Motion Picture Herald (Jan-Mar 1954)

DISTRIBUTORS WIN VITAL TEST IN SUPREME COURT MYERS SEES DECISION BAR TO EXCUSE FOR BIDDING Denying Crest Plea, Court Finds Parallel Act Not Anti-Trust Violation by J. A. OTTEN WASHINGTON: The U. S. Supreme Court ruled Monday that the major distributors had not violated the anti-trust laws when they refused to license first run films to the neighborhood Crest theatre in Baltimore. The Court’s decision was a major victory for the distributors and should have important effects on other private anti-trust suits still pending in lower courts in which neighborhood theatres are trying to obtain first run films. By a seven to one vote, the Supreme Court denied Crest’s appeal from a similar adverse decision by the Fourth Circuit Court of Appeals. The high court ruled that proof of parallel business behavior was not enough to establish an anti-trust law violation, and that theatres suing the majors must establish that the parallel activity was positively the result of a conspiracy and not merely of independent but similar business judgment. Moreover, the Justices said it was not enough for a plaintiff to cite the conspiracy established by the Goverment in the Paramount case and expect that to win the plaintiff's case, too. Rather, the court ruled, a plantiff must prove that the Paramount case conspiracy was still operating in the plaintiff’s case. Clark Gives Decision; Douglas Withdraws Justice Clark delivered the seven-page court opinion Monday. Justice Douglas withdrew from the case after it was argued and took no part in the final decision. Justice Black noted briefly that he would have ruled in favor of Crest on the ground that the District Court Judge should have given more weight to the Paramount case evidence. The Crest suit, brought by Theatre Enterprises, Inc., owner of the Crest, charged that the eight major distributors had violated the anti-trust laws by conspiring to restrict first-run pictures to downtown Baltimore theatres. A District Court jury found against Crest, the Fourth Circuit Court sustained this decision, and Crest appealed to the Supreme Court. Justice Clark’s opinion said all the distributors advanced much the same reasons for denying Crest first-run films. He said they argued that Crest, even though a neighborhood theatre, was in substantial competition with downtown theatres, thus ruling out any day and date first-runs. WASHINGTON: The decision in the Crest theatre case should clear the court dockets of “flimsy cases” and in addition it emphasizes the point that distributors need not resort to bidding for their protection, Abram Myers, Allied general counsel, said Tuesday. The statement, issued from National Allied headquarters here, said: “The decision upholds the position outlined in my speech at Allied’s Pittsburgh convention, October 3, 1950 and thereafter unsuccessfully urged upon the film companies by an Allied committee that in the absence of collusion or conspiracy film companies may safely select their customers for sound business reasons and it is not necessary for them to institute bidding for their protection. “While the Court did not expressly so state I think the rest of Allied’s contention Moreover, he said, no downtown theatre would have waived its own exclusive license to permit the Crest to get day and date showings, even if the distributors had wanted to license it. Thus the Crest would have had to receive an exclusive license of its own, Justice Clark observed. However, he continued, “an exclusive license would be economically unsound” because the Crest is a suburban theatre, located in a small shopping center serviced by limited public transportation facilities. The distributors all said, Justice Clark noted, that the downtown theatres offered much greater opportunities for the exploitation of newly-released films and therefore much greater return on subsequent runs as well as on first-runs. “The crucial question,” the opinion then declared, “is whether respondents’ conduct toward petitioner stemmed from independent decision or from an agreement, tacit or express. To be sure, business behavior is admissible circumstantial evidence from which the fact finder may infer agreement. But this court has never held that proof of parallel business behavior conclusively establishes agreement, or, phrased differently, that such behavior itself constitutes a Sherman Act offense. Circumstantial evidence of conciously parallel behavior may have made heavy inroads into the traditional judicial attitude toward con follows as a corollary that bidding is essential only when an independent exhibitor demands pictures on a run formerly monopolized by a circuit theatre and the refusal to sell is a hangover of conditions condemned by the Supreme Court in the Paramount case. “However, our distributor friends should not get the idea that the way has been cleared for a resumption of discriminatory practices against independent exhibitors and in favor of presently or formerly affiliated theatres such as were condemned in the Paramount case because, if they do, the decrees in that case will supply the necessary proof of conspiracy. The Crest decision should have the effect of clearing the court dockets of flimsy cases involving only parallel action but cases involving overt acts of conspiracy or which button on to the Paramount case will not be affected.” spiracy, but ‘conscious parallelism’ has not yet read conspiracy out of the Sherman Act entirely.” Justice Clark said Crest realized this and therefore sought to bolster its case by bringing in the Paramount case and suggesting that since a uniform system of runs and clearances had been used there, use of the same device in the Crest situation should be “legally equated to conspiracy.” “But the Paramount decrees, even if admissible, were only prima facie evidence of a conspiracy covering the area and existing during the period there involved,” the decision said. “Alone or in conjunction with the other proof of the petitioner, they would form no basis for a directed verdict. Here each of the respondents had denied the existence of any collaboration and in addition had introduced evidence of the local conditions surrounding the Crest operation which, they contended, precluded it from being a successful first-run house. They also attacked the good faith of the guaranteed offers of the petitioner for first-run pictures and attributed uniform action to individual business judgment motivated by the desire for maximum revenue.” Justice Clark said the District Court judge had instructed the jury that the Paramount decrees alone could not support a verdict for Crest, and that additional evidence was required to relate the presumed Paramount conspiracy to Baltimore and to the claimed damage period. MOTION PICTURE HERALD, JANUARY 9, 1954 13