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

44 CONCENTRATION OF ECONOMIC POWER The curious conflicts of interest within the industry caused by the question of unfair protection have resulted in a queer half-conviction on the part of even those using the practice that it might be better all around if equitable clearance and zoning schedules generally applicable throughout the industry might be developed. The establishment of equitable protection arrangements, while it has an easy sound, is most difficult of attainment. Large theater investments have in many cases been made on the basis of existing clearance arrangements. The question as to whether these clearances are now equitable is likely to be considered somewhat beside the point when a change may vastly depreciate values. Nevertheless, efforts have been made by the industry to rationalize the clearance system. Discussions which were intended to lead to uniform clearance and zoning schedules were inaugurated in about IQSO" through the film boards of trade. These film boards of trade represent the local organ- izations of the major distributors in each of the key cities. Exhibitors and distributors conferred on the establishment of these schedules. It was intended that each theater in an exchange area would be allotted a definite playing position, and that all distributors would adhere to the schedule adopted. Uniform clearance and zoning schedules were set up for about 10 exchange areas for the 1930-31 season. However, in 1 of these territories, an independent exhib- itor, feeling that the schedules discriminated against him, instituted legal action under the antitrust statutes. The court declared the plan to be illegal under the Sherman Act, and it was abandoned.^^ The establishment of uniform schedules was again attempted under the N. R. A. Code for the Motion Picture Industry. Clearance and zoning boards, consisting of representatives of distributors and exhib- itors, were set up in each of 31 exchange cities. However, only 1 major schedule was approved during the life of the code—^that for the Los Angeles territory—and in this case a number of the protests were outstanding at the time of approval. Nevertheless, the local clearance and zoning boards considered 875 individual complaints of inequitable protection arrangements and in many of these relief was ordered. No further attempts to set up uniform schedules have been made since invalidation of the code. However, it must be noted that exist- ing protection arrangements with respect to any theater are sub- stantially the same for all major distributors. The subject of unfair clearance is recognized in section VIII of the recent consent decree signed by the five major companies. It is stipulated that the reasonableness of the protection applicable to an exhibitor's theater shall be subject to arbitration. With certain restrictions the question of the run to be enjoyed by a theater is also subject to arbitration under the consent decree. The provisions of the consent decree are discussed in greater detail in appendix III. Presumably, the exhibitor subject to unfair clearance can bring a successful action under the antitrust laws, alleging arbitrary and concerted action to limit competition and injure his business. As in the case of overbuying, the principal difficulty is in determining whether the particular conditions obtaining have resulted from the complex economic forces involved or from an express intent to exploit unfairly the advantage of greater buying power. It must be agreed that in any particular situation, even with all the facts, it is most 3i Youngclaus v. Omaha Film Board of Trade, 60F (2d) 538, July 2, 1932.