Harrison's Reports (1946)

152 Those who violate the Act may not reap the benefits of their violations and avoid an undoing of their unlawful project on the plea of hardship or inconvenience. That principle is adequate here to justify divestiture of all interests in some of the affiliates since their acquisition was part of the fruits of the conspiracy. . . ." In the Schine Case, after pointing out the unusually rapid growth and the great power of the defendants, Judge Knight stated the contention of the Government that the defendants had violated the Sherman Act by the use of their "great buying power to suppress competition by bringing about various restrictions on the competitors' ability to compete," resulting in the elimination of competition; "that this suppression has been brought about in various ways," such as depriving a competitor of product, acquiring theatres by threats to buy or build or by agreements to employ the competing exhibitors, and by unreasonable clearance. The Court concluded that the defendants had violated the law. They have maintained an unlawful combination by which they have unreasonably restrained interstate com' mercc. They have monopolized "the business of operating theatres and the supplying of major films in various cities and towns;" and each major distributor has aided and abetted them in restraining trade and monopolizing theatre operations. The defendants, by their great film buying power, have exerted pressure on the distributors to obtain privileges. And, in the language of the District Court: "The means and methods employed by the different dc fendant corporations through their officers and authorized representatives to obtain a 'monopolistic' control were numerous. Principally among these were arbitrarily depriving independents of first and second run pictures, securing unreasonable clearances, making threats to build or open closed theatres to prevent construction or operation by independents, lowering admission prices, obtaining rental concessions, restricting independents who sold to Schine as to periods and places of operation, making long time franchise agreements covering the 'Circuit.' " In some situations Schine "was arbitrarily able to keep independents from opening a theatre in the town with suitable run of the product." In several towns Schine cut admission prices and in others gave out cut-rate tickets. In agreements for the purchase of theatres the covenants preventing competition by the independents were unreasonably restrictive as to time and area. Franchises gave Schine unusual benefits and were utilized as means of restraint. Its great buying power enabled it to obtain special privileges or concessions not obtainable by independents. It secured contracts providing for lower admission prices than those of independent subsequent runs. In ordering a far-reaching injunction and in decreeing the dissolution of the combination the Court reasoned: "The motion picture business in production, distribution and exhibition has come to be a leading industry in this country. The producer-distributors and chains of exhibitors occupy positions from which 'monopolization' is easily brought about. . . . Fair competition should benefit the public, but 'monopolization' when exercised by a strong wide-reaching organization or group of affiliated organizations crushes or weakens opposition, eliminates fair competition to the disadvantage of the public and the individual competitor." In the White Bear Case, which was an action for damages against a theatre operating corporation and some of its officers, the Court held that overbuying first run films, not to secure a sufficient supply for the legitimate conduct of the defendant's business, but to prevent them from being available to the plaintiff, with the intention of driving it out of business, constituted a conspiracy and an attempt to monopolize, in violation of the anti-trust laws. The essential similarity of many of the facts cited in these important opinions to many of the facts found by the Expediting Court are obvious. Later, in considering the remedy ordered by that Court, there will be further comment upon this similarity and also upon an important difference in the findings. But evidence of monopolistic practices is not invariably an essential to the proof of the existence of a monopoly. For a long time it has been the law that a monopoly may be created by the acquisition of great wealth and power for deliberately calculated purposes of control, resulting in the elimination of competition.