Harrison's Reports (1946)

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 , on M V uonsner Canada 16.50 wew 1 orK a* 1 ' P. S. HARRISON, Editor Mexico, Cuba, Spain 16.50 A Motion Picture Reviewing Service Great Britain 15.76 Devoted Chiefly to the Interests of the Exhibitors Established July 1, 1919 Australia, New Zealand, India, Europe, Asia 17.50 Itg Editorial p0iiCy: 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 12, 1946 No. 41 A Legal Analysis of the Statutory Court's Decision — No. 10 By George S. Ryan (3) Divestiture of Theatres (Continued) It is settled law, as indicated by the quotation of the Court from the Pullman Case, that the mere fact that there is only one store in a town— or, it might be added, one first-run exhibitor in a city — does not constitute a monopoly in the legal sense. Conversely, it is "legally objectionable" if the merchant — or defendant exhibitor — "maintains his position by devices which compel every one to trade with him exclusively. . . ." And, as pointed out, an exhibitor is guilty of monopolizing or attempting to monopolize if he engages in practices designed to eliminate competition and thereby establish a monopoly. With these undisputed principles of the anti-trust laws in mind, let us analyze the facts found by the Expediting Court. The unlawful practices of the defendants are: admission price fixing; run and clearance established by conspiracy; formula deals, master contracts and franchises; discriminatory license provisions; block booking; blind selling; pooling of theatres; operating, buying and booking agencies; and discrimination against independent exhibitors by a great number of devices. For the most part these practices were considered by the Statutory Court from the point of view of the defendants as distributors, although in some instances the violations were charged against the distributor-exhibitor defendants. In any event, it is clear that, with the possible exception of block booking and blind selling, the condemned practices could not have been put into effect without the demand or the acquiescence of the defendants as exhibitors. Even in connection with block booking and blind selling, which it may be assumed were adopted by the defendants as distributors, it is obvious that the employment of these practices against independent exhibitors and not against defendant exhibitors constitutes unlawful discrimination. If the practices condemned by the Court were employed for the purpose and with the effect of injuring independent exhibitors and restricting or eliminating their competition, then obviously they constitute monopolistic practices. On this issue what does the Statutory Court find? In the "Analysis of the Court's Opinion" from a layman's point of view in Harrison's Reports of July 20, 1946, in connection with a discussion of this issue, it was stated that some independent exhibitor leaders argued that in the portion of the opinion relating to "Discrimination among Licensees" the Court found the "competitive advantages" of certain contract provisions "so great that their inclusion in contracts with the larger circuits constitutes an unreasonable discrimination against small competitors in violation of the anti-trust laws." In the analysis, there is also an excerpt from the opinion of the Court on the subject of "Clearance and Run" to the general effect that independent distributors and exhibitors have been met by a fixed scale of clearances, runs and admission prices to which they have been obliged to conform, and which they had no fair chance to change. In amplification of these views, it may be pointed out that the opinion of the Court contains statements along the following lines: "If the exhibitors are not restrained by the distributors in the right to fix their own prices, there will be an opportunity for the exhibitors, whether they be affiliates or independents, to compete with one another. This is because one exhibitor by lowering admission prices will be able to compete with other exhibitors in obtaining patrons for his theatre — a competition which may well benefit both exhibitors and the public paying the admission fees." After stating that large circuits, by use of their great film-buying power, had been able to negotiate for grants of unreasonable clearance or unjustified prior runs, and that the defendants may not have entered upon a general policy of discriminating against independents in their grants of clearance, the Court said that the major defendants — ". . . have acquiesced in and forwarded a uniform system of clearance and in numerous instances have maintained unreasonable clearances to the prejudice of independents and perhaps even of affiliates. . . ." "It is clear that the purpose of these two types of clearance agreements was to fix the run and clearance status of any theatre thereafter opened, not on the basis of its appointments, size, location, and other competitive factors normally entering into such a determination, but rather upon the sole basis of whether it were operated by the exhibitor-party to the agreement." "Clearances are given to protect a particular run against a subsequent run. . . ." ". . . These formula deals have been negotiated without, so far as we are informed, any competition on the part of independent theatre owners who would labor under a great disadvantage in attempting severally to match or outbid the offers of a circuit that was making offers for all of its theatres." In speaking of illegal "pooling" of theatres the Court declared there had been "restraint of competition in exhibition by the five major defendants through ownership of theatres jointly with one another or if their interest be more than five per cent even where jointly held with independents. . . ." After enumerating and commenting upon discriminations against independent exhibitors in favor of large affiliated and unaffiliated circuits, the Court declared: ". . . The competitive advantages of these provisions are so great that their inclusion in contracts with the larger circuits constitutes an unreasonable discrimination against small competitors in violation of the anti-trust laws " The Court stated that "The only way competition may be introduced into the present system of fixed prices, clearances and runs" is to install a system of competitive bidding. "A system of fixed admission prices, clearances and block booking is so restrictive of competition in its tendency that it should be modified to comply with the terms of the Sherman Act. ... In various ways the system stifles competition and violates the law. . . ." (Continued on inside page)