Harrison's Reports (1949)

IN TWO SECTIONS— SECTION ONE Entered as second-clays 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 I, on M V Publisher Canada 16.50 Wew 1 ork zv' n T P. S. HARRISON, Editor Mexico, Cuba, Spain 16.50 A Motion Picture Reviewing Service Great Britain 17.50 Devoted Chiefly to the Interests of the Exhibitors Established July 1, 1919 Australia, New Zealand, India, Europe, Asia .... 17.50 Ug Editoria, 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. XXXI SATURDAY, AUGUST 20, 1949 No. 34 ABRAM F. MYERS' ANALYSIS OF THE N. Y. STATUTORY COURTS DECISION Because of the vital nature of the decision handed down last month by the Federal Statutory Court in connection with the Government's anti-trust suit against the major companies, and because exhibitors everywhere are interested in the opinions of Mr. Abram F. Myers, National Allied's general counsel, whose views on the legal position of the industry, particularly with regard to anti-trust violations, have been upheld by the courts consistently, Harrison's Reports is herewith reproducing the full text of his analysis of the decision, as contained in an organization bulletin issued this week : "THEATRE ACQUISITIONS PART OF THE CONSPIRACY "On December 14, 1945 Allied's General Counsel, in behalf of the Conference of Independent Exhibitors' Association, filed a brief in the District Court as amicus curiae. It closed with the following paragraph: " 'And those practices are not to be judged as separate, isolated acts — as defendants would have it — but as integral parts of the system by which the monopoly has been created and maintained.' "The basic error in the District Court's first decision was in failing to tie in defendants' theatre acquisitions and operations with their obvious — one might almost say admitted — conspiracy to fix admission prices, uniform clearances, etc.; and in viewing their theatre holdings separately instead of collectively. As the result, the District Court felt that competitive bidding, the elimination of pools and joint holdings and injunctions against illegal trade practices afforded an adequate remedy. "The Government attorneys who negotiated the improvident consent decree of November 20, 1940 were guilty of the same error, only more so. They ignored the conspiracy and the decree did not even deal with the fundamental vice of price-fixing. All they could see in the case were certain trade practices which, they felt, could be remedied by giving the independent exhibitors a highly restricted arbitration privilege. "Judge Hand in his recent opinion did not repeat that error. He treated the case as a unit and not a heterogeneous mass of unrelated charges; and he then concluded, in keeping with the requirements of law and logic, that virtually all the defendants had done, including their theatre acquisitions (called 'vertical integrations') was in furtherance of the unlawful conspiracy. "The Court's position is summed up in the following passage from Judge Hand's opinion: " 'But here we are presented with a conspiracy among the defendants to fix prices, runs and clearances which we have already pointed out was powerfully aided by the system of vertical integration of each of the five major defendants. Such a situation has made the vertical integrations active aids to the conspiracy and has rendered them in this particular case illegal, however innocent they might be in other situations. We do not suggest that every vertically integrated company which engages in restraints of trade or conspiracies will thereby render its vertical integration illegal. The test is whether there is a close relationship between the vertical integration and the illegal practices. Here, the vertical integrations were a definite means of carrying out the restraints and conspiracies we have described. . . . " *In respect to monopoly power, we think it existed in this case. As we have shown, the defendants were all working together. There was a horizontal conspiracy as to price fixing, runs and clearances. The vertical integrations aided such a conspiracy at every point. In these circumstances, the defendants must be viewed collectively rather than independently as to the power which they exercised over the market by their theatre holdings. . . . The statement in our former opinion that the defendants were to be treated individually is subect to our comments in dealing with Findings 152, 153 and 154.1 We were then proposing to set up a bidding system which was thought adequately to restore competition and, therefore, to render a treatment of the defendants in the aggregate as irrelevant. We regard such treatment as now necessary.' "These considerations, fortified by findings as to the extent of the control over the market exerted by the defendants through their theatres, led inexorably to the following conclusion as to the remedy: " 'As an injunction is regarded as an insufficient remedy there must, in our opinion, be a divorcement or separation of the business of the defendants as exhibitors of films from their business as producers and distributors. Just as in the Crescent case affiliation was held to furnish the incentive for carrying out the conspiracy that there existed, we find that vertical integration has served a similar purpose in the case at bar.' "HOW PICTURES WILL BE SOLD "The District Court in its first decision thought competitive bidding was a cure-all for the discriminations in the licensing of pictures disclosed by the evidence, consequently its decree contained no provision in reference to discrimination. In striking out the competitive bidding provision the Supreme Court called attention to the omission and directed that it be cured. In its latest opinion the District Court ordered the inclusion in the final decree now due to be entered of a provision which is contained in the Paramount consent decree entered last winter. Such provision would enjoin the defendants2 'from licensing any feature for exhibition upon any run in any theatre in any other manner than that each license shall be offered and taken theatre by theatre, solely upon the merits and without discrimination in favor of affiliated theatres, circuit theatres, or others.' "There is considerable current discussion as to whether this provision makes bidding mandatory in competitive situations. Judge Hand sensed that objection would be made and entered the Court's disclaimer. 'It may be objected,' said Judge Hand, 'that this is competitive bidding which has been rejected by the Supreme Court, but it neither involves calling for bids nor licensing picture by picture. A group of pictures may be licensed to one who wishes to take them without conditions being imposed that he can obtain one only if he purchases the group. "It is apparent that somewhere along the line the meaning of 'discrimination' as used in the earlier opinion has been lost. Heretofore it has been used in connection with certain contract provisions which were made available to the circuits but withheld from independent exhibitors. As pointed out by the Supreme Court, 'These included suspension of the terms of a contract if a circuit theatre remained closed for more than eight weeks with reinstatement without liability on reopening; allowing larger privileges in the selection and elimination of films; allowing deductions in film rentals if double bills are played; granting moveovers and extended runs; granting road show privileges; allowing overage and underage; granting unlimited playing time; excluding foreign pictures and those of independent producers: and granting rights to question the classification of features for rental purposes.' "While Allied would be the last to contend that the provision which the Court has approved for the forthcoming decree is limited to the above-enumerated examples of discrimination and does not include arbitrary discrimination (Continued on bac\ page)