Harrison's Reports (1958)

140 HARRISON'S REPORTS August 30, 1958 in the 'request for offer' for the first week is 67 cents for each person 12 years of age and over, and 29 cents for each person under 12 'excluding infants.' Thus under this plan a person becomes an 'adult' at the age of 12 and a child between 12 and infancy must pay or be paid for. The form asks for a minimum guarantee in addition to the royalty payments, hence if attendance does not come up to the distributor's expectations, the exhibitor will have to make up the difference. It also calls for information con' cerning the admission prices the exhibitor proposes to charge, which information would be superfluous if Paramount con' templated licensing on a royalty basis and no more. But there are other and even more persuasive indications of a purpose to regulate admission prices. "In the first place, the request for bids is addressed to four drive-ins in the Tulsa area. Considering that all patrons attend drive-ins in cars, these theatres are assuredly competitive. If they waived their costs and a profit, the minimum admission they could charge would be the distributor's so-called royalty. Normally each licensed drive-in would add to this uniform capitulation an amount calculated to cover operating costs and yield a profit. Indulging the violent assumption that the distributor will not in some manner indicate the admission prices it thinks should be charged, the chances are that the drive-ins will independently arrive at uniform charges due to the similarity of their operations. And since the form letter accompanying the request for bids says that the two drive-ins licensed as a result of the bidding will be expected to play the picture simultaneously, Paramount doubtless expects them to charge the same prices, in hopes that both will be filled to capacity and one will not outdraw the other by charging a lower one. "With respect to the many drive-ins that do not charge for children, the requirement that they pay Paramount so much a head for each child admitted constitutes price-fixing, pure and simple. Moreover, in a case in Indiana, according to information in this association's file, Paramount demanded a royalty of 80 cents for adults during the first week. Asked how the company arrived at that figure the salesman replied: "They want $1.25 adult admission charged and 80 cents figures out approximately 70 per cent of the net $1.14.' (That is the net amount retained after deducting the admission tax.) Similar computations based on the royalty for adults for the second week and for children for both weeks show that the royalty payments, coupled with the 'intimated' admission prices, are artfully contrived to yield Paramount the 70 per cent of the gross for the first week and 60 per cent of the gross for the second week that it has been demanding of indoor theatres for this attraction. "A striking revelation of Paramount's true purpose appears in The Film Daily for June 16, 1958. In spelling out the policy for drive-ins, Edward G. Chumley, special U.S. and Canadian sales manager for "The Ten Commandments,' declared: 'We are not at this time interested in licensing any drive-in that cannot play the picture for at least two weeks ... to open on a Wednesday, Thursday, or Friday,' thus insuring two weekends. He then goes on to explain the "royalty" device, using this pregnant passage: '. . . the per person royalty which you (the salesman) shall seek shall be computed on the basis of the appropriate percentage of the net admission prices which other exhibitors in the area have charged for admission to their theatres on this production.' (Italics added.) "This royalty method waas first attempted by RKO with respect to a picture entitled 'Hans Christian Andersen.' In Judge Barnes' letter to Senator Schoeppel dated November 17, 1953 he gave his blessing to it in a single sentence: 'It is our considered opinion that it does not constitute the fixing of minimum prices by the parties to the license agreement and hence it is a proper method by which to determine the film rental to be paid by an exhibitor to the distributor.' In a recent letter to this association Judge Hansen, Barnes' successor, reaffirmed this opinion by reference to the former letter. Neither cited any authority or advanced any reasons in support of his 'considered opinion.' "The importance of this innovation should not be minimized because, at present, it is being used in connection with only one picture. The history of the business is that when one company succeeds with a new device for increas ing its revenue at the expense of the exhibitors, others soon adopt it. "The discussion above in the main has dealt with pricefixing tactics as evidenced in certain bid forms used by the film companies recently. There has also been prevalent in the past two years (and now is quite common) the practice by practically all film companies of releasing pictures to both first-run theatres and subsequent-runs in accordance with an agreed upon (by telephone conversation usually in advance of booking) admission price. In other words, if the first-run theatre agrees in advance to charge $1.25 (or an increased price over the theatre's regular price) then the film company will serve the print at an earlier date than it would if the exhibitor does not agree to charge $1.25. Likewise, those subsequent-run which will charge 90 cents (again an agreement in advance to raise the regular price) can play a picture earlier. If there is refusal to raise the price, the theatre plays the picture much later. These practices relate to negotiated or usual deals, not bidding, and destroy the Attorney General's tortured efforts to validate price-fixing as an adjunct to competitive bidding. "In the face of the plain language of the injunction the Attorney General's defense of the price-fixing activities of the film companies is superficial and unconvincing. But such an important question affecting the public interest (as all price-fixing does) should not be resolved solely as a matter of law. The Attorney General in the performance of his duty to enforce the antitrust laws should make an investigation to ascertain the effects of these selling policies on the public and on the theatres. "A simple field investigation in a limited number of cities and towns in various parts of the country would tell the story. If such a survey disclosed that prices were generally increased over the theatres' usual scales for certain designated pictures, that would constitute evidence of pricefixing. If it disclosed that theatres on the same run in competitive areas had advanced their admissions to a uniform figure, the proof would be irresistible. So far as we are aware all drive-ins East of the Mississippi River playing 'The Ten Commandments' are charging a $1.25 for adults and 50 cents for children, a coincidence that offends against all laws of probability. "During the hearings before the Senate Small Business Committee a representative of this association placed in the record tabulations complied from newspaper advertisements and data supplied by exhibitors which revealed price increases to a uniform level for three pictures, 'Peter Pan,' 'Hans Christian Andersen' and 'Salome,' in a number of competitive areas. Maurice Silverman, the Antitrust Division attorney in charge of motion picture matters, dismissed the exhibits by saying that 'identity is a factor that has to be considered with respect to all the other factors pertaining to those theatres.' In an obvious effort to minimize the evidence of uniformity, he added: 'Frequently you will find that theatres in an area generally charge about the same price.' This was too much to let stand without qualification, and Judge Barnes quickly added: "I think it is particularly significant if it occurs in an isolated example relating to a particular picture, which presents an admission price different from that ordinarily used in the theatre . . . and naturally is a suspicious matter.' "Those were exactly the kind of situations set forth in the exhibits. But the Department took no action in the matter." From what the "white paper" has to say on the tactics employed to fix admission prices, one does not have to be a legal mastermind to see that Allied has made out a strong case against the Antitrust Division for refusing to act on the numerous exhibitor complaints that have been filed with its office. It is apparent that Hansen, as head of the Antitrust Division, either is not disturbed by Allied's charges or chooses to ignore them, and his refusal to act on the complaint made by Shor is merely another instance of his condonation of distributor policies and practices that are nullifying the intent and effectiveness of the decrees, as well as the declared purposes of the anti-trust laws. This continuing attitude serves as further proof that there is a dire need for the Congressional investigation demanded by Allied.