The Film Daily (1929)

THE -<Bt! DAILY Thursday, October 17, 192! 'Compulsion* Big Issue of U. S. Decision VOLUNTARY AGREEMENT ON CLAUSES URGED Stressing that the parties may suggest provision, "if such be feasible under which uniform contracts containing arbitration clauses may be voluntarily adopted by the members of this industry without coercion or other unlawful restraint," Federal Judge Thacher's decision in granting an injunction to the Dept. of Justice against ten distributors, the Hays organization and Film Boards of Trade, makes the compulsory feature of arbitration its main issue. The admitted gain to the industry as a whole, he says, cannot compensate in the eyes of the Sherman antitrust law, a sacrifice of the rights of the individual. The ruling points out that the defendants distribute 60 per cent of the supply of films, and members of Film Boards 98 per cent, so that it is impossible for at theater to secure sufficient films for regular operation without dealing with one or more Film Board members. Formation of the Hays' organization is recited, and the resultant deliberations for a uniform contract, culminating in the present form of agreement and arbitration system. Rules of arbitration are recited, together with the provision for deposits by exhibitors of a sum not to exceed $500 on existing contracts, if they fail or refuse to abide by and comply with arbitration awards. Refusal To Arbitrate Would Cause Hardship, Ruling Says In view of the exhibitor's necessity to contract in advance with several distributors for the delivery of films to be exhibited in accordance with a program laid out for more than a year in advance, it will at once be seen that the exhibitor's refusal to arbitrate will immediately subject him to heavy demands for security, which if not complied with will result in the termination of his entire supply of films for exhibition in his theater, and probably result in conditions under which he cannot continue in business. It is alleged in the petition that the members of the Film Boards of Trade have gone beyond the requirements of the contracts and the arbitration rules and have entered into supplemental understandings and agreements, without the knowledge and against the general instructions of the defendant distributors and of the defendant Association, to refuse to contract for the future exhibition of any Cases Differ Arbitration case of the Dept. of Justice against distributors presents an entirely different situation from the credit system case, Judge Thacher, ruled in Federal Court New York in granting an injunction against enforcement of alleged illegal provisions of the standard contract and arbitration agreements. "The distinction lies in the inherent nature of the restraints imposed, and in the instant case the restraint, if not shown to have been voluntary on both sides is oppressive, and therefore undue and unreasonable," the decision states. "Competition , Promoted, Conditions Better" Distributors take satisfaction in the opinion of Judge Thacher that the standard contract and arbitration agreements have promoted competition between distributors, and improved conditions in the industry. "We direct attention to the fact that Judge Thacher finds that competition between the distributors has been promoted by the adoption of the standard exhibition contract and that in many ways general trade conditions have been vastly improved," says a statement issued by E. P. Grosvenor, chief of defense counsel "The important thing, of course, is to preserve this; and Judge Thacher in concluding his opinion suggests that the Government and the industry indicate provisions to be incorporated in the decree under which the use of a uniform contract containing an arbitration clause may be continued. Therefore the industry will undoubtedly proceed immediately to try to agree with the government upon such practical changes as may be necessary to accomplish this result." Rights of Individual Must be Protected, Decision Holds motion picture films with any exhibitor who has failed to comply with any decision of any Board of Arbitration. The proofs abundantly establish the fact that this was the consistent practice of many of the Film Boards of Trade until quite recently, when their attention was called to the fact that such action was not justified by the rules. When this was done the members of the Film Boards of Trade were told that the question whether distributors would deal with any exhibitor who had refused to arbitrate or had failed to comply with an award was one for the decision of individual distributors ; but at the same time it was stated that it has been the consistent policy of the distributors to refuse to deal with exhibitors who failed to arbitrate or to comply with arbitration awards. The coercive effect of this situation has undoubtedly been that unless exhibitors submitted to arbitration and complied with the awards rendered against them, they have been unable to enter into new contracts and have been required to suspend service in their theaters unless able and willing to comply with the arbitration awards rendered against them or to deposit security under all of their outstanding contracts. * * * » * is keen and active, or even that it has been promoted and enhanced by what has been done, if, in fact, it can be seen that the freedom of others to engage in trade, to enter into normal commercial agreements, and to have recourse to the courts for their rights, has been unduly restrained by the coercive and collective action of the defendants. That competition between the distributors has been promoted by the adoption of the Standard Exhibition Contract, and that in many ways general trade conditions have been vastly improved, I have no, doubt, and so find. But the record is equally clear that all