Boxoffice (Oct-Dec 1940)

(t ■ ■ "No Permanenl Stay Looking to Future" Sees "Protection" for "Existing Monopoly" (Continued from page 5) not disposed of by administrative action prior to May 27, 1935, or a complaint in writing to the department of justice are considered to be “demands in writing”); or (d) Complainant operated his theatre at least one year prior to the entry of the decree, and subsequent to July 20, 1935, and prior to July 20, 1940, a prior operator of the theatre demanded in writing features from the respondent distributor on the same run as or an earlier run than that enjoyed by the circuit theatre (or filed a complaint with N. R. A. or the department of justice); and 6. Such refusal to license comp-lainant was in fact because the theatre licensed to exhibit them on the run requested was a circuit theatre. In considering such a complaint the arbitrator shall take into consideration the following factors, among others: (a) The terms, if any, offered in respect of each of the two competing theatres; (b) the seating capacity of each of said theatres; (c) the capacity of each for producing revenue for the distributor; (d) the character, appearance and condition of each, including its furnishings, equipment and conveniences; (e) the location of each of said theatres; (f) the character and extent of the area and population each serves; (g) competitive conditions in the area in which they are located; (h) their suitability for exhibition of the distributor’s features on the run requested; (i) the character and ability of the exhibitor operating each and his reputation generally in the industry and in the community for showmanship, honesty and fair dealing; (j) the policy under which each of the theatres has been operated and the policy under which the complainant proposes to operate his theatre if he obtains the desired run; (k) the financial responsibility of the exhibitor operating each of the theatres; and the distributor’s prior relations with each of the two theatres and with their owners and operators and any equities arising therefrom. By carefully noting the “ands” and “ors,” which I have emphasized, in connection with the findings that must be made by the arbitrator, an exhibitor can determine whether he is eligible to bring such a proceeding; by carefully studying the factors on which the arbitrator will make his decision he can form an estimate as to his chances of success. The obvious purpose of the section is to adjust the complaints that gave rise to the suit without offering any encouragement to other exhibitors similarly situated who did not give vent to their complaints. The limitation that the section shall only apply to theatres in existence when the decree is signed, or which are replacements of such theatres, shows a purpose to freeze conditions as they will exist when Uiese past grievances have been adjusted. Unlike most antitrust decrees there are no permanent injunctions looking to the future. If the arbitrator finds for the complainant, he will enter an order prohibiting the distributor from licensing its features on the run in question in either house otherwise than by a separate contract which shall not be a part of any circuit deal. After a final award in favor of the complainant, such exhibitor may institute another arbitration proceeding on the ground that the award has not been complied with in good faith; and if the arbitrator finds that it has not, he may award the complainant compensatory damages. If one takes a fine sight on the remedy thus provided, It will be found as leaky as a sieve; but the arbitrator will be wholly impartial, with no axe to grind, and it would be astonishing if he would induge the distributor’s good faith if, after a strong showing by the complainant he still could not secure the pictures. Further Acquisitions of Theatres The main object of the suit was to compel the distributors to divorce themselves from their theatre holdings. The proposed decree marks a complete recession by the department from the position taken by It in the pleadings in the case, in the press release accompanying the filing of the case, in the press reiease dated December 20, 1939, refuting rumors that the case wouid never come to trial and in the statement made by Assistant Attorney Generai Thurman Arnold before a subcommittee of the senate committee on the judiciary last May at a hearing on Senator Neely's bill to separate the production and distribution of motion pictures from the exhibition thereof. Exhibitors do not now know what infiuence intervened in the department of justice and brought about this abrupt change of front. Gossip naturally centers about prominent personages in the administration who are directiy or indirecty interested in the motion picture industry. But speculation along this line will not settle immediate problems. It sinister influence was exerted, the facts will eventually come to light, as they Hints "Iniluence" on Divorcement Change Washington — In discussing "the complete recession by the department (oi justice}" on theatre divorcement, Abram F. Myers, in his decree analysis, strongly suggests influence was brought to bear. "Exhibitors do not now know what influence intervened . . . and brought about this abrupt change of front. Gossip naturally centers about prominent personages in the administration who are directly or indirectly interested in the motion picture industry," he observes. always du. it no such influence was exerted, then unfounded charges will do more harm than good. For the time being, opposition to the decree must be confined to its lack of merit as a document; it can not go to the motives of those who have framed and are offering it. Under this section of the decree the consenting defendants, for a period of three years, will notify the department of justice of any legally binding commitments made by them for the acquisition of additional theatres. The decree specifies the information to be included in the reports and the department is authorized to request such further intormation as it desires. All such information will be confidential except in case of court proceedings. For a period of three years no consenting defendant may “enter upon a general program of expanding its theatre holdings” but this shall not be construed to “prevent any defendant from acquiring theatres or interests therein to protect its investment or its competitive position or lor ordinary purijoses of its business.