Investigation of concentration of economic power; monograph no. 1[-43] (1940)

Qg CONCENTRATION OF ECONOMIC POWER and take over the businesses of competing exhibitors by means whichi will be subsequently discussed. The exact method whereby a similar- result has been achieved by an affiliated company is sometimes diffi- cult to ascertain. The possibilities are illustrated by a contempt citation against the Fox West Coast Theatres Corporation—the- exhibition branch of the Twentieth Century-Fox organization. This- charge states: As a result of the practices and activities described in this Petition and Information, many unaffiliated exhibitors in the Los Angeles Exchange Territory have been unable either to contract for first or second run or first suburban run pictures, or to contract for pictures to exhibit in competition with defendant Fox West Coast, and therefore have been impelled either to sell their theaters.' outright to Fox West Coast, or to enter into profit-sharing agreements, or pooling arrangements, so-called, under which the unaffiliated exhibitor has granted Fox West Coast a controlling interest in his theater or has poofed the theater with a theater operated by defendant Fox West Coast, which receives an equal or con- trolling interest in the venture.^^ The charge then names 26 unaffiliated theaters which were turned over to Fox West Coast or pooled with its theaters between 1932 and. 1936. ,. , While it is quite true that a similar result might have been achieved by a powerful independent exhibition chain, it is nevertheless reason- able to assume that the affiliation of the exhibition organization with- one of the major producers was no hindrance to these activities. The Code of Fair Competition for the Motion Picture Industry, promulgated under the N. R. A., declared it to be an unfair trade practice for any distributor to threaten, coerce or intimidate any exhibitor into entering a contract for the exhibition of motion pictures or into paying higher film rentals by the commission of any overt act evidencing an intention to build or acquire a competing theater.^^' It was added, however, that this should in no way abrogate the right of a producer or distributor to build or acquire in good faith a theater- in any location. The efJect of this proviso was to nullify the entire clause, since it was incumbent on the aggrieved party to prove the; act was not in good faith. That both of these practices—making score charges and coercion of exhibitors into entering film contracts, into paying higher film rentals or into relinquishing control of their theaters—still constitute sources of discord in the industry is seen from the fact that these practices are included among the charges made by the Government against the major companies in the recent antitrust suit.^^ The con- sent decree recently entered as a result of this suit, however, contains no stipulation with respect to either of these practices. OVERBUYING Overbuying of films is a practice whereby an exhibitor licenses more features than are strictly necessary for the operation of a theater, with the express intention of preventing a competitor from securing" enough good pictures to permit normal operations. It is a constant threat to the small exhibitor competing with a powerful opponent. 2» United States of America v. Fox West Const Theaters Corporation, et al., in the District Court of the United States for the Southern District of California, Central Division, information charging criminal contempt and petition for rule to show cause, No. 14048-C, filed Aug. 31, 1939. ^ National Recovery Administration, Code of Fair Competition for the Motion Picture Industry, art. V,. dtviBion D, Part 1 of the approved code, 1933. " United States v. Paramount, Inc., 1940.