this good has been accomplished through the exercise and irresistible economic force consolidated by combination in the hands ol the distributors, who collectively control the available supply of films and by virtue of this control have imposed their will upon the industry. Reasonableness of Contract Arbitration Admitted Assuming the contracts and the system of compulsory arbitration to have been just and reasonable in operation, the fact that many exhibitors were not represented in the conference leading to their adoption cannot be disputed. One can hardly imagine a more direct restraint upon trade than an agreement between competitors in an open market not to trade except upon terms which they have fixed in advance. But it is argued that the terms of the Standard Exhibition Contract were not unfair or unreasonable ; that the system of compulsory arbitration has been of great advantage to exhibitors and distributors alike, and therefore that the agreement of the distributors to use only this form of contract in all their dealings, and to enforce its arbitration clauses by collectively refusing to deal with any exhibitor who fails to comply with them, is not an undue restraint of interstate commerce within the meaning of the Statute as interpreted in the Standard Oil Case (221 U.S. 1) and the American Tobacco Case (221 U.S. 106). Freedom Called Unduly Restrained By Joint Action Tn judging the inherent character of the restraint one must look not only to the restraint voluntarily imposed upon the competitive activities of those who are in the combination, but also to the involuntary restraint imposed upon the freedom of outsiders to engage in trade under natural and normal conditions. It is therefore not enough to say that competition between distributors Gain To Industry Held Not Justifying "Restraint" By agreement of these distributors exhibitors who were not represented in the adoption of the uniform contracts have been constrained to accept their terms regardless of their wishes, and by the compulsory system of arbitration, sanctioned and enforced by collective action of the distributors, have been constrained to perform the contractual obligations thus assumed . In fairness it cannot be said, that the restraint imposed upon these eixhibitors is voluntary because they accept and agree to be bound by the contracts. They can have none other, because the defendants have agreed that they shan't ; and unless something more than the mere acceptance of all they can get is shown they must be said to have acted under an involuntary restraint, imposed and continued by the defendants to the end that the contracts shall be signed and their terms obeyed. That such coercive restraint upon the commercial freedom of an exhibitor who are neither represented nor consulted with reference to the agreement to adopt the standard form of contract is undue and unreasonable both at Common Law and under the Sherman Act, I cannot doubt. Gains resulting from sudh restraints to the industry as a whole do not in the eyes of the Statute justify the vicarious sacrifice of the individual, even for the sake of bigger and better business. A State Legislature could not lawfully impose compulsory arbitration upon the motion picture industry. (Wolff v. Industrial Court, 262 U.S. 522.) Much less should it he within the power of a combination of practically all the distributors to do so Sy coercion exercised through a control of the available supply of films. Rights Of Companies On Agreements Outlined The decision in United States v. First National Pictures, Inc., supra, is distinguishable GAIN TO INDUSTRY BY CONTRACT IS CITEI because in that case the collective power c the defendants was exercised to correct frauc ulent and irregular trade practices by demane ing reasonable security for the performam of new contracts. Under the circumstana there disclosed there was nothing oppress* in what was done pursuant to the CrtI Rules. This case presents an entirely differ* situation. The distinction lies in the inhej nature of the restraints imposed, and in ■ instant case* the restraint if not shown | have been voluntary on both sides is opprf sive, and therefore undue and unreasonaB Nothing that has been said should 1 taken in derogation of the right of trade! commercial groups, or of traders generaB to voluntarily impose upon themselves statu ard forms of agreement which do not undid restrict competition and thus restrain trad or to agree that all controversies arising ^ tween them shall be settled by arbitration Such agreements dealing only with fl rights of those who execute and intend I be bound by them are normal and usual, ar are proper instruments in the lawful condur) of trade. It is only when such agreement are sought to be imposed upon others, regarc less of their wishes, by coercive combination having the power to say "Take what offered or get nothing," that they becon illegal. Upon settlement of the decree the parti may suggest provisions, if such be feasibi under which uniform contracts containit? arbitration clauses may be voluntarily adoptby the members of this industry witho cocerciot r»: other unlawful restraint. revision¥c1ract provisions slate (.Continued from Page 1) phasiz*d the beneficial results of tl standard contract and arbitration sy terns, but said the law is violated. I suggested that the parties revise t! agreements to conform with the la\ Defendants in the action ar Paramount, First National, M-G-l Universal, United Artists, Patr FBO, (RKO), Educational, the Hal association and 32 Film Boards. FOX METROPOLITAN TO CONTINUE STEADY GROW! (Continued from Page 1) interested only in acquiring hous it can operate profitably. The Leon Leonia, N. J., is latest acquisiti to the chain, while the Brook, Bou Brook, N. J., has opened under F management after remodeling.