Harrison's Reports (1944)

Entered as second-class matter January 4, 1921, at the post office at New York, New York, under the act of March 3, 1879. Harrison's Reports Yearly Subscription Rates: 1270 SIXTH AVENUE Published Weekly by United States $15.00 Rnnmifilo Harrisons Reports, Inc., U. S. Insular Possessions. 16.50 nnun,iou Publisher Canada 16.50 New York 20, N. Y. P. S. HARRISON, Editor SPain A Motion Picture ^viewing Service Australia New" Zealand' Devoted Chiefly to the Interests of the Exhibitors Established July 1, 1919 India, Europe, Asia .... 17.50 Ug Editoria] Po]icy. No problem Too Big for Its Editorial Circle 7-4622 Sbc a copy Columns, if It is to Benefit the Exhibitor. A REVIEWING SERVICE FREE FROM THE INFLUENCE OF FILM ADVERTISING Vol. XXVI SATURDAY, DECEMBER 30, 1944 No. 53 The Implications of the U. S. Supreme Court Decision in the Crescent Case In the issue of Harrison's Reports of December 17 there was discussed the victory of the U.S. Government in the Crescent case as a result of the decision of the U.S. Supreme Court. In that issue the statement was made that reference to this case and to the U.S. Supreme Court decision will again be made. The decision of the U.S. Supreme Court is so important that Harrison's Reports again refers to it, in greater detail. In doing so, it feels that it is rendering the industry as a whole a great service, for it is this paper's desire that producers, distributors and exhibitors, whether affiliated or independent, owners either of a single theatre or of a circuit of theatres, whether large or small, understand the implications of this decision clearly, lest they find themselves in serious trouble if they should continue to resort to practices they resorted to in the past. In order to save the reader the trouble of looking up either the December 16 issue or other issues for the facts of this case, a recapitulation of these facts may not be. out of place: In 1938, the Department of Justice brought suit against Crescent Amusement Company, of Nashville, Tennessee, and its affiliates as well as against some of the officers of the parent company and of its affiliates, for violation of the AntiTrust laws in effecting and maintaining a monopoly in restraint of trade in the theatre business in the territories where they operate, by the following acts: employing their buying power for the purpose of making it either difficult or impossible for their competitors to buy film, eventually compelling many of them to sell their theatres to the "monopoly" by means of, (a) buying the building in which a competitor had a theatre; (b) building a competitive theatre regardless of the town's needs; (c) compelling the distributors to sell their pictures to them instead of to their competitors; (d) long term franchises; (e) repeat runs, and by other acts. The eight major companies were named as co-defendants, but when the case came to trial the complaint against the five companies that signed the Consent Decree was dismissed, and later on the Court found that the charges against Universal and Columbia had not been sustained, but United Artists was found to have violated the Anti-Trust laws in two small towns by combining with some of the defendants to eliminate independent theatre competition. The case was tried before Judge Elmer D. Davies and, in May, 1943, Judge Davies found the defendants guilty of building up and maintaining in the picture theatre business a monopoly and enjoined and restrained them from continuing their monopoly. The judge declared the film franchises of the combination with the film distributors, with exception of those entered into by its Nashville theatres, invalid, ordered the divestment of interlocking ownership among the defendants, and prohibited them from any further employing their tactics against their independent exhibitor competitors. Because of the fact that Judge Davies did not incorporate in his decree a provision restraining the defendants from ac quiring additional theatres as a protection for the independent exhibitors in their (the defendant's) territories, the Department of Justice filed an appeal with the U.S. Supreme Court requesting that the decree be remanded to Judge Davies for correction so as to enjoin and restrain the defendants from acquiring additional theatres, except in Nashvillle, unless they first proved to the Court that the acquisition of a theatre would not restrain competition unreasonably. The contention of the Government was that, once a theatre is acquired by the defendants, the damage to competition cannot be repaired even if the Government should afterwards prove that the acquisition of that theatre was in restraint of trade. And the U.S. Supreme Court, by its sweeping decision of December 11, found for the Government. This decision settles some questions that no other decision had settled previously. One of the most important is its declaration that exhibition of motion pictures is Interstate Commerce. The Court said : "Interstate commerce was found to have been employed in consummating the conspiracy. ..." After explaining how pictures are sold and in which way they reach the exhibitor, the Court said : "... The findings are wholly adequate to establish that the business of the exhibitors involves a regular interchange of films in interstate commerce. As we shall see, that course of business may be sufficient to make the Sherman Act applicable to the business of exhibiting motion pictures. ..." And elsewhere in the decision, "... And as we have said, the course of business which involves a regular exchange of films in interstate commerce is adequate to bring the exhibitors within the reach of the Sherman Act. ..." The second question that it settles is the fact that a defendant in a motion picture anti-trust case cannot use the argument that he will suffer hardships in order to dissuade the court from ordering him to divest himself of his illegally acquired theatre interests. The defendants in this case, in their cross-appeal, pleaded that the divestment of their stock interests would, under the current tax laws, be tantamount to confiscation. But the Court said: "In the five-year period ended in August 1939 when this bill was filed the exhibitors experienced a rather rapid growth — in the number of towns where their theatres were operated; in the number of towns where they operated without competition; in their earnings and surplus. The United States claims that that growth was the product of restraints of trade in violation of §1 of the Sherman Act and of monopolistic practices in violation of §2." (The enumeration of the violations follows.) And in its decision, the Court stated : "Those who violate the Act [the Sherman Act] may not reap the benefits of their violations and avoid an undoing of their unlawful project on the plea of hardship or incon( Continued on last page)