Showmen's Trade Review (Apr-Jun 1939)

Page 22 SHOWMEN'S TRADE REVIEW June 3. 1939 Code of Fair Trade Practices Preamble The signatories hereto, being distributors, exhibitors and organized groups of exhibitors of motion pictures, hereby severally adopt the following as a code of fair practice, hereby severally binding themselves to the observance of the principles, policies and practices set forth herein in the licensing, distribution and exhibition of motion pictures in continental United States. I. Exclusive Privilege (1) Exclusive as a matter of right. Whenever an exhibitor shall have entered into a license agreement for all of the feature motion pictures ("features") offered' at any one time by a distributor for a run in any situation-, such exhibitor shall have the right to exclude therefrom, without payment of the license fee therefor, not to exceed twenty per cent, of the total number of features contracted for, if the average of the license fees for all features contracted for shall not exceed $100.00 per picture; fifteen per cent., if such average is in excess of $100.00 and not in excess of $250.00; and ten per cent., if such average is in excess of $250.00. In determining the number of features that may be excluded, fractions of one-half or more shall be counted as one and fractions of less than one-half shall not be counted. In computing the average of the license fees for all features contracted for the license fees of features based in whole or in part on a percentage of the gross receipts of exhibition shall be included at the average of the license fees of all the distributor's features of the preceding motion picture season which were exhibited upon a percentage basis for the same run in such situation. If none of the distributor's features was so exhibited during the preceding season, then such average of license fees shall be agreed upon by the distributor and the exhibitor and included in the license agreement. For the purpose of determining the rights of exclusion of an exhibitor hereunder, so-called "Westerns" (as such term is understood in the motion picture industry), 3 reissues and foreigns (except such as may have been produced outside of the United States in tfie English language by an American producer or distributor or subsidiary thereof) shall not be included in the number of features offered or contracted for as above provided, but shall be deemed to have been offered in separate groups and, if contracted for, the features in each such group shall be subject to exclusion on the basis set forth above and, if included with other features in the same license agreement, shall be separately listed. The right of an exhibitor to exercise his exclusion privilege herein provided for shall be subject to the following terms and conditions: (a) a first run exhibitor shall give the distributor written notice with respect to each feature he elects to exclude within fourteen days after the mailing by distributor of the first notice of availability thereof ; any other exhibitor shall give such notice within fourteen days after the close of the first exhibition of such feature in the city or town in which his theatre is located or the mailing of the notice of availability thereof, whichever is later, provided that if such feature is not exhibited on a trior run in such city or town and notice of availability shall have been previously mailed to such exhibitor, the distributor shall mail to such exhibitor a new notice of availability thereof and notice of exhibitor's election to exclude such feature shall be given within fourteen days after the mailing of such new notice; (b) the exhibitor shall not, at the time of giving such written notice, be in material default under the license agreement ' ; (c) exclusions shall be made proportionately among the several price brackets provided for in the license agreement''; but any number of exclusions to which an exhibitor is entitled may be made from the lowest price bracket; (d) if any exhibitor, having the right to do so, fails 'An exhibitor contracting for a portion of distributor's features shall be deemed to have contracted for "all of the feature motion pictures initially offered" if the distributor shall have offered only such portion to exhibitor. ^An exhibitor shall be deemed to have contracted "for a run in any situation" if he contracts for the right to exhibit each feature for a particular run either at a specified theatre or upon an "or" basis, i.e., at one of two or more specified theatres. ''Only "Westerns" which are not of the usual character and type of, and are inexpensively produced as compared with, the distributor's general line of features for the particular season in question. /•Without limiting the generality of the term "material default", an exhibitor shall in any event be deerned so to be in material default if, at the time of giving notice of exclusion, he has failed to pay the license fee due for any feature theretofore exhibited by him or if. at such time, he has failed reasonably to perform the license agreement with respect to the playing of features theretofore made available to him thereunder. ^Example: If the agreement licenses forty-eight features, of which eight are in the highest bracket, twelve are m the next to highest bracket, sixteen in the next to lowest bracket, and the remaining twelve in the lowest bracket, and, if the exhibitor has the right to exclude ten per cent (five features), then not more than one feature may be eliminated