Motion Picture Herald (Jul-Aug 1943)

July 3, 1943 MOTION PICTURE HERALD 29 U. S. FINDS MONOPOLY IN AD FILM INDUSTRY Trade Commission Orders Distributors to Cancel Exhibitor Contracts The Federal Trade Commission Wednesday found evidence of monopolistic conspiracy in the advertising film business, an industry already acutely restricted by the war, in an order directed to five distributors, two booking agencies, three officials and the Association of Advertising Film Companies. The order, which followed investigation of industry practices, called on those named as respondents: To cease and desist from making contracts with exhibitors for the exclusive privilege of exhibiting national advertising films in their theatres; To cease the practice of classification by the booking agencies of the size and weekly attendance of theatres for the purpose of determining display rates or charges to advertisers; To cease the practice of booking agency rate cards for computing the amount of compensation due any theatre. Named in the order were: Motion Picture Advertising Service Company, Inc., New Orleans, and C. J. Mabry, vice-president. United Film Ad Service, Kansas City, Mo. Ray-Bell Films, Inc., St. Paul, Minn. Alexander Film Company, Colorado Springs, Colo. A. V. Cauger Service, Inc., Independence, Mo. Screen Broadcast Corporation, New York, and Albert E. Fair, president. General Screen Advertising, Inc., Chicago, and J. D. Alexander, chairman of the board, and also president of Alexander Film Company. Operations on Ad Films Drastically Cut Operations of producers and distributors of advertising films, including those companies named by the Federal Trade Commission in its original citation last March for violations of Section V of the Federal Trade Commission Act, have been drastically cut since the war because the film division of the War Production Board ruled out advertising pictures when giving priorities for raw stock to established motion picture companies. The WPB order provided that no raw stock would be allotted to commercial producers unless the individual companies could show that the stock was to be used for a picture which would further the war effort. This ruling automatically closed the advertising film business for the duration. For the past year, the large companies in this category distributed mostly those films which were made and on the shelf before the WPB order went into effect. Production was completely stopped. In recent weeks, however, it has been reported that at least one producer of advertising pictures has launched an attempt to get priority for raw stock from the WPB for minute films, to be sponsored by national advertisers, which would promote some phase of the war effort. The commission charged that the distributors named in the complaint controlled about 90 per cent of the business done in their industry. It estimated that of the 16,000-odd theatres in the United States, about 8,000, located in small cities and towns, were under contract with the distributors to exhibit film advertising products under either national advertising or cooperative programs. Fixed rates paid to