Harrison's Reports (1946)

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, 1870. Harrison's Reports Yearly Subscription Rates: 1270 AVENUE OF THE AMERICAS Published Weekly by United States $15.00 (Formerly Sixth Avenue) Harrison's Reports, Inc., U. S. Insular Possessions. 16.50 M v , „. M v Publisher Canada 16.50 INew 1 orK w" 1 • P. S. HARRISON, Editor Mexico, Cuba, Spain 16.50 A Motion Picture Reviewing Service Great Britain 15.75 Devoted Chiefly to the Interests of the Exhibitors Established July 1, 1919 Australia, New Zealand, India, Europe, Asia .... 17.50 Ug Editorial p0i;Cy: 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. XXVIII SATURDAY, SEPTEMBER 28, 1946 No. 39 A Legal Analysis of the Statutory Court's Decision — No. 8 By George S. Ryan The Remedy The remedy for the violations of law by the defendants is specified in the order for a decree subsequently to be made by the Court when final judgment is entered. After providing for the dismissal of all claims against any defend' ant as a producer, the order grants relief in several ways: (1) an injunction against the condemned practices; (2) the inauguration of a competitive bidding system for runs and clearance; (3) divestiture of interests in pooled theatres; and (4), so far as the parties consent, the arbitration of disputes. "In order to secure compliance with the decree" the order also grants reasonable access by the Government to all books and papers of the defendants and a reasonable opportunity to interview their officers and employees. It specifies that proceedings under the decree shall be stayed pending appeal or for the purpose of enabling the parties to adjust their business without an unfair burden. It pro' vides also for retention of jurisdiction in the Court for the construction and enforcement of the decree and for the punishment of any violations of it. The last-mentioned provisions of the order are self' explanatory. Only the four numbered sections require comment here. (1) Injunctive Relief In a court of equity the time-honored remedy for a violation of property rights is an injunction to prohibit the con' tinuance of the violation. In an action under the anti-trust laws by the Government the right to an injunction is spedfied in the Sherman Act itself.69 The injunction to be contained in the decree runs against all the violations of the law by the defendants. These are enumerated in the first section of this paper,60 and have already been commented upon in some detail. The total extent of the prohibition will not be known until the final decree is actually entered. From the outline given in the order for the decree, however, it is clear that the injunction will effectually prevent a continuance of all the condemned practices. In view of the findings of the Court, it is reasonably certain that in the event of an appeal by any defendant this section of the decree will be sustained by the Supreme Court. (2) Competitive Bidding The provision to be made in the decree for the inauguration and maintenance of a competitive bidding system for run and clearance constitutes positive and affirmative relief, in contrast with the prohibitions of an injunction. In the motion picture industry, such a provision is at least novel, and, if not altered by the Supreme Court, will constitute a drastic change in the licensing practices of the industry. The new bidding system was first proposed by the Court in the section of the decision relating to clearance and run. Thereafter it is mentioned in several ways and in varying language. Because of the extreme importance of this system to all persons engaged in the industry, and because it is advisable, before arriving at any conclusions, to have clearly in mind all the views expressed by the Expediting Court and the factors that influenced their judgment, the language of the decision will be quoted or summarized at some length. After mentioning the fixed system of clearances, runs and admission prices confronting both independent distributors and exhibitors, the Court said: ". . . The only way competition may be introduced into the present system of fixed prices, clearances, and runs is to require a defendant when licensing its pictures to other exhibitors to make each picture available at a minimum fixed or percentage rental and (if clearance is desired) to grant a reasonable clearance and run. When so offered, the licensor shall grant the license for the desired run to the highest bidder if such bidder is responsible and has a theatre of a size, location, and equipment to present the picture to advantage. In other words, if two theatres are bidding and are fairly comparable the one offering the best terms shall receive the license. Thus price fixing among the licensors or between a licensor and its licensees as well as the noncompetitive clearance system may be terminated, and the requirements of the Sherman Act, which the present system violates, will be adequately met. The administrative details involved in such changes require further consideration. We are satisfied that existing arrangements are in derogation of the rights of independent distributors, exhibitors and the public, and that the proposed changes will tend to benefit them all." In considering the restraints caused by formula deals, master agreements and franchises, the Court declared : ". . . In our opinion these restraints will be obviated or at least sufficiently mitigated by requiring a distributor wishing its pictures to be shown outside of its own theatres to offer to license each picture to all theatres desiring to show it on a particular run and, if the theatres are responsibly owned and otherwise adequate, to grant the desired run to the higher bidder." In the opinion of the Court moveover runs and provisions for "overage and underage," to permit a circuit to apply a deficit in the playing time of one theatre to one or more other houses, are incompatible with the bidding system. But "extended" or "repeat" runs are not objectionable "if reasonably limited in time when other exhibitors are given the opportunity to bid for similar licenses." The Court also left the door open to revise any other practices that might inter' fere with the "effectiveness of the bidding system." In the section of the decision relating to block booking the Court stated: ". . . The distributor may of course not license his pictures at all, but if he does license them, he must do so severally and, in accordance with the bidding procedure previously indicated, must license them to the exhibitor or exhibitors who are qualified and offer the best terms for the various runs." (Continued on last page)