film industry is already heavily regulated, with censors having broad powers over what can and can’t be shown onscreen. The new law is an attempt to address fraud and other problems that have emerged as China’s film market continues to grow quickly. According to official data based on cinema filings, films screened in China brought in more than $6.5 billion in 2015, up almost 50% from the year before. But authorities say they believe box-office fraud is common.

Last year, dozens of cinemas reportedly received warnings, lost some funding support or had to temporarily suspend operations because of box-office fraud.

Such fraud typically involves cinemas and distributors buying up tickets or counting some of the earnings of one film as those of another. Such actions might boost a movie’s profile enough to attract a bigger audience, constituting unfair competition. Cinemas might also conceal their true ticket sales to avoid sharing all the takings with the filmmakers.

In March, film authorities suspended the license of the Chinese distributor of the Hong Kong martial arts movie “Ip Man 3” after it reportedly bought $9 million worth of tickets and fabricated more than 7,600 screenings of the film.

China’s box office is expected to overtake the world’s current largest, North America, within three years.

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