*’ Had it not been tor the clause here emphasized, the standstill would have been similar to that under a temporary injunction, with freedom of action only to protect existing property rights pending final outcome of the case. But the addition of this clause robs the section of all force, renders the section so vague that it can not be enforced and marks a capitulation by the department of justice as astonishing’ as it is complete. The section goes on to provide that proceedings based on a violation thereof shall be by way of application to the court for injunctive relief “which shall be limited to restraining the acquisition, or ordering the divestiture of theatres or interests therein, if any, about to be acquired, or acquired, in violation of the section.” That is to say, if the government can sustain the seemingly impossible burden of showing that such theatres were a part of a general program of expansion and not merely acquired for ordinary purposes of business. Another section (XXI) recites that the government has represented to the court that “the public interest requires” that the provisions of this decree (except for the provisions in reference to trade showings and selling in groups of five) shall operate for a trial period of three years. Therefore, the decree is to be entered upon the condition that the government will not seek theatre divorcement as prayed in the complaint, or seek to dissolve or break up any of the affiliated circuits, until three years have elapsed. This provision may have a restraining influence on the defendant distributors during the three-year test period. They still will have the threat of divorcement hanging over their heads. If, in the meantime, they continue their abuses, oppressions and depredations they will chalk up a record that should insure further proceedings for divorcement unless, in the meantime, all witnesses have died or been bought off or the defendants retain sufficient influence with the department of justice to enabl#» them to go scot free. Escape Clause The escape clause applies to the sections relating to trade showings and selling in groups of five. While it is an amazing provision to be found in an anti-trust decree, since it involves a principle directly opposed to the anti-trust law, it should afford some measure of comfort to the opponents of the five-group system. It insures that this method or selling will last for only one year. It provides — (a) (b) If by June 1, 1942, a decree shall not have been entered against the non-consenting defendants (Columbia, United Artists and Universal), requiring them to trade show their pictures and to sell in groups of five, then such requirement shall be inoperative as to the consenting defendants (Paramount, M-G-M, Warner Bros., 20th Century-Fox and RKO) except with respect to licenses entered into prior to September 1, 1942, covering features released prior to such date and subsequent to August 31, 1941. (c) (d) If prior to June 1, 1942, a decree shall have been entered against the non-consenting de fendants with respect to trade showing pictures or selling in groups of five, and the provisions of such decree are more favorable to the distributors than the similar provisions of this decree, the consenting defendants may at their election be relieved from the provisions of the constant decree and become subject to the more moderate provisions of the new decree. (e) In case of a decree against the non-consenting defendants on the subjects mentioned prior to July 1, 1942, and an appeal therefrom by such non-consenting defendants, which appeal shall have the effect to suspend the operation of said decree pending the outcome thereof, then operation of the consent decree so far as it relates to trade showings and group selling shall also be suspended unless and until such decree shall have become final and binding on the non-consenting defendants. After such decree has beconie final, the consenting defendants shall have the same right of election as in (c) and (d). (f) If at any time congress passes legislation on the subject of trade siiowings or group selling, the consenting defendants may apply to the court to be relieved from the provisions of the consent decree on these subjects. (g) At any time alter September 1, 1943, any consenting defendant may move to vacate the then effective provisions of the consent decree relating to trade showings and group selling by filing an application under oath stating that during any consecutive 12-month period either (1) distributors of motion pictures have licensed 25 per cent or more of the features released for exhibition in the United States free from the requirements of the consent decree, or (2) 12V2 per cent or more of the total gross income from licenses for motion pictures in the United States (excluding states rights exchanges) has been derived from pictures licensed otherwise than as required by the consent decree. Upon such application the court shall enter an order relieving the consenting defendants of the requirements unless within GO days the government (which alone will have all the figures) shall establish to the satisfaction of the court that during such 12-month period less than 12^ per cent of the gross income from film licenses (excluding states rights) has been derived from pictures licensed otherwise than as required by the decree. (h) At any time after September 1, 1942, any consenting defendant may apply to be relieved upon a showing, satisfactory to the court, that subsequent to that date and by reason of the competition of persons not selling exclusively in accordance with the provisions of the decree, compliance therewith by the consenting defendant has substantially and adversely affected the applicant’s business. The amazing thing about (g) and (h) is that they are not restricted to the competition of the non-consenting defendants, they may be brought into operation by the competition of new producers and distributors entering the field. One might have supposed that the purpose of the Sherman law was to foster new competition; but by these provisions the government engages to protect the existing monopoly. This is a strange principle in the enforcement of the anti-trust law and discussion concerning it will not end with the entry of the decree. However, they insure that the selling methods set up in the decree will last for only one season — just long enough to tide over the possibility of enactment of the Neely bill. Of course, if the administration should now actively support legislation on the subject of compulsory block booking and blind selling, the industry — producers, distributors and exhibitors alike — may have to choose as between the system set up in the decree and the Neely bill. Additional Protective Provisions Many provisions of the consent decree are aimed at protecting the existing rights or privileges of the consenting defendants, viz: (a) The decree shall not relate to operations and activities of the consenting defendants outside of continental United States. (b) It shall not affect the right of a consenting defendant, prior to general release, to roadshow a picture or to arrange for such roadshowing upon such terms as it may see fit. (c) The decree shall not apply to any franchise signed prior to June 6, 1940 (when the negotiations were begun), or to any license made pursuant to such franchise, except as to the arbitration of clearance as hereinabove explained. The ambiguity in the draft of October 18 in reference to exemptions from the decree has been eliminated but the several provisions on the subject are confusing. To clear this up, all franchises signed prior to June 6 are exempted except that franchises between one distributor and (Continued on page 18) BOXOFFICE : : November 9, 1940 17