Harrison's Reports (1943)

172 HARRISON'S REPORTS October 23, 1943 "V. Affiliated theatres still a problem. The utterly cynical attitude of the dclendants towards Section XI has been established by the number ol theatres built and acquired and the worthlessness of the section has been demonstrated by the decision of Judge Goddard dismissing the Government's application to make certain defendants disgorge their post-decree acquisitions. Answers to Question No. 1 1 of the questionnaire show that the acquired theatres at once succeed to the priorities and preferences invariably accorded to affiliated theatres. The notation of a Michigan exhibitor sums up the story: 'Mel Theatre was acquired by United Theatres (Paramount) and priorities that go with an affiliated theatre were at once evident.' "It is reported from another State that Paramount has bought a lot adjacent to an independent theatre and the exhibitor is laced with affiliated competition just as soon as WPB relaxes its control of building materials. "With the tremendous reserves which the defendants are building up as a result oi their wartime profiteering, they are poised lor another gigantic campaign of theatre acquisition and construction and unless Section XI is entirely rewritten and made effective they will accompUsh their monopolistic purpose under the very wording of the decree. "Meanwhile, the defendants are extending their monopoly by other means. The creation of additional first-runs by means of moveovers has been mentioned. The answers to the questions dealing with discriminatory clearance (No. 8), discrimination in supplying prints (No. 9) and doublefeaturing 'A' pictures (No. 2U) show the continuing purpose of the defendants to grant special favors to the affiliated theatres and to use those theatres in softening the independent exhibitors for the kill. "But most important of all is the processing of the independent theatres by forced percentage playing so as to exert a degree of control almost as great as if they owned and operated such theatres. The L3epartment"s attention already has been called to this by a resolution of the Allied board of directors dated August 12. Comments of the exhibitors quoted in the summaries show that not only do the distributors determine admission prices and playdates on percentage engagements, but they dictate the amount and kind of advertising the theatres shall use; and not only do they place checkers in the theatres during the run of percentage pictures but they require that the books and records of the independent exhibitors shall be subject to inspection and audit for an indefinite period of time. "Thus in spite of the consent decree the monopoly marches on and the exhibitors, are being transformed from independent business men into mere agents of the distributors, with little or no voice in the operating policies of their theatres and compensated by a bare commission based on the receipts of their own boxoffices. "■VI. Arbitration. Only 22 of the reporting exhibitors, operating a total of 81 theatres, had filed arbitration proceedings under the decree. Most of these — 15 — reported that they had received no, or every inadequate, reUef. The returns, therefore, represented little in the way of actual experience under the arbitration system. A larger number reported that they had observed the operation of the system and assigned reasons for not having invoked it .The similarity of the comments from different parts of the country shows that distrust of the system is widespread and that its defects are fundamental. The five principal criticisms are: "(a) Expense incident to the conduct of proceedings. The exhibitors do not dwell so much on the taxable fees and costs as on attorney's fees which distributors have made necessary. "(b) Unfair tactics employed by attorneys for distributors and affiliated theatres. Each distributor has been separately represented and these 'batteries of lawyers' have bulldozed exhibitors and unduly influenced arbitrators, besides resorting to all manner of technicalities. "(c) Lack of available legal talent to combat the experienced and trade-wise attorneys regularly employed by the distributors. "(d) Delay resulting from the distributors' tactics, the prescribed procedure and appeals. The system can only be invoked in proceedings involving clearance and run which hxjk to permanent relief. It is useless in proceedings involving a particular group of pictures since they would pass availability before a final award could be made. "(e) A feeling (more prevalent in some territories than others) that the panels and especially the Appeal Board are composed of persons of an ultra-conservative, pro-distributor point of view. Except in Eastern Pennsylvania this applies more to the Appeal Board than to the local arbitrators. "It has been evident for some time that the Appeal Board stands low in the estimation of the exhibitors. Question No. 14 contained three suggested reforms and asked the exhibitors to express a preference in regard thereto. But little interest was shown in the subject, this apathy being attributable in part to a leeling of lutiluy as shown by the remarks on the system in general and in part to lack ol familiarity with the work of the Board. The proposals and the returns are as follows: "(a) The Board should be abohshed and the awards of the local distributors made final — 44 exhibitors, with 128 theatres. "(b) The Board should be replaced by local appeal boards composed of qualified arbitrators chosen from the panels — 89 exhibitors, with 234 theatres. "(c) The Appeal Board should be retained but there should be a change in personnel so that all will not reside in New York — 34 exhibitors, with 90 theatres. "VII. Conclusion. In its statement announcing the signing of the consent decree (dated October 29, 1940) the Department said that 'Properly administered it should put an end to disputes between distributors and exhibitors . . . and should result in placing the industry on a lair competitive basis.' And the Department added: " 'If these results are not obtained after a reasonable trial period, there will be no alternative for the Government but to proceed with the litigation and press for a revision of the entire industry structure in accordance with the prayer of the petition.' "On January 22, 1943 the Department made public a prelmiinary report of the special unit of the Antitrust Division charged with the supervision of the motion picture consent decree. After commenting that the decree had supplied 'some relief to a substantial number of exhibitors from certain unfair trade practices,' the Department said — " 'It has not yet demonstrated that film licensing discriminations inherent in the ownership of theatres by distributors may be effectively remedied by measures short of divorcement.' "In view of the conditions revealed by the survey which this Association has made, we think the conclusion now is inescapable that the consent decree has not, and by reason of its ineffective provisions can not, achieve the objects and purposes of the Department as set forth in the original petition and its numerous pubhc statements. The unhappy truth is that the motion picture monopoly is more powerful and in general its practices are more oppressive today than when the consent decree was entered. The three-year test period afforded the defendants ample time in which to put their house in order, but this they have utterly failed to do. We respectfully urge that the Department now insist upon sterner measures better calculated to curb the trust and to insure fair competitive conditions. "In closing let us add that based on our understanding at the conference on August 9 exhibitors were told that the information forwarded by them on the questionnaires would be kept in strict confidence. The names of the reporting exhibitors have been omitted from the summaries. However, in a few cases it might be possible to identify the exhibitors by their comments or the nature of their grievances. In order fully to protect these exhibitors against retaliation, neither the questionnaires nor the summaries should be exposed to distributor representatives."