The Film Daily (1928)

THE -;gBg^ DAILY Sunday, February Producers^ ^ Distributors' Brief ASSERT Bill CLAMPS ON IL The chief legal objection to this proposed legislation is that its effect would be to deprive producers and distributors of their absolute right to choose their own customers. It has been repeatedly decided by the Circuit Court of Appeals and the Supreme Court of the United States that a manufacturer and/or wholesaler may select his customers at will; and in the absence of a conspiracy or concerted action to coerce, intimidate or boycott, may refuse for any reason he considers fit, to sell his product to a retailer. The leading decisions on this point are to be found in the cases against manufacturers and/or wholesalers of various commodities who refused to sell their products to retailers who did not keep and maintain certain resale prices and are commonly known as the Resale Price Maintenance Cases. One of the leading cases is that of the Federal Trade Commission vs. Beechnut Packing Co. in the U. S. Supreme Court, wherein the right of a seller to choose his own customer at will is affirmed. Illustrative of the extent of this rule was the assertion from the bench by Justice McReynolds, during the argument of this case, that a trader had the right to refuse to sell to a man because his hair was red. This statement of the law was not challenged. One of the latest decisions is that of the United States Circuit Court of Appeals, Second Circuit (New York) in the case of Harriet Hubbard Ayer, Inc., vs. Federal Trade Commission, decided Nov. 1, 1926. After reviewing the acts of the respondent, the court held "In doing this we think the i)etitioner did no more than it might lawfully do in selecting its customers whom it considered desirable.'' — petition for certiorari denied by the Supreme Court, March 14, 1927. This rule of freedom of choice is well established in numerous decisions and there can be no denial of its importance in the motion picture industry. E\'ery producer, necessarily from the very nature of the industry, desires to have his pictures exhibited in the best theaters. This is especially true with respect to the first run exhibition which, in effect, is the showwindow of the territory and often determines whether the picture is to be a succc-^s or a failure. The character of the theater, its location, policy, prices of admission, seating capacity, manner of presentation, class of patrons, general reputation, etc., are all matters of vital importance to the producer and distributor, and often they are equally as important, if not more so, than the rental paid by the theater. The elfect of the Brookhart bill would be to ignore all these important considerations and make the price of the picture the one con trolling feature in the industry and deny to the jiroducers and distributors in this industry the same right of contract granted to manufacturers and wholesalers in other industries, to wit. the freedom to choose the.r own customers. The author of the bill probably had in mind the rulings of the court on this question of freedoin of choice of a customer, so in drawing the ]iroposed bill sought to avoid this rule by emphasizing the fact that the films are copyrighted. Almost without exception they are described as "copyrighted motion I)icture films." This was done probably for the purpose of making the motion picture industry an exception to the law governing all other industries and to bring the proposed law under the decision of the United States district Court for the Eastern District of Pennsylvania in the case of the United States vs. M. P. Patents Co. et al, which was a proceeding brought by the government under the Sherman law. In that case the defendants owned a patented device used in projecting a picture on the screen. It was necessary for exhibitors to have licenses to use this device and the defendants would only grant such licenses on the condition that it be used to project pictures distributed by them, thus compelling the exhibitors to buy their pictures. This was, of course, held illegal and the court entered an order of dissolution. This state of facts, however, presents an entirely different question from that of a producer offering his product as a whole at a lower i)rice than that fixed for one or two Key to Text THESE arguments against the Brookhart bill were prepared by Charles C. Pettijohn, counsel of the Hays organization. All type matter in italics was inserted by THE FILM DAILY in preparing the brief for publication so that the reader may compare the stand assumed by producers and distributors with the original text of the bill. I)ictures, or from that of a producer who chooses as his customers such exhibitors as he thinks are desirable. The mere fact that these films are copyrighted does not make them an exception. There is no analog^ between a copyrighted film and a patented mechanical device. Every picture is difierent and no two can possibly 'je exactly alike. Their value and worth is to be found, not in the tact that they are protected by a copyright, but in their drawing power at the box-office. In every show year several hundred desirable pictures are on the market. Some are better sUited for certain audiences and theaters than others and some are more popular gen erally over the country than others. All ol which goes to make an open market and keep intensive competition. Entirely different from the situation presented by one and only one necessar\ mechanical device, which is pat ented and for which there can be no sub stitute or alternative. An analysis of this proposed law brings out other objectionable effects. Section 1 — Page 2 — Line 1 This follows the title of the bill (page 1) and is devoted entirely to definitions. Section 2 — Page 4 — Line 9 Section 2. In the course and conduct of the motion-pictitrc indnstry the producers own or operate studios in the States of California, Nem York. Nezv Jersey, and other States ivhcre they make or produce motion-picture films. In the production of motionpicture films lart/e quantities of unexposed negative and positive films are shipped from otiier States to the studios. At the studios and on suitable sites called "locations" scenes are photographed upon reels of tiegativc film, and the ncyativc film is developed and edited, and at least one positive film is made. The negative film is then sliippcd from the studios to laboratories located sometimes in the same States and sometimes in a different State, ivlicre as many positive prints are made as may be necessary to meet the demand for the films. The positive films being then cjvcred by copyright arc distributed by distributors to c.vhibitors in the several States. When the films are projected by an exhibitor upon a screen tlie final stage of tlie pliotographic process takes place and there is then depicted what is commonly knozvn as motion pictures.. To facilitate tlie delivery of motion-picture films to the exhibitors most distributors have estab.lislied branch offices throughout the United States known as "exchanges," 'vhcre negotiations for the booking of films are conducted with exhibitors, /•'lom these exchanges, located in the pi incipal cities in the various sales districts throughout the United States, service is given to smaller cities and towns in contiguous territory, the films in passing between the exchange and the exhibitor frequently crossing State lines. This section is devoted entirely to a