Harrison's Reports (1947)

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 , M Publisher Canada 16.50 Nevf Yor* 20. * • P. g. HARRISON, Editor Mexico^ Cuba, Spam 16.50 A Motion Picture Reviewing Service A^teaH Zealand" Devoted Chiefly to the Interests of the Exhibitors Established July 1, 1919 India, Europe, Asm .... 17.50 Ug Editorl&1 Policy: No problem Too Big for Its Editorial Circle 7-4622 <J5C a Copy Columns, if It is to Benefit the Exhibitor. A REVIEWING SERVICE FREE FROM THE INFLUENCE OF FILM ADVERTISING Vol. XXIX SATURDAY, JANUARY 4, 1947 No. 1 Final Decree Establis On Tuesday, December 31, the special statutory court, composed of U. S. District Judges John Bright and Henry W. Goddard, and U. S. Circuit Judge Augustus N. Hand, issued a final decree determining the Government's New York anti-trust suit against the major companies. Except for a modification of the system of bidding for pictures, and the termination of the arbitration system as set up under the 1940 Consent Decree, the Court adhered closely to the opinion it handed down last June 11. (The full text of the Decree appears on the bank and inside pages of this issue.) Having found that the evidence submitted by the Govern' ment established various infractions of the Sherman Act on the part of each of the defendants, the Court ordered the distributors enjoined from (1) fixing minimum admission prices in license agreements; (2) agreeing to maintain a uniform system of clearance; (3) granting clearance between theatres not in substantial competition; (4) granting or enforcing unreasonable clearance against theatres in sub' stantial competition; (5) further performing existing fran' chise agreements, and from making similar agreements in the future; (6) making or further performing any formula deals or master agreements; and (7) performing or entering into any license that makes the licensing of one picture conditional upon an agreement to accept one or more other pictures. The Decree provides that, whenever clearance is challenged as being unreasonable, the burden of proving its reasonableness shall be on the distributor. In cases where an exhibitor is enabled to buy more than one feature in advance of trade showings, the Decree provides that he be given a twenty per cent cancellation privilege on the number of pictures he buys. This privilege, however, must be exercised within ten days after he has been afforded an opportunity to inspect the picture. The Court met some of the objections against the competitive bidding system described in its June 1 1 opinion by modifying the system so that competitive bidding will be necessary only within a competitive area, and then only when an exhibitor demands it. To clarify what it means by a "competitive area," the Court defines it as a "territory occupied by more than one theatre in which it may fairly and reasonably be said that such theatres compete with each other for the exhibition of features on any run." The Decree goes into specific detail regarding procedure for the handling of competitive bidding: It provides for the distributors, when offering to license a feature, to notify all exhibitors within the competitive area not less than thirty days in advance of the date when bids will be received, and to state in each offer the amount of flat rental required as the minimum for a specified number of exhibition days, the time when the exhibition is to commence, the availability, and the clearance, if any, to be granted for each run. Within fifteen days after receiving such notice, any exhibitor in the competitive area may enter a bid for the picture, and his bid shall state what run he desires and what he is willing to pay, specifying either flat rental, or a percentage of the gross receipts, or both, or any other combination, and specifying also the clearance he is willing to accept, and the time and days he desires to exhibit it. The distributor is granted the right to reject all bids, but in the event of the acceptance es New Sales Policies of any, the license must be granted to the highest responsible bidder, one who has a theatre of a size, location and equipment adequate to yield a reasonable return to the distributor. Each license must be offered theatre by theatre and picture by picture, and must be granted solely on the merits, without discrimination in favor of affiliates or old customers. The provisions covering competitive bidding, as well as conditioning the licensing of one feature on the licensing of another (block-booking), do not become effective until July 1, 1947. The distributors are enjoined also from arbitrarily refusing an exhibitor's demand for a license or run. As exhibitors, the defendants are enjoined from making or further performing franchise agreements, formula deals, and master agreements; continuing the "pooling" of theatres; leasing theatres to either another defendant or independent exhibitor in the same competitive area in return for a share of the profits; and operating, buying, or booking features for any of its theatres through any agent acting in a similar capacity for any other exhibitor, independent or affiliate. In the matter of divestiture of theatres, the Court did not go beyond its original ruling of partial divorcement; that is, it ordered the theatre-owning defendants to divest themselves of ownership in any theatre held jointly with one or more of the other defendants, regardless of the size of the interests involved. In theatres owned jointly with an independent exhibitor, the Court ordered termination of such joint ownership wherever a defendant had an interest of more than five per cent but less than ninety-five per cent. The defendants were given two years in which to dissolve these joint holdings, either by a sale to, or purchase from, the co-owners. In acquiring a co-owner's interest, however, a defendant must first satisfy the Court that such acquisition will not unduly restrain competition. Each of the defendants is required to make periodic reports to the Court outlining the extent to which it has complied with this provision. The Decree provides also for the Department of Justice to be given an opportunity to be heard in regard to theatre acquisitions before any such acquisitions shall be approved by the Court. The Court ruled that nothing contained in the Decree shall interfere with the right of a distributor-defendant to license its own pictures in its own theatres on whatever terms and conditions it desires. The existing Consent Decree was nullified except insofar as may be necessary to conclude arbitration proceedings now pending. In discontinuing the arbitration system, the Court, in a memorandum that accompanied the Decree, stated that it did so because of the unwillingness of some of the parties to consent to its continuance. It recommended strongly, however, "that some such system be continued in order to avoid cumbersome and dilatory court litigation. . . ." For the purpose of securing compliance with the Decree, the Court provided for the Department of Justice to have access to the defendants books and records. The Decree becomes effective sixty days from December 31, 1946, with an additional stay of thirty days in the event cither the Government or the defendants take an appeal to the Supreme Court. Harrison's Reports regrets that, for lack of space, it cannot comment on the Decree. But it will refer to it again in subsequent issues.