Independent Exhibitors Film Bulletin (1945)

FRIEND OF (Continued Numerous other abuses for which the consent decree did not even purport to provide a remedy, some of which actually developed under the decree, were included in the returns of the above-mentioned survey. Inasmuch as these are more properly matters for attention in the drafting of a final decree they will not be dealt with herein. The results of the survey were transmitted to the Department of Justice. When a final decree is written a remedy should be provided for all the unfair practices and discriminations set forth in the Government's petition — to the extent, of course, that they are sustained in the proof. The consent decree reached only a few of the practices that call for a remedy. The observation of the Board in Matter of Adwell, No. 105, is pertinent: But arbitration under the decree does not extend to everything that might be considered, even though justly, as unfair and unreasonable. It is limited to the matters specified in the decree itself. IV THE FACTS NOW PROPERLY BEFORE THE COURT DISCLOSE A PRIMA FACIE VIOLATION OF THE SHERMAN ACT 1. The element of combination is established. The Government's brief destroys defendants' contention that there is no community of interest among them — that the element of combination is lacking in this case. The picture that is presented of five great producing and distributing companies, each owning, operating or being interested in circuits of theatres, each licensing films to the theatres of the others, under contracts which impose hampering and restrictive conditions upon their independent competitors, constitutes a veritable Hornbook definition of a combination in restraint of trade. 2. Ownership of theatres by five of the defendants creates a community of interest among all. In this connection the Court should not overlook the community of interest that has been created among the defendants, all of them, by the action of the five consenting defendants in invading the field of exhibition. At the time the specially constituted District Court rendered its decision in Paramount Pictures, Inc. v. Langer, the statute in question was still in the books and the case was not moot. While the judgment is no longer binding on the parties, the decision is interesting and informative as reflecting the unanimous views of three distinguished judges who sat in the case. In their decision they pointed out clearly this community of interest among the theatre-owning producers: A producer having affiliated theatres has the power to grant to its theatres the right to exhibit first run all pictures produced by it. It has the power to grant to its theatres greater clearance than to their competitors. Its bargaining power for the pictures of other producers which have affiliated theatres is greater than that of a competing independent exhibitor, because producers operating theatres must purchase pictures from each other, and each of such producers owns many theatres. A producer which owns theatres has the power to make it impossible for the independent exhibitor to procure films from it, and difficult to procure them from other major producers in case the producer-exhibitor desires those films for itself. There is evidence tending to show that producers with affiliated theatres have exercised the powers possessed by them for their own advantage and to the detriment of their independent competitors. The first run metropolitan theatres, of which the consenting defendants have virtually a monopoly, provide the earliest and largest return to the distributors in the form of film rentals. Each distributor, therefore, whether it has theatres of its own or not, naturally is anxious to secure for its pictures as much of this first run playing time as possible. And in order to secure this playing time the incentive to grant special preferences and favors to the affiliated theatres and to discriminate against their independent competitors becomes very great. These affiliated prior run theatres provide a ready-made market for all eight major producers and the community of interest resulting therefrom affords an explanation of the mutual back-scratching which characterizes the conduct of the defendants. 