Harrison's Reports (1946)

128 HARRISON'S REPORTS August 10, 1946 ( 1 ) Admission Price Fixing Over a period of years, in a substantially unbroken line of authority, beginning with the very first case decided under the anti-trust laws and the first civil action to reach the Supreme Court," that tribunal and the lower Federal courts have invariably condemned as illegal every pricefixing combination. In the motion picture industry such a combination was declared illegal in the well-known Interstate Circuit Case.1 At the time of the trial, no principle of the anti-trust laws was more firmly established." The issue, therefore, was not whether a price-fixing arrangement was illegal, but whether the acts and practices shown by the evidence and exhibits proved such a combination. In a very penetrating analysis of distributing practices the Statutory Court found the existence of two types of conspiracy to fix and maintain minimum admission prices, condemning them as illegal. The first was a conspiracy of distributors among themselves and with various affiliated and independent exhibitors; the second a separate conspiracy of each distributor with the exhibitors located in an area or community. They also ruled that the admission price structure was an attempt to give prior-run theatres a monopoly of the potential patronage. But they did not pass upon the legality of separate license agreements establishing admission prices between a distributor and an exhibitor, in which other distributors and exhibitors were not concerned, (a) Conspiracy of Distributors In analyzing the evidence the Court pointed out that, in their licenses, the defendant distributors had fixed the minimum admission prices to be charged in all theatres where their pictures were exhibited; and that, as they distributed about 77.6% of all features distributed nationally, except westerns and low-cost productions, or approximately 65.5% of all features of all kinds, they controlled the prices to be charged for all pictures exhibited by their theatres or independent exhibitors in the United States. The Court summarily dismissed the contention, among others, that the prices stipulated were those currently charged by the exhibitors, and stated that the "severe penalties" in the license agreements for violation of the minimum price stipulations indicated that the defendants had "more than merely a passing interest" in the maintenance of admission prices." The minimum admission prices stipulated in various license agreements, declared the Court, not only between the defendants and affiliated theatres, but also between them and independent houses, "are in substantial conformity." In effect, the distributors conceded that the admission prices "are in general uniform," asserting that they were "the usual admission prices currently charged by the exhibitors," and that they were not dictated by the distributors. In reply to this contention the Court said: "It does not seem important whether the distributor was the more controlling factor in determining the minimum admission prices. Whether it was such a factor or merely acceded to the customary prices of the exhibitors, in either event there was a general arrangement of fixing prices in which both distributors and exhibitors were involved. But it is plain that the distributor did more than accede to existing price schedules. The licenses required them to be maintained under severe penalties for infraction, and the evidence shows that the distributors in the case of exceptional features, where not satisfied with current prices, would refuse to grant licenses unless the prices were raised. Moreover, the distributors, when licensing on a percentage basis, were interested in the prices charged and even when licensing for a flat rental were interested in admission prices to be charged for subsequent runs which they might license on a percentage basis. Likewise all of the five major defendants had a definite interest in keeping up prices in any territory in which they owned theatres, and this interest they were safeguarding by fixing minimum prices in their licenses when distributing their films to independent exhibitors in those areas. Even if the licenses were at a flat rate, a failure to require their licensees to maintain fixed prices would leave them free by lowering the current charge to decrease through competition the income in the licensors' own theatres in the neighborhood. The whole system pre supposed a fixing of prices by all the parties concerned in all competitive areas." By a table that was collated from the exhibits, the Court showed specifically the similarity or identity of admission prices; artd they quoted at some length from the testimony of three witnesses — two from distributors and one from a Paramount affiliated exhibiting corporation. Joint operating agreements between defendants and also between them and independent theatre owners prescribed admission prices or methods by which they were to be determined. Franchises and master agreements "stipulate minimum admission prices often for dozens of theatres. . . ." Licenses for separate theatres of the defendants "disclose the same inter-relationship." "Such uniformity of action spells a deliberately unlawful system, the existence of which is not dispelled by the testimony of interested witnesses that one distributor does not know what another distributor is doing; and there can, in our opinion, be no reasonable inference that the defendants are not all planning to fix minimum prices to which their licensees must adhere. . . ." From this language and from similar statements in other parts of the opinion, it will be observed that, notwithstanding the testimony of defendants' witnesses, the Court inferred the existence of a "deliberately unlawful system" from "uniformity of action." ". . . We think that RKO, Loew's, Warner, Paramount and Fox, in granting and accepting licenses with minimum prices specified, have among themselves engaged in a national system to fix prices, and that Columbia, Universal and United Artists, in requiring the maintenance of minimum prices in their licenses granted to these exhibitor-defendants, have participated in that system." "It is a reasonable inference from all the foregoing that the distributor-defendants have acquiesced in the establishment of a price-fixing system and have conspired with one another to maintain prices. Such a conspiracy is per se a violation of the Sherman Act. . . ." Here, it will be noted, the Expediting Court found the existence of a "national system to fix prices," and that the distributor defendants had "conspired with one another to maintain prices." These findings are inevitable, even though the representatives of the distributors denied that they knew or cared about what other distributors were doing. The conspiracies were established by proof of concert of action among the distributors, and in at least one respect by joint action by a distributor and exhibitors; by the knowledge of distributors and others in the industry of existing trade practices; by the existence of a uniform system of doing business; and by simultaneous action to the same end. The effect of rulings of this nature, not only in connection with admission prices, but also in relation to other practices, will be discussed later in a section of this article to be devoted to "Conspiracy." At this point, however, it may be reiterated that the findings as to conspiracy were not based upon any direct admissions by any distributor that any conspiracy existed.10 ^Interstate Circuit, Inc. v. United States, 306 U.S. 208. 'United States v. Crescent Amusement Company, 323 U.S. 173. 'Bigelow v. RKO Radio Pictures, Inc., 326 U.S. *Goldman Theatres, Inc. v. Loew's, Inc., (CCA. 3) ISO F. 2d 738: 6 United States v. Schine Chain Theatres, Inc., (D.C W.D. N.Y.) 63 F. Supp. 229. ^United States v. Jellico Mountain Coal and Coke Co., (C.C. N.D. Tenn.) 46 Fed. 432. Montague v. Lowry. 193 U.S. 38. ''Interstate Circuit, Inc. v. United States, 306 U.S. 208. The principle was also applied in the Schine Case and the so-called Jackson Park Case. 8 The law on this subject is elaborated in an article by the writer appearing in Harrison's Reports on April 25 and May 2, 1936. The article concluded with the assertion that if there were a combination of distributors to prescribe minimum admission prices "the concerted action manifestly constitutes a conspiracy in restraint of trade." "In the article just mentioned, which was a part of a series on "Anti-Trust Litigation in the Motion Picture Industry," the writer pointed out several combinations in which the distributors participated to establish minimum admission prices. "From the first days of the feature film," it was said, "there has been a uniform trend toward higher admission prices to the public, and, as a necessary corollary, toward higher film 'rentals' to exhibitors." It was also stated that minimum admission prices were established by the Standard Exhibition Contract, which has been adjudicated to be the result of a (Continued on inside page)