Harrison's Reports (1945)

IN TWO SECTIONS— SECTION ONE 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 Rnni«1R12 Harrison's Reports, Inc., U. S. Insular Possessions. 16.50 m ° Publisher Canada 16.50 New York 20, N. Y. P. S. HARRISON, Editor Mexico Cuba. Spain 16.50 A MoUon pjcture Reviewing Service o,rea.t ^"tain ............ id.io Devoted Chiefly to the Interests of the Exhibitors Established July 1, 1919 Australia, New Zealand, India, Europe Asia .... 17.50 Jtg Editoria, Policy. No problem Too Big for Its Editorial Circle 7-4622 35c a Copy Columns, if It is to Benefit the Exhibitor. A REVIEWING SERVICE FREE FROM THE INFLUENCE OF FILM ADVERTISING Vol. XXVII SATURDAY, FEBRUARY 17, 1945 No. 7 The Department of Justice Means Business As most of you know, the United States Government, through the Department of Justice, has made application to proceed with the trial of the New York antitrust case, in which the Consent Decree had been entered against the five consenting distributors. When it was found that the trial could not take place until the fall of this year, the Govern' ment applied for temporary relief pending the outcome of the trial and the entry of a final decree. In its brief supporting the application for temporary relief, the Department of Justice has worked out a case against the distributors on the subject of clearance which seems to be as powerful as it is astounding. Abram F. Myers, General Counsel of National Allied, in a release dated February 9, 1945, analyzes the brief in so clear a manner that its subject matter and its significance can be understood by the layman. And, since Harrison's Reports considers the matter of the New York anti-trust suit of importance to every one in the industry, the pertinent portions of Mr. Myers' release are herewith reproduced. Says Mr. Myers: "The temporary relief requested is confined to clearance, more especially unreasonable clearance granted to affiliated theatres. ... In the nature of the case, the relief available on a motion in advance of a trial on the merits is limited. But while narrow in scope the requested order, if granted, will be devastating in its effect upon the elaborate clearance system which the defendants have built up for the protection of their affiliated prior-run theatres. "But the real significance of the Government's brief, which appears to have been overlooked in the comments thus far made, is that it raises legal questions which strike at the very foundations of the defendants' monopoly. A weakness of the defendants — which has cropped out in all attempts by exhibitors to discuss industry problems with them— is that they have stressed the legality of each act or practice, considered separately and apart from all the others, and have closed their eyes to the altered legal status of such acts and practices when viewed as parts of a system or combination. The Government's brief should jar them into an over-all survey of the legal predicament into which they have drifted. "LEGALITY OF CLEARANCE "The brief treats of clearance from the standpoints of economics, the law, and enforceability. It is, in effect, a searching treatise on the subject and is bound to have a profound influence on industry practices. Clearance, it points out, obviously restricts the ability of one theatre to compete with another; therefore, an agreement fixing clearance is a violation of the Sherman Act, unless the restraint is a reasonable one. Such restrictions have in the past been imposed by the distributors on the theory that their copyrights entitle them to impose such conditions 'as are necessary and appropriate to realize maximum revenue from the exploitation of the copyright.' Upon this theory, the distributors have customarily undertaken to fix the minimum admission prices at which their films should be exhibited to the public. The brief sets forth, in the appendix, excerpts from the exhibition contracts of the five consenting defendants showing that maintenance of those minimum prices is made a condition of the enjoyment of such run and clearance privileges as the distributor grants. "It is then pointed out that the prescribed minimum admission price is not a price paid for the right to exhibit the picture — the consideration for that right is the film rental stipulated in the license. At this stage the brief brushes aside all distinction betwen pictures licensed on flat rentals and those licensed on percentage. In either case, it says, the amount of the film rental will vary with the ability of the film to attract patrons to the theatre and thus, in both cases, the distributor has a 'stake' in the exhibitor's admission prices. Thus the Government, in its first line of attack, takes the extreme position that any attempt by the distributors to regulate admission prices, regardless of the terms under which the film is licensed, constitutes resale price maintenance in violation of the Sherman Act. But the most deadly blow aimed at the heart of the defendants' monopoly is contained in a later passage. "The brief recites that each of the five consenting defendants— Fox, Loew, Paramount, RKO and Warner — (1) controls a large circuit of theatres, (2) licenses films to its own circuit, the circuits owned by the others and theatres competing with them, by license agreements which fix the minimum admission prices to be charged by all of the theatres licensed, (3) maintenance of those admission prices is tied to run and clearance provisions determining the relative time at which films licensed become available for exhibition in competing theatres. The brief then ties all this up into a bundle which might aptly be labeled 'Gigantic PriceFixing Combination.' It says: " 'We submit that such a system of admission price-fixing by cross-licensing is prima facie illegal because it is in effect a means by which affiliated theatre operators, through their distribution affiliates, agree with each other as to the admission prices that should be charged by their various theatres in the competitive areas in which each operates and as to those to be charged by independent theatre operators who compete with these affiliated theatres. Such a price-fixing system is unreasonable per se and may not be justified under the Sherman Act by any proof that these defendants might offer.' "A BLOW FOR LIBERTY "Independent exhibitors will be gratified that the brief strikes a blow at the gradual usurpation by the distributors of control over the operating policies of the theatres — an encroachment against which Allied has many times protested. Ownership of the copyright of a feature film is only one of the many property rights involved in the exhibition of motion pictures. The brief speaks a word for good old brick and mortar. The distributors are reminded that they do not sell their film to the thcatrc-going public; that they merely license it to the exhibitor. And the exhibitor does not sublicense it to the public 'but sells his patrons the right to witness a performance ... of which the exhibition of a single feature film may be only a part.' 'The exhibitor," says the brief, 'who possesses the theatre, determines the program of entertainment to be offered and collects the admission fees which make the exhibition of the film profitable, would normally determine independently the price at which that entertainment should be made available to the public. . . .' (Continued on last page)