3. Defendants' invasion of the exhibition field was not normal integration. Defendants may claim, as they have in the past, that their ownership and control of theatres represents merely normal integration and that, therefore, they come within the decision in United States v. U. S. Steel Corp. But vertical trusts no less than the horizontal variety may acquire monopolistic power; the test is, Whether or not such power is wrongly used. In the first place, it must be remembered that the defendants together "distribute about 75 per cent of all first-class feature films exhibited in the United States." Interstate Circuit v. United States. As above shown, they are bound together by contractual relations and community of interest. If the ownership and operation of theatres can be called "integration," it stems from a horizontal trust of the old-fashioned variety. Addyston Pipe & Steel Co. v. United States. In the second place, the theory of the Government's petition in this case, the implications of the consent decree and the clear 20 COURT BRIEF from Page 17) tenor of the facts presently before the Court is that defendant j have not only suppressed competition inter se, but that they pos<i sess and have exerted the power to inflict harm on their mdepen dent competitors and to injure the public. For combinations o I this kind dissolution and divestiture are the appropriate remedy V INDEPENDENT EXHIBITORS SHOULD BE PROTECTED IN ANY ORDER THAT MAY BE ENTERED j 1 Attorney General's proposals dated August 7, 1944. A stated early in this brief the last plan considered by the Confei ence of Independent Exhibitors as a body and specifically ap , proved was that filed by the Attorney General on August 7, 194< j That plan provided for dissolution and divestiture of the mon I opoly in theatres and to this, we may assume, the defendants WM not agree. The defendants having shown no disposition to accede to an I plan for ad interim relief save their own milk and water proposal 1 dated January 20, 1944, the Government had no alternative sav | to apply to the Court for such measure of relief as may be affordei by temporary injunction. 1 The Government's motion is justified by the facts set forth l its brief and if defendants remain adamant, the motion should b granted — at least insofar as it proposes that defendants be rf quired to justify the clearance granted to the affiliated theatre But we feel that it would be in the interest of all concerne if the parties, with the encouragement of the Court, should adoi and agree to as temporary relief, pending determination of th| issues, such provisions of the Attorney General's proposals as a: appropriate for inclusion in a consent order. Among the proposals of the Attorney General which appear I be appropriate for that purpose are: (a) Paragraphs 1 and 2 providing for the restoration of Se III and the modification of Sec. IV (a) and Sec. IV (b), relatm to the distribution of films. (b) Paragraph 3 Which would supplement Sec. IV (a) ar would prevent the defendants from forcing an exhibitor to licen.< films for all his theatres as a condition of licensing films for single theatre. (c) Paragraph 4 which would amend and strengthen be VIII, relating to clearance. (d) Paragraph 5, which would provide an effective substitu for the meaningless Sec. X, relating to discrimination in tfl granting of runs. These, of course, should be supplemented and reinforced I an effective substitute for Sec. XI, under which defendants we free to acquire and build theatres virtually at will, and did in fa acquire many theatres. The decision of the Supreme Court in til Crescent Case, supra, sets the pattern for such a provision — th is, that defendants be required to obtain the permission of t Court before adding to their theatre holdings. 2 In restraining the unlawful conduct of the defendant burdens should not be imposed on the independent exhibitoi Having been charged with no offense, the independent exhibito' rightly regard with misgiving the proposal in the Governmen brief that clearance granted to independent theatres shall be su ject to the injunction. Aside from the few large independe, chains all or most of which are now being sued by the Govei ment under the Sherman Act, independent exhibitors do not pc sess the buying power or influence with which to secure spec favors from the defendants. The Court should be alert to prote| the innocent victims of the combination for whose protection t suit was filed. The proposed temporary injunction would clot defendants with color of authority for abitrary actions affecti. independent exhibitors and the latter would be relegated tola suits or other time-consuming and expensive methods of redre We suggest that the temporary injunction, if granted, be hm ed in its application to clearance granted by defendants to t affiliated theatres or to the affiliated theatres and the large — j or 100 theatres — independent chains. VI CONCLUSION Wherefore, we respectfully submit — 1. That the best interests of all concerned would be sen' by the entry of an ad interim consent decree embodying the torney General's proposals mentioned in Section V, 1 of this br 2. That lacking agreement of the parties to such an ad terim decree, the Court should grant the Government's mot for a temporary injunction limited in the manner suggested , Section V, 2 of this brief. 3. That in either event the case should be set for trial oiday certain, during the coming spring if possible. Respectfully submitted, ABRAM F. MYERS, Counsel for the Conference of Independent I Exhibitors on the Consent Decree, i 729 Fifteenth St., N. W., Washington 5, D. C. JESSE L. STERN, 625 Eighth Avenue, New York, N. Y. Of Counsel. FILM ULLETI1