from the highest bracket, not more than one from the next to highest bracket, not more than two from the next to lowest bracket, and the remaining one feature from the lowest bracket; or all five or any lesser number may be eliminated from the lowest bracket. to exclude one or more features from higher brackets, he shall, for each feature, have the right to exclude one feature from the lowest bracket; provided, however, that if at the same time there are no unplayed available features in the lowest bracket, he may exclude a feature from the next lowest bracket. Upon the exclusion of any feature under this Section (1), the license therefor shall terminate and all rights thereto shall revert to the distributor and such exclusion shall be charged against the number of exclusions to which the exhibitor may be entitled, whether or not a new license agreement for the exhibition of such feature is subsequently entered into by such exhibitor. All disputes growing out of the exercise or attempted exercise by an exhibitor of the exclusion privilege provided for in this Section (1) shall be subject to arbitration. (2) Exclusion for cause. An exhibitor shall have the right, in addition to the exclusion privilege provided for in Section (1) above, to exclude from any license agreement any feature which may be locally offensive on moral, religious or racial grounds, provided he shall give the distributor written notice, not later than fourteen days after the conclusion of its first exhibition in the exchange territory in which the exhibitor is served, of his desire to exclude such feature, specifying the reasons therefor. Upon the exclusicn of any feature under this provision, the license therefor shall terminate and all rights thereto shall revert to the distributor. Any dispute as to whether or not a feature is in fact so locally offensive shall be subject to arbitration. The arbitrators shall not, in deciding such question, take into consideration the decision of any arbitrators with respect to the same feature except only that they may do so if such decision concerns the same feature in the same local area in which exhibitor's theatre is located. II. Trade Agreement Each distributor shall make a general trade announcement at or prior to the beginning of each of its seasons, containing such information as it may be practicable to give of all features completed or actually in production then intended for release during such season, it being understood that the completion of such features actually in production and the making of such other features v/hich it is intended to produce are subject to the hazards and uncertainties of the business and they may not be completed or produced, as planned. III. Public Demand for Exceptional Feature If in any town or in any city, or section of a metropolitan city, an exhibitor shall request of a distributor the license for a run in any situation" of a feature, having such an exceptional and outstanding appeal as to create a natural and spontaneous national public demand and for which there is a spontaneous and natural public demand in the town, city cr section of the metropolitan city in which his theatre (s) is located, and which would not be shown in such town, city or section unless licensed for exhi'iition to exhibitor, and the distributor offers to exhibitor a greater number of features than exhibitor because his playing time will be so absorbed by previous commitments for features can without altering his operating policy reasonably exhibit in such situation, the distributor will then offer to such exhibitor such lesser number of features, including such requested feature, as may be agreed upon or, lacking such agreement, such number as may be determined by arbitration to be the maximum number of features which can reasonably be exhibited by exhibitor in such situation; provided that the distributor shall have the right at any time before the arbitrators shall have made their award to offer or license all or any of its features to any other exhibitor. An exhibitor who has been a customer of a distributor and who has refused to contract for such distributor's features for the situation involved shall have no right to attempt to use this Article to compel such distributor to license to him from time to time its outstanding features. Any dispute as to whether such requested feature is an "Exceptional Feature" as above described or as to the number of features which can reasonably be exhibited by exhibitor in such situation or as to whether exhibitor is so attempting to use this Article, shall be submitted to arbitration by exhibitor within fourteen days after the refusal by distributor to license to exhibitor the number of features requested by the exhibitor. IV. Preferred Playing Time (11 Flat rentals and guarantees. A distributor will not exercise the right to designate features for preferred playing time which it may have under a license agreement with respect to any features, the license fee for which is either a fixed sum or is computed in whole or in part upon a percentage of the gross receipts of exhibition with a fixed minimum sum guaranteed. (2) Features Unsuitable for Preferred Playing Time. If a distributor shall exercise the right to designate features for preferred playing time which it may have under a license agreement with respect to any feature licensed solely on a percentage basis, which is claimed by exhibitor to be unsuitable for such playing time and if exhibitor shall give distributor