descri|)tion of the interstate commerce and as this question has been definitely decided by the decisions of the Binderup case, the Con necticut tax law case and Fox vs. Federal Trade Commission, it is of little importance except for its phraseology. A comparison shows that this section has been copied almost verbatim from paragraphs 2 and 3 of the findings as to the facts filed by the Federal Trade Commission in its recent case against Famous Players-Lasky Corp.. et al. Docket 835, except that there has been added the statement that the films are copyrighter. Page 4. Line 23 — The positive films being then cohered by copyright are distributed by distributors to exhibitors in the several States. There was no such allegation in either the commission's original complaint or findings, otherwise they are practically identical. Section 3 — Page 5 — Line 12 Section 3. A continuous supply of attractive motion-picture subjects is essential to the successful conduct of a film exchange or motion-picture theater. Lcitam producers and distributors who by means of direct ozvnership or tnrough total or partial stock control, leases, operating agreements, or otherwise arc also exhibitors enjoy a ccrntrolling advantage over distributors and exhibitors who are not so affiliated. Sucli controlling advantage is theirs hy virtue of controlling the production as well as the distribution and exhibition of films. Their control of production and distribution has resulted in conditions that liai'e made it necessary for many crhibitars to affiliate with the producers and distributors in order to obtain an adequate supply of suitable motion-picture subjects, such affiliations being established by means of giving to a producer or distributor control of such e.rhibitor's theater or titeaters through total or partial stock control, leases, operating agreements, or othcnvise, or by former exhibitors acquiring a substantial interest or control in a producer or distributor. As a result of tins condition, theaters controlled by or affiliated with one distributor are in many cases operated by another distributor. There is an increasing number of cases of control of a theater or group of theaters by two or more distributors. Such common, interlocking interest and control by one distributor in the theaters of another distributor results in restricting the supply of suitable copyrighted motion-picture films obtainable by exhibitors who me not so affiliated with a producer or distributor. The continually increasing control of motion picture theaters by producers and distributors results in restricting the number of motionpicture theaters in which may be e.vhibited the film productions of producers and distributors not affiliated zcith motion-picture theaters. Certain practices have grcrwn up in the distribution of films the continuance of -which tends to increase the restrictions above described and threatens to create a monopoly in the business of producing, distributing, and e.rInbitiny copyrighted motion pictures. 1 he..e practices consist of {a) blind booking and block, booking (b) unfair discrimination in the allocation of product in favor of exhibitors affiliated with, producers and distributors and to the prejudice of exhibitors not so affiliated. Blind booking and block booking is the system of booking films whereby the exhibitor IS denied the right to view the product he is to lease and to select sucii part thereof as he deems suitable to the tastes of his public, but is required to lease all of the product of a given distributor offeicd for release during a gi^en period long in advance of the time when the product is to be delivered and often before the making of such product has been commenced. Tiie system of "blind booking" and "block hooking" makes it incumbent upon an exhibitor to lease films zvltich arc not suitable for his needs and which he does not want in order to obtain films which from the descriptive matter he concludes his patrons wilt demand and which he must have in the successful conduct of his business. This system of blind and block booking of films requires the exhibitor to show films of poor quality or to suffer the loss of the rental on such films, and precludes the small producer having only a few films a year or any other producer or distributor having no theater affiliations, from competing with TRUE TRADE CONDITII DISTORTED IS CH the producers and distributors the latter by block booking succi monopolise the playing dates exhibitors. This practice of blind am booking is frequently waived benefit of theaters affiliated ducers and distributors. By the practice of arbitrc^ry] lion of produce theaters affiliati producers and distributors a trarily given the choice of '.without affording the unaffilia\ hibitor competing with such or affiliated theater the opport: bid or compete for such choice This section describes certaai ditions and practices in the Indus clares that the practices of blind 1 booking and unfair discrimination affiliated and chain theaters, in pri independent theaters, threatens t' monopoly in the industry. These form the base on which the bill is as the following sections are i: correct these alleged evils. They a: more than self-serving declarations] sumptions made by the author of without any foundation or justificati(| If these assertions, allegations am tions, be true in fact, they are mat(, should be brought to the attention tj partment of Justice and the Fede, Commission for prosecution under trust laws, the provisions of which to correct any such evil. The Federal Trade Commission, extensive investigation, issued an on block booking but before attempt! force such order, very properly ( in co-operation with representative whole industry, at a Trade Pra| ference, to find a sales system to. for block booking and at such members of the industry agreed modifications which, when put'into entirely eliminate any possibility any of the practices heretofore i:. The Department of Justice, as is v| is making a comprehensive inves the industry, so there seems to be need of this legislation. The real these declarations and assumptions injected here into this bill is that seeks thereby to justify the radica tic provisions of the sections wh| These provisions, as will be seen criminate illegally against membe] industry, by depriving them of enjoyed by all other manufacturit( tributing concerns in the country, to do this and thereby crcumvei] settled economic laws and court IS sought to make an exception of| try by these allegations and dec threatened monopoly. Section A — Page 8 — Lij Section 4. Six months after of this Act it shall he unla\\ any producer or distributor righted motion-picture films current of interstate commerce or offer for lease for exhibitio theater or theaters copyrightea picture films in a block or ■. two or more films at a designatl sum price for the entire block only and to require the exfi lease all such films or perm! lease none: or to lease or lease for exhibition such nu. ture films in a block or groujmi or more at a designated mm price for the entire block or at separate and several pric arate and several prices fi and several films, or for a numbers thereof less than number, which total or price and separate and sev shall bear to each other sii as to operate as an unreasikbli %\ .ttraint upon the freedom of .' ei tor to select and lease for use td hition only such film or film of block or group as he may aire prefer to procure for exhi\io»