Motion Picture Daily (Apr-Jun 1935)

MOTION PICTURE DAI LY Wednesday, June 12, 1935 Legal Doubts Delay VoluntaryCode Start (Continued from page 1) than the what and the how of selfregulatory machinery. Admittedly, a formula of some kind must be set up to adjudicate intra-industry disputes. This is conceded. Once known as arbitration, Judge Thomas Thacher, a few years ago, ruled the method, when compulsory, was illegal. Voluntarily pursued, the plan was within the law as the jurist read the law. Yet, major interests asserted then, as they do now, that any other type but the enforced type defeated the purpose which brought the plan into existence in the first instance. That purpose, in their lights, was to keep the flow of buying and selling running smoothly and without interruption or long-winded delay necessitated by recourse to overcrowded courts of law. While it would seem that to any individual should be set aside the privilege of legal redress, it is also held to make sense that, under proper auspices and impartial trade judges, contract difficulties might better be settled from within. At any rate, the Thacher decision is a mental and an actual hurdle which has to be jumped under any theory evolved for self-regulation. Exactly what the answer is is exactly what is causing much of the difficulty. Company lawyers are being relied upon to furnish the answer. Have Been Burned Often Having been burned plentifully and often, they may sidestep if they do not advise that the matter be kept on ice. In other instances, notably the 5-5-5 deliberations which ran hectically and then not so hectically over a period of 22 months, the legal coterie decided thumbs down because they envisioned unhappy days ahead with the Department of Justice and, perhaps, with the Federal Trade Commission thrown in by way of a next-to-closing act. Clearance, once known as protection until there came along those who insisted upon a change of name to remove any impression smacking of racketeering, is a second big something which calls for an answer so far apparently not supplied. The legal standing of the practice which belongs as part of the fabric of the industry has been challenged from time to time through the years, but a clear cut, sharply defined exposition of what can or what cannot be permitted with out stubbing toes has never been forthcoming. There are instances, distantly removed now, where clearance under its former monicker has been condemned in lower court decisions. Distributors, however, have been lax in carrying the fight up the line into higher courts of jurisdiction, the consequence being considerable lack of legal opinion as to their exact rights or otherwise. Procedure in the past has taken a twofold course. Where complaining and allegedly hard-pressed exhibitors had won in earlier rounds, practice, as a rule, had been to straighten out such a situation and then call off the suit. In other instances where distributors had been found traveling too fast and too hard down protection's alley, consent decrees had been entered upon, thereby wringing an admission of malpractice out coupling with it a promise to be good in the future. Several highly placed opinions, The M.P.T.O.A. Plan The M.P.T.O.A. suggestion to end duals, to avoid admission price cuts and to eliminate all forms of premiums and giveaways is outlined in the organization's latest bulletin. The purpose, as outlined in the bulletin is this : "To protect the so-called deluxe operations in competitive spots, and to prevent the cheapening and demoralizing of the business in such competitive areas, as has happened in the past time and again, we suggest the use of a provision in the license agreements by exhibitors operating Class "A" theatres similar to the following rider." Execution of the idea, described as one to be voluntarily requested by the exhibitor, would take the form of a rider to existing exhibition contracts. It would provide : This rider attached to and made a part of this application for a contract bearing even date herewith shall be deemed incorporated therein when approved by the distributor. (1) The distributor agrees to require by contract with any exhibitor to whom a license is granted to exhibit any of the feature motion pictures specified in the contract to which this rider is attached and made a part thereof, for exhibition at any theatre situated within the territorial limits specified in the Schedule in connection with the "run" and "clearance period" therein provided for, that during the exhibition thereat of any of said pictures such exhibitor will (a) charge for adult admissions to said theatre an actual admission fee of not less than (*twenty-five) cents for the evening performances after (*6:00 P.M.) and/or not less than (•fifteen) oents for matinee performances prior to (*6:00 P.M.); or (b) will not lower the prices publicly announced or advertised for admission thereto by giving rebates in the form of premiums, gifts, prizes, chances on anything of value, or by means of reduced script books, coupons, throw -away tickets or "two-for-one" admissions or any other thing of value or by any other method or device of a similar nature which directly or indirectly lowers or tends to lower such publicly announced admission prices; and will not conduct or operate any lottery, drawing, gamble or any other form of hazard at such theatre; or (c) will not exhibit any of the said motion pictures together with another feature length motion picture for the same admission charge. (Any motion picture originally made and released in more than 3,000 linear feet of film shall be deemed a feature motion picture.) If the distributor shall exhibit or grant to any exhibitor a license to exhibit any of said motion pictures for exhibition at any theatre situated within the said territorial limits in violaton of the provisions hereof, the rental specified in the schedule provided to be paid by the exhibitor to the distributor for each of said motion pictures so exhibited shall be reduced by a sum equal to (*25%) of such rental and, if paid by the exhibitor, the distributor shall repay to or credit the account of the exhibitor with the amount of such reduction. (2) During the whole of the licensed exhibition period of each of the said motion pictures, the exhibitor agrees to and shall charge for admission to the theatre designated not less than the admission prices specified in said contract; and agrees to refrain from doing or permitting any of the acts specified in the paragraphs of this rider designated as (b) and (c). If, during any such period of exhibition, less than said admission prices be charged, or if the exhibitor shall do or permit any of the acts specified in said paragraphs (h) and (c), the provisions of this rider con tained in paragraph (1) thereof shall be deemed null and void and of no effect and the distributor shall be relieved of any further obligation to comply therewith and in addition the distributor shall have the right