written notice of his objections thereto and the reasons therefor within seven days after the mailing of notice of such designation in case of a first run in a city in which Some slight revisions in the code which were not available at the time of going to press are not included here. an exchange is located or in any other case within seven days after the close of its first exhibition in the exchange city from which exhibitor is served or the mailing of the notice of designation, whichever is later, the question of such suitability shall be determined by agreement between distributor and exhibitor or, lacking such agreement, by arbitration. Unless distributor rejects the claim of exhibitor by mailing notice to exhibitor within seven days after the mailing by exhibitor of such notice of objections as above provided, distributor shall be deemed to have withdrawn such designation. Should distributor, however, reject such claim, exhibitor shall commence arbitration proceedings to determine the dispute within seven days after the mailing of such notice of rejection. If the feature is determined, by agreement or arbitration, to be unsuitable for the designated preferred playing time, or the designation thereof be deemed withdrawn as above provided, distributor may, at its option, either (a) designate the feature to be exhibited upon the same license terms on other days of the week or (b) then or thereafter substitute another feature to be exhibited on preferred playing time upon the terms designated for the feature objected to; in the latter case the license fee for the feature originally designated shall be such as may be designated by the distributor within its right under the license agreement. Nothing in this Section (2) shall decrease or increase the number of features in each bracket as set forth in the license agreement. V. Some Run Available To meet objections of certain exhibitors to so-called "exclusive selling," an exhibitor shall be able to obtain from a distributor a run of its features in any situation, the run to be designated by the distributor, provided (a) distributor and exhibitor can mutually agree upon the number of features to be licensed and other terms and conditions; (b) the exhibitor's theatre(s) (i) is not of an obsolete character, (ii) is in good condition and (iii) is operated under a policy that it not destructive and (iv) is operated under a policy which will not substantially reduce the distributor's revenue from any other runs^; and (c) exhibitor is of good reputation as a theatre operator ana customer or, if he has not been an exhibitor theretofore, is of good reputation and financially responsible. Any dispute arising under provisos (b) or (c) hereof shall be subject to arbitration. No dispute under proviso (a) hereof shall be subject to arbitration; but each distributor states that it will be its policy not to request unreasonable license fees or other terms or conditions from an exhibitor for the purpose of defeating this Article V. VI. Regular Customer To meet objections of certain exhibitors to socalled "selling away to a circuit," a distributor will not refuse to license its features to its regular customer who is not a "circuit customer"^ in order to license them, for the same run in the same competitive area, to another exhibitor for the sole reason that such other exhibitor is a circuit customer, provided such regular customer (a) has substantially performed his previous license agreements with the distributor, (b) maintains and operates his theatre in a modern manner, and (c) is financially responsible. Any dispute as to whether a distributor has so refused to license its features to such regular customer shall be subject to arbitration. Should distributor elect to license its features to an exhibitor (other than its then current customer) who is a circuit customer, distributor shall, if its then current customer is not a circuit customer, give him notice by telegraph of its election so to do. Should such current customer fail to commence arbitration proceedings within five days after the sending of such notice, he shall be deemed to have waived all claims, if any, in connection with such features under this Article VI. VII. Short Subjects, Newsreels, etc. No exhibitor shall be required to license short subjects, newsreels, trailers, serials, re-issues, "Westerns" or foreigns, '■• (hereinafter collectively referred to in this Article as "Shorts"), as a condition of licensing other features. An exhibitor shall have no right to assert any claim that the licensing of such features was so conditioned unless he shall have mailed to the distributor at its Home Office notice in v/riting of such claim and the grounds therefor within forty-eight hours after delivery by exhibitor of his signed application for such "Shorts." Any dispute as to whether the licensing of such features was so conditioned shall be subject to arbitration. The powers of arbitrators in any such dispute shall be limited to: (Continued on page 44) ""For a run in any situation" as defined in Section (1) of Article I, footnote 2. ■"A policy shall not be deemed destructive or one which will substantially reduce such revenue if it is a policy established under methods of competition norma] and^ fair in such situation. 'A "circuit customer," as that term is used in Article VI, is a customer who is, or is a part of, a circuit, a buying combine, a booking combine or a cooperative. ^"Westerns" and foreigns as defined in Article I, Section (1).