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, 1879. 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 , _n M v Publisher Canada 16.50 Wew 1 orK 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 Itg Editorial Poiicy: 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, OCTOBER 5, 1946 No. 40 A Legal Analysis of the Statutory Court's Decision — No. 9 By George S. Ryan (3) Divestiture of Theatres The chief objective of the Government was that "the major defendants should be divested of their theatres in order that no distributor of motion pictures be an exhibitor." Except in connection with theatre "pools," the Court denied the Government's prayer for this relief. In the section of this article relating to "pooling agreements"84 it was pointed out that the Statutory Court had unequivocally branded as illegal the pooling of interests in theatres by exhibitor defendants, whether such arrangements were made between exhibitor defendants or between the exhibitor defendant and an independent exhibitor, and whether the arrangement took the form of an operating agreement, a lease, a joint stock ownership of theatreoperating corporations, or the joint ownership of theatres in fee. In prescribing a remedy for these violations of law the Court ordered that each defendant should cease and desist from ownership of any interest in a theatre in conjunction with another defendant-exhibitor; and that each defendant should cease and desist from joint ownership with an independent of an interest in any theatre greater than five per cent, unless its interest was ninety-five per cent or more. Where such interest is more than five per cent and less than ninety-five per cent, the joint interest should be dissolved either by a sale to or a purchase from the co-owner. Each of the defendants was enjoined from expanding its theatre holdings, except with the permission of the Court for the purpose of acquiring a co-owner's interest in jointly owned theatres. A defendant, however, might acquire theatres or interests in them in order to protect its investments or to enter a competitive field, if, upon application to the Court or other competent authority, such acquisition should be approved. The language is comprehensive in its prohibition. It includes substantially every conceivable way in which joint interests in theatres may be held. It leaves open no avenue of evasion. About 361 theatres in which the defendants had joint interests are affected. But this number does not include theatres in which a defendant has a joint interest with an independent, or theatres connected with a defendant through film-buying or management contracts or through corporations in which a defendant owns an indirect minor stock interest. The number of such theatres is not stated in the decision. The reasons given by the Expediting Court for its refusal to require divestiture by the defendant producers-distributors of their interests in other theatres may be summarized as follows: (1) Only in certain localities does the ownership by the defendants even of first run theatres approximate a monopoly. (2) In localities where there is ownership by a single defendant of all the first run theatres, there is no sufficient proof that the ownership has been acquired for the purpose of creating a monopoly and has not arisen from the inertness and lack of financial ability of competitors or from the preference of the public for the best equipped houses. (3) There is no evidence that in such localities other exhibitors have been prevented from owning first run theatres, and consequently there is no monopoly. (4) There is no substantial proof that any of the corporate defendants was organized or has been maintained for the purpose of achieving a national monoply. (5) The major defendants have interests in 3,137 theatres, or only 17.3? per cent of the total number in the United States. (6) In about 60 per cent of the 92 cities having populations of over 100,000 there are independent theatres in competition with those of the major defendants, and in about 91 per cent of these cities there is first run competition between independents and some of the major defendants or among the major defendants themselves — except so far as it may be restricted by unlawful trade practices. (7) In all the 92 cities there is competition in some run. (8) If divestiture were ordered the Court would still have to give relief against the unlawful trade practices. (9) If the unlawful practices were employed in the future in favor of powerful independents they would effect the same undesirable results now existing. (10) Total divestiture would be unjust to the defendant corporations and the public would not accomplish any useful purpose. (11) "... The opportunity of independents to compete under the bidding system for pictures and runs renders such a harsh remedy as complete divestiture unnecessary, at least until the efficiency of that system has been tried and found wanting." The Statutory Court explained that each defendant had a right to own and operate theatres, "and it takes greater proof than that each of them possessed great financial strength, many theatres, and exhibited the greater number of first-runs to deprive it of the ordinary rights of ownership." Except for the unlawful trade practices, which will be abolished, "there is general competition among all the defendants as well as between them and independent distributors for the exhibition of their various pictures." The Court then proceeded to quote from the Pullman Case, which has already been commented upon at some length in this article,05 as follows: "If there is only one store in a town at which every one trades, that fact docs not itself constitute a monopoly in the legal sense. It is only when the merchant maintains his (Continued on last page)