*4 In recent years it has been decided by courts of eminent authority that the intentional acquisition and exercise of monopolistic power to eliminate competition, even without predatory practices directed toward the destruction of competitors, constitutes a monopoly within the scope of the anti-trust laws." And the Supreme Court ruled the day before the decision of the Statutory Court, that a combination or conspiracy to acquire or maintain the power to exclude competitors was illegal, and that, neither the actual exercise of the power, nor the actual exclusion of competitors, was necessary to the crime of monopolization." In considering the remedy granted by the Expediting Court, which is the next subject of discussion in this paper, it is necessary to keep these principles of the law of monopolizing firmly in mind. "At the commencement of tbc discussion of this topic ii the following: "What has been the effect upon competition in the industry of the consolidation of corporations producing and distributing films and operating theatres? The possession of strength is a temptation to use it; power may be dangerous, when directed by ignorance, ambition or greed. Generally the result has been to give producer owned theatres a substantial monopoly of major films, to the exclusion of independent exhibitors. Almost invariably they have secured the films first run, with long periods of protection. In some instances, however, they have insisted upon the exclusive right to exhibit the films in their respective localities, and, less frequently, they have bought or reserved, or engrossed, a number of films they were unable to use." "Hood Rubber Co. v. United States Rubber Co., 229 Fed. S8S. -National Cotton Oil Co. v. Texas, 197, U.S. 115. 41 National Biscuit Co. v. Federal Trade Commission, 229 Fed. 733, 738. "United States v. E. C. Knight Co., 156 U.S. 1, 16. Northern Securities Co. v. United States, 193 U.S. 197. "Standard Oil Co. v. United States, 221 U.S. I, 61. MBigelow v. Calumet & Hecla Co., 167 F. 704, 716. "Ballard Oil Terminal Corpn. v. Mexican Petroleum Corpn. (CCA. I) 28 F. (2d) 91, 99. "United States v. Great Lakes Towing Company, 208 F. 733, 743. "Montague v. Lowry, 193 U.S. 38. "United States v. Brims. 272 U.S. 549; White Bear Theatre Corporation v. State Theatre Corp. (CCA. 8) 129 F. (2d) COO; Mid-West Theatre Co. v. Co-operative Theatres (D.C., E.D. Mich., S.D.) 43 F. Supp. 216; Goldman Theatres, Inc. v. Loev/s, Inc. (CCA. 3) 150 F. 2d 738. « United States v. Schine Chain Theatres, Inc., (W.D.N.Y.) 63 F. Supp. 229; United States v. Crescent Amusement Co., 323 U.S. 173; White Bear Theatre Corpn. v. State Theatre Corpn. (CCA. 8) 129 F. (2d) 600; Mid-West Theatres Co. v. Cooperative Theatres, (D.C, E.D., Mich., S.D.) 43 F. Supp. 216. The existence of monopolistic practices was the basis of findings of monopolizing in the two Maine actions summarized in Harbison's Reports of November 20, 27 and December 4, 1943, under the title "Amazing Facts and Findings." "Northern Securities Co. v. United States, 193 U.S. 197. United States v. Reading Co., 253 U.S. 26. United States v. Lehigh Valley R.R. Co., 254 U.S. 255. "United States v. Pullman Co., (D.C, E.D., Pa.) 50 F. Supp. 123; (1943); United States v. Aluminum Co. (C.C.A. 2) 148 F. (2d) 416; (1945). In the Pullman Case, for example, a three-judge Expediting Court found that the defendant had obtained an almost complete monopoly of the manufacture of sleeping cars and the furnishing of sleeping car service to the railroads throughout the country. From an early date in its history the defendant had the intention of eliminating what a stockholders' record called ''useless competition." Before 1900 it bad acquired every other sleeping car company in the country which had not gone out of business or been absorbed by companies subsequently acquired by it. In no instance, however, was the acquisition the result of predatory practices, and in many instances the negotiations were initiated by the seller. But it maintained its monopolistic position by devices which made successful competition practically impossible, such as exclusive dealing contracts with the railroads, the refusal to furnish sleeping car service except with cars owned by it, and the making of long-term contracts with staggered expiration dates. "As a competition killer," the Court said, the long-term contract is an effective weapon." From its monopolistic position the defendant was able to dictate terms to its customers. It made a practice of securing sleeping cars only through its own manufacturing company. It had been able to prevent anyone else from entering the field. The Court concluded that, even though many of the acts and contracts were ordinarily within the defendant's rights, disassociated from any plan, it was the duty of the Court to look at the whole picture. "The sum total, it is clear, constitutes a complete domination by the defendants of a limited but important market. They have full (Continued on inside page)