to waive or to eliminate from any contract made with any other exhibitor operating a theatre situated within Vhe said territorial limits the provisions thereof made in compliance with the provisions of said paragraph (1); but the rights of the distributor under all other provisions of said contract shall remain unimpaired. Exhibitor Approved: Distributor *The minimum admission for evening and matinee performances; the time indicating when such performances begin and end respectively; and the percentage by which rentals shall be reduced, are matters for individual negotiation with each separate distributor. The figures here used are by way of examples only. Explaining how it foresees the plan in operation, the bulletin goes on: "The responsible exhibitor with a real investment in the business will do well to give this suggestion careful consideration before it is too late. Negotiations are now starting for the coming season's exhibition contracts. The first or prior run exhibitor, seriously concerned with maintaining a single feature policy, relatively higher admissions and who has to pay a film rental many times larger than a subsequent run, can on his own initiative negotiate such an agreement with each distributor separately that supplies pictures for the theatre. "These points should be noted: "1) The restrictions would apply only to the pictures specified in the contract into which the rider is incorporated. Pictures of all other distributors and other pictures of the same distributor can be sold any way they choose to any theatres. It does not restrain other theatres from double featuring, giving premiums, etc., or charging unreasonably low admissions, merely that they cannot use these same pictures that way in unfair competition directly with this theatre. "2) The specific provisions of such a rider can be cut to fit the local situation in any competitive area by eliminations or additions to the suggested provisions. The provisions are limited to only those theatres directly competing with the exhibitor's theatre. "3) The exhibitor should be prepared to defend the agreement in court, if necessary. There is every indication that the premium dealers, promoters of "advertising" schemes and double feature producers will threaten law suits or get some small exhibitor to file one. As far as we can ascertain, these questions have never been decided by a superior court. There is an inferior court decision on a double feature clause, which is generally expected to be reversed on appeal anyhow, but this is on the grounds of a conspiracy between two or more distributors. In many situations the cost of such a court determination would be insignificant compared to the value of such protection against the chiseling of unfair and unscrupulous competitors. "4) Under such a clause, if a distributor elects to license his pictures for subsequent run showings without requiring a minimum admission, etc., he must refund a percentage of the film rental paid by the exhibitor. "5) If the subsequent run secures a limited license on condition that he will charge a minimum admission, etc., then violates this agreement in this respect, it is believed that the exhibitor would have a right to bring suit against such subsequent run for damages and/or an injunction because the agreement was made for his benefit, even though the exhibitor is not actually a party to the contract. "6) The exhibitor using the rider must agree to maintain admissions in his own theatre, loses the protection if 'he fails to do so. The agreement is in effect reciprocal." Arthur Lee Denies G. B. Is to Be Sold therefore, today assume the attitude that the problem of clearances and whatever rights rest in them have never been adequately cleared up. They tie in with this circumstance trepidation over new attempts along old lines and misgivings over adven tures into new ones. The one tangible suggestion about future methods of preventing trad; disruption and chaos from sweeping in is that advanced by Ed Kuykendall (Continued from page 1) than amply financed and that it is extending its theatre circuit, is spending more money on individual productions, and progress is being made on its equipment company to make it more self contained. Lee pointed out that G. B. is probably the only company which, in addition to production, distribution and exhibition, also has large interests in co-relative organizations such as its. own recording process, equipment company, research and invention staffs, its radio station in the Duchy of Luxembourg and in television. The Ostrers, Lee asserted, are "in the business to stay; they have contributed much toward it and have made definite plans to make even greater contributions in the future." All announcements pertaining to the 1935-36 lineup, he declared, will be carried through and delivered with the one possible proviso — that more money will be allocated to some of the pictures than originally intended, and all contracts for their distribution will be definitely adhered to by G. B. president of the M.P.T.O.A., who strikes out for curtailment of duals, price slashes and premiums through a modification the new wrinkle written into many of his film service contracts at the insistence of Karl Hoblitzelle of the Interstate Circuit in Texas. The wrinkle has taken the form of a clause which would prevent any first-run product playing an Interstate house at more than 40 cents, night adult admission, from running in any house thereafter under 25 cents. Dallas neighborhoods have protested the plan and have tried their luck in court without success so fat. In the meantime, Hoblitzelle, through his circuit buying power, has won his point. How Kuykendall Plan Works Kuykendall proposes to eliminate price reductions, giveaways and duals by restrictions in the form of a contract rider on distributor and exhibitor alike. If the distributor, for instance, violates the terms, he would be compelled to refund 25 per cent of the contracted rental to the Class A house. If the exhibitor takes a stroll on his agreement, the distributor would be relieved of the obligation to supply service. It is noteworthy that the proposal would be confined to specifically named pictures ; that other pictures of the same distributor may be sold in any manner and under any terms. Avowedly, the plan is directly designed to protect the Class A theatre with all thereafter patently slated to get along as best they can. It was reported late yesterday some distributors will not take to the suggestion kindly. It would appear obvious as well that many exhibitors, including some of those who are M.P.T.O.A. members, also will not. While the proposed rider was described as a scheme emanating from KuykendalPs own think tank, a question unanswered was whether or not it does not actually constitute a "trial balloon" sent aloft by distributors at large to catch the sentiment of the exhibitor body to a suggestion which is heading for discussion as well as hot argument.