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 . v l on w v Publisher Canada 16.50 New York 20' P. S. HARRISON, Editor Mexico, Cuba, Spain 16.50 A Motion picture Reviewing Service AultraUa^New Zealand.' Devoted Chiefly to the Interests of the Exhibitors Established July 1. 1919 India, Europe, Asia .... 17.50 Ug Editorial Poiicy. No probiem Too Big for Its Editorial circle 7-4622 d&C a copy Columns, if It is to Benefit the Exhibitor. A REVIEWING SERVICE FREE FROM THE INFLUENCE OF FILM ADVERTISING Vol. XXVIII SATURDAY, OCTOBER 19, 1946 No. 42 A Legal Analysis of the Statutory Court's Decision — No. 11 By George S. Ryan (3) Divestiture of Theatres (Continued) In at least one very important respect, however, the facts found by the Statutory Court are at variance with the find' ings in the other two cases. In both the Crescent and the Schine decisions it was stated without qualification that the acts were committed for the purpose of eliminating competition and acquiring monopolistic control. The conclusions of the Statutory Court are to the contrary. In language already quoted they said that there was "no substantial proof that any of the corporate defendants was organized or has been maintained for the purpose of achieving a national monopoly. . . ."; and that there was no sufficient proof that ownership by a single defendant of all first-run theatres in a locality had been "for the purpose of creating a monopoly. . . ." But on several occasions the Expediting Court mentioned the great power of the defendants, with the obvious, if not openly-expressed, intimation that the possession of such power constitutes a temptation to use it in disregard of the rights of competitors. In connection with the pooling and joint ownership of theatres, they suggested that such arrange ments between independent exhibitors might be regarded as unreasonable restraints; but that "This result is certain when some of the parties are of major stature in the movie industry and have in other ways imposed unlawful re straints upon it. . . ." They also declared that the resulting elimination of competition between a major defendant and another joint owner "is unreasonable in view of the defendants being a powerful factor in the industry capable of exerting vast influence to its ends, and of the methods it has employed to restrain and control normal competition in distributing and exhibiting motion pictures. . . ." This reasoning coincides with the view expressed by Judge Knight in the Schine Case that ". . . the producerdistributors and chains of exhibitors occupy positions from which 'monopolization' is easily brought about. . . ." In the absence of accurate knowledge of the evidence before the Court any comment upon the findings in regard to "national monopoly" would be of comparatively Little value. At the trial the Government relied largely upon documentary evidence. In the early stages of the litigation it took depositions of many of the leading representatives of the defendants, but to what extent these witnesses were examined in regard to the purpose and effect of theatre acquisition and ownership is merely a matter of conjecture.68 It should be noted also that, in the Crescent Case, the Supreme Court specifically mentioned that the combination had used its power for the purpose of restricting or eliminating competition; and that in the Schine Case the trial judge found that the defendants had maintained an unlawful combination by which they had unreasonably restrained interstate commerce. No explicit findings of a similar nature were made by the Statutory Court. But it is obvious that each defendant exhibitor, controlling a large circuit of theatres, was in itself a combination, in the legal sense of the word, and that, so far as it employed the practices con demned by the Statutory Court, it was restricting competition and restraining trade. Assuming that, in view of the findings of the Statutory Court, the defendants were guilty of unlawful restraints of trade, in the nature of monopolistic practices, notwithstanding the ultimate conclusions that no national or local monopoly of exhibition resulted, the question remains whether the employment of such practices makes any of the defendant exhibitors such a monopoly or a combination in restraint of trade that its dissolution should be decreed. In language already quoted the Court indicated that they had the right to require "complete divestiture," if such a "harsh remedy" were necessary. They suggested that a " 'root and branch' decree might be legally possible." The inference is that, in denying the relief requested by the Government, they were exercising the judicial discretion inherent in a trial court, particularly when sitting in equity. The law is clear that their findings of fact should not be revised on appeal, unless clearly erroneous.™ And in the Crescent Case the Supreme Court said they had freely modified decrees in Sherman Act cases, but that, because of the wide range of discretion in the District Court, they "will not direct a recasting of the decree except on a showing of abuse of discretion." Obviously, in exercising their judicial discretion to deny the Government's prayer for divestiture, the Expediting Court were greatly influenced by their belief that complete divestiture would withdraw the defendants from the exhibition field and "create a new set of theatre owners which would be quite unlikely for some years to give the public as good service as the exhibitors they would have supplanted. . . ." This view accords with another pronouncement to the effect that there was no proof that ownership by a single defendant of all the first run theatres had been for the purpose of creating a monopoly and had not "rather arisen from the inertness of competitors, their lack of financial ability to build theatres comparable to those of the defendants, or from the preference of the public for the best equipped houses. . . ." These views are emphasized by the Court, notwithstanding other findings of unlawful trade practices and of discriminations in favor of producer-owned theatres that obviously resulted in a tremendous advantage over any actual or potential independent competitor. They vary from the opinion expressed by Judge Knight in a clearly-reasoned decision in the Schine Case, in which he gave little weight to the contention of the defendant that the record did not disclose that Schine "has not furnished sufficiently attractive entertainment." And they appear to conflict with the opinion of the Supreme Court in the Crescent Case, which set aside as of little consequence the contention of the defendants "that the independents were eliminated by the normal processes ol competition; that their theatres were less attractive; that their service was inferior; that they were not as efficient business men as the defendants." (Continued on last page)