Investigation of concentration of economic power; monograph no. 1[-43] (1940)
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CONCENTRATION OF ECONOMIC POWER 37- The fear aroused by this practice may be judged from the fact that about 85 percent of the complaints submitted to the N. R. A. before' formulation of the code for the motion picture industry dealt with some form of overbuying.^^ Overbuying manifests itself in many ways. In its simplest form, an exhibitor buys more pictures than he can use, simply to prevent their use by a competitor. Overbuying may also take the form of unnecessary and too frequent changes of program which, as in the first instance, results in a shortage of films available to competing exhibitors. In still another form, an exhibitor, as a condition to entering into a contract, may require that a distributor refrain from licensing pictures to a competitor. Such an agreement, which gives the exhibitor sole exhibition rights in his locality, is known as an ''exclusive rights" contract. The effect of overbuying on the consumer is so obvious that it hardly needs to be depicted. In the first place, if the number of operating theaters is actually reduced, there is an economic loss to the community, since no new enterprise enters the field to take the place of that deposed. The practice may result in the absolute reduction of the number of films shown in the locality where an exhibitor makes them unavailable to a competitor but does not use them himself. As an alternative to this practice, the offending exhibitor sometimes attempts to show the pictures by resorting to a policy of frequent changes of program. This not only limits the consumer in his choice of a place and a time to see particular films. It may mean complete loss of opportunity to see particular features since in the localities in -vyhich overbuying is most common, a teature is seldom shown more than once. Finally, if the practice succeeds in its objective of eliminating all competition, the protection afforded to the consumer by this com- petition is wholly lost. The consumer remains with only the choice of seeing pictures on terms offered by the exhibitor or not seeing them at all. Overbuying, when undertaken with the express purpose of elimi- nating competition, is almost certainly a violation of the Federal anti- trust statutes. Consequently, a number of complaints against over- buying have from time to time been filed in the Federal courts. A case pending at the present time may be used to illustrate the general tenor of such suits.'^ The complamant states that he started operating the Palace Theater in St. Johnsbury, Vt., in the fall of 1926. Shortly after, another inde- pendent, the Star Theater, was opened in the same town. Both thea- ters operated on a policy of 3 to 4 films weekly, and each secured about one-half of all the major distributors' product. For profitable opera- tion each theater needed approximately 200 films annually. In August 1935, the Interstate Theater Corporation, an extensive New England chain, leased the Star through a subsidiary. The oper- ator of the Palace alleges that Interstate then made contracts wjth the major distributors whereby the Star was granted special privileges, including price concessions, priority in play dates, rights of selection of pictures and cancelation privileges, and that due to the strong bar- gaining power of Interstate, the major distributors refused to license " National Recovery Administration, Work Materials No. 34, p. 70. " Tegu's Palace Theatre, Ivc. v. Interstate Theatre Corporation, et al., Civil Action No. 25, District Court of the United States, District of Vermont. 286782—41—No. 43 4