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 I, 9rt N V Publisher Canada 16.50 New Y ork zo» w T 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 Kg Editorial p0ncy: 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, NOVEMBER 16, 1946 No. 46 A Legal Analysis of the Statutory Court's Decision — No. 15 By George S. Ryan Buying and Booking Agencies From the opinion of the Expediting Court it is apparent that no defendant may lawfully operate theatres or buy and book films through an agency acting for any other exhibitor, affiliated or independent."5 But, as the prohibition is binding only upon parties before the Court, there may be doubt whether also a buying or booking agency, acting for independent exhibitors or groups of independent exhibitors, is illegal. The question deserves consideration, not only because some distributors may interpret the decision as outlawing all such combinations, but also because other exhibitors may be injuriously affected by the activities of such organizations. On this point there is no clear current of judicial authority. At first glance the decision of the Court seems to condemn all such organizations; but their language was primarily directed at agencies in which the defendants had an interest; and, as already stated, a judge of a United States District Court has ruled that a Michigan buying and booking combination was lawfully in existence, even though some of its activities were illegal."6 A booking agency which docs not engage in the business of buying films, except by spot-booking in isolated instances for individual members, is well within the law. No restraint of trade or tendency to monopoly can result from its normal operations. The legality of a buying agency, as well as of any similar combination, depends in large measure upon the nature and extent of its power, the method in which the power is exercised, and the relations of its members, not only to each other, but also to competitors. In a paper of this kind no rule can be stated that would be applicable to all such organizations. With hesitation, however, some general ideas may be advanced. The use of buying power, either by a circuit of theatres or a buying organization, to monopolize product, or to secure unreasonable preferences, or to injure competing exhibitors, or to minimize or eliminate competition, is clearly unlawful. In some circumstances, also an organization purchasing films for a number of exhibitors in competitive localities may come within the condemnation of the law, because of its tendency to eliminate competition between its members for the product of the various distributors. If, however, its activities are confined to purchasing pictures in a normal manner, without any element of coercion, for exhibitors operating in separate communities, it is difficult to perceive any legal objection to such an agency. Under the competitive bidding features of the proposed decree, in any event, the buying power of all such organizations will be rendered innocuous. In the future each defendant will license its product separately to each theatre, and will be unable to comply with any unwarranted demands. Under such a system, fairly administered, no improper operations will be practicable. Pooling Agreements The law condemns an agreement for the pooling or joint operation of theatres by the defendants because it tends to suppress or eliminate competition."' Inevitably such an arrangement restricts competition between the contracting parties. Because of the buying power of the combined theatres, particularly when controlled by powerful circuits, it may also tend to eliminate the competition of other exhibitors in the same area, and to create a local monopoly. Conversely, however, there may be situations where two independents are operating theatres in competition with affiliated houses and where, consequently, a joint operating arrangement is essential to their economic salvation. In such circumstances is a pooling arrangement illegal? Such an agreement, although affecting competition, apparently would have no tendency to create a monopoly. It might even tend in some degree to equalize the struggle between the independent exhibitors and the circuit, and in many situations to be what is regarded by the law as a reasonable arrange . ment to promote competition for the ultimate benefit of the public. Competitive Bidding In the section of this article relating to "The Remedy," a fairly comprehensive outline was drawn of the competitive bidding features of the proposed decree and of their probable effect upon the business of independent operators.08 Until the administrative details are finally determined no further suggestions can be advanced in regard to future procedure. It appears reasonably certain, however, that an independent exhibitor will have an opportunity to improve his playing position by bidding for a run that formerly has been unavailable. When the decree is entered, therefore, all independents should analyze it carefully to ascertain its effect upon their operations. Clearance It has already been pointed out that the Statutory Court have declared clearance unlawful because of the defendants' "concert of action in the formation of a uniform system," which constituted a conspiracy, and have condemned unreasonable clearance resulting from the exercise of filmbuying power."9 They indicated, however, that a grant of clearance was valid when not the result of conspiracy, when not accompanied by price-fixing stipulations, and when not unreasonable as to time or area. The ban of the Court is broad, relating generally to "the theatres to which they [the defendant distributors] license their films. . . ." Even in the light of this comprehensive condemnation the defendants have apparently made little, if any, change in existing clearance structures. What they intend to do after the entry of a final decree remains to be demonstrated. In the event they insist upon the perpetuation of the present structure, an exhibitor may have to decide whether or not to take positive action for the preservation of his rights. Undoubtedly some form of arbitration tribunal will be established for the determination of the reasonableness of clearance. Obviously, too, in some situations the only complete remedy may be by virtue of the anti-trust laws.100 In the meantime, however, it may be desirable for an exhibitor who is oppressed by the existing clearance structure to make forcible protest, in the first instance, to the distributors themselves. He should put himself definitely on record as being unwilling to tolerate it. Undoubtedly the distributors (Continued on last page)