Harrison's Reports (1946)

136 HARRISON'S REPORTS August 24, 1946 ", . . The decision of such controversies as may arise over clearances should be left to local suits in the area concerned, or, even more appropriately, to litigation before an Arbitration Board composed of men versed in the complexities of this industry." The violations of the anti-trust laws, specified by the Court, arc of a very flagrant nature. Clearance is merely a method of granting protection against competition to a favored theatre. It can be and frequently has been, used to stifle a competitor to death." The remedy should therefore be correspondingly direct and complete, by injunction or otherwise. Here the remedy prescribed by the Court is ineffective; it does nothing to prohibit the ouliawed practices; it merely states, what every lawyer knows, that an independent or other person injured may have a remedy by local action at law,21 with a possibility of arbitration. In another part of the opinion the Court again mentioned the arbitration of clearance, and also of other controversies. Subsequently the question of arbitration will be commented upon in this paper separately. " Younyclaus v. Onvalia Film Board of Trade (D.C. Neb.) 60 F. (2d) 538. "In an article in Harrison's Reports of May 30, 1936, the present writer narrated criminal and equitable proceedings by the Government in 1930 and 1932 in Los Angeles and Chicago, resulting in the entry of Consent Decrees, which, among other things, enjoined the defendants from enforcing unreasonable and discriminatory clearances, and from adopting or attempting to enforce any uniform plan, system or schedule of zoning, clearance or protection, whereby theatres of the defendants should receive unreasonably long periods of protection or unreasonable zoning privileges over competing independent exhibitors. "The Government need not have relied entirely upon such evidence. In a continuation of the article just mentioned, in the issue of Harrison's Reports of June 6, 1936, the writer quoted at length from resolutions of the Motion Picture Producers tand Distributors of America, Inc. [then the "Hays Office"], correspondence of its counsel, and the iindings of an auditor appointed by the District Court of Massachusetts, all showing clearly that the activities of the defendant distributors constituted a conspiracy in restraint of trade. The article then declared that the provisions in regard to Clearance and Zoning Boards in the so-called Code of Fair Competition of the Motion Picture Industry, adopted under the NRA, "obviously constituted a conspiracy." It also stated: "In other parts of the code there were provisions for the compulsory use of the Optional Standard License Agreement and for the maintenance of minimum admission prices specified in these agreements, and a stringent prohibition against lowering the announced admission prices by rebates in any form. A violation by an exhibitor of these provisions would result in the shutting off of his film supply. "These provisions not only placed the stamp of legality upon forbidden practices, but they also required the very men injured by them to participate in the violation of the law." In the action of A. B. Momand v. Griffith Amusement Company, et al. (D.C. W.D. Okla. No. 6517, Law) in which the writer was counsel for the plaintiff, the Court found and concluded : "The Association [the Hays Office] fostered adoption in the exchange centers of the practice of clearance or protection, and during the summer of 1930 the general counsel of the Association supervised and advised the conferences of the exchanges on the subject. Conferences were held in the exchanges and so reported at a meeting of the Association in September, 1930." "The promotion and adoption by the Association and its memLers in May, 1930, of a plan for local uniform clearance and zoning was an unreasonable restraint of trade, whenever and wherever said plan was put into effect." 20 United States v. Crescent Amusement Co., 323 U.S. 173. "Bigelozv v. RKO Radio Pictures, Inc., (CCA. 7) 150 F. 2d 877; 326 U.S. "Goldman v. Loew's, Inc., (CCA. 3) 150 F. 2d 738. 23 United States v. Schine Chain Theatres, Inc. (W.D. N.Y.) 63 F. Supp. 229. 24 In an article on "Monopoly of Product" in Harrison s Reports. May 23, 1936, after showing how a competing exhibitor might be put out of business by being deprived of product, the writer stated that it had not been "necessary for a producer-controlled circuit to prevent independent exhibitors from showing major films," and added: "Because the value of a picture depends in a large measure upon its novelty, the same result may be accomplished by delaying the delivery of films until their value has substantially disappeared. It is merely the difference between sudden death ancf slow torture. To this ingenious practice has been given the name 'Protection'." 25 The identical remedy (excluding arbitration) was granted fifty-six vears ago by the Congress of the United States, when, on July 2, 1890, they enacted "AN ACT to protect trade and commerce against unlawful restraints and monopolies" — popularly referred to as the "Sherman Anti-Trust Law." A WAY TO COMBAT THE THREAT OF INVASION Among the numerous reasons for the exhibitors' alarm over the proposed system of buying and selling pictures through competitive bids is the possibility that the system would, not only leave the established exhibitor open to invasion by a new comer, but also create a rash of indis criminate theatre building that may result in many communities being dangerously overseated. There is no question that the threat of invasion, which has always existed to some degree, has been heightened by the court's ruling that any qualified person will have the right to bid for pictures. It is unpredictable as to whether or not the court, in handing down a final decree, will heed the exhibitors' opposition to auction-selling, but it is doubtful whether any modifications the court might make in the decree will in any way restrain a newcomer, or even an experienced exhibitor, from building a competitive theatre, except, of course, in the case ol the theatre-owning distributors, whose expansion in any area will be under the supervision of the court. Those of you who might be concerned over the possibility of your community's becoming overseated, because of a rash of indiscriminate theatre building, should read again the warning and advice given in these columns in the May 19, 1945 issue, which dealt with the control of theatre building. The editorial, which is as timely today as it was then, tollows in part: "... The prosperity that the people of this country have enjoyed during the last few years has enabled many of them to accumulate sizeable bank accounts and, now that the trend is back to normalcy, many individuals are shopping around for enterprises that will give them post-war security. "The motion picture theatre, to those who are unacquainted with show business operations, seems to be a lucrative business. And one can hardly blame them for being impressed, because the fantastic salaries paid to picture people in Hollywood, and the tremendous dollar grosses that arc publicized in both the daily and trade papers, are enough to make one's head swim. If one could only convince these people of the pitfalls in our business . . . they might think twice before investing their money. But in most cases such an approach by an exhibitor to a prospective exhibitor would be looked upon with suspicion; he might leel that he was being talked out of a 'good thing.' "Yet the fact remains that a surge of indiscriminate theatre building on the part of, not only newcomers, but also those in the business, without regard for a community's ability to support more than a given number of theatres, threatens to undermine the orderly conduct of the exhibition business. Competition can often be beneficial, but 'over-seating' is usually disastrous to all concerned. "Established exhibitors seeking some measure of protection can do something about this impending condition before it is too late. "In the . . . November 11 [1944] issue, I reproduced an ordinance adopted by the City Council of Winchester, Kentucky, on February 19, 1937, regulating the operation of motion picture theatres and other similar places of public entertainment within the city limits. This ordinance was modeled alter a proposed ordinance drafted by my attorney a number of years ago, prescribing the conditions under which new theatres might be built, and it is designed to protect the established exhibitor. It is an effective ordinance because, unlike others, which limit the number of theatres in accordance with the number of inhabitants, thus leaving their constitutionality doubtful, this one is predicated on the police powers of the local governing body, and would thus have a better chance of being upheld if challenged in the courts. "Those who have copies of the November 11, 1944 issue of Harrison's Reports may extract that ordinance and present it to the city councils for action; those who have misplaced their copies may apply to this office for another copy. "Now is the time lor action, before the reckless surge of theatre building gets under way. You must not permit yourself to become complacent merely because building operations are still under strict control. The restrictions may be lifted momentarily. Then it will be too late for preventative measures. Remember that you cannot build a dam while the flood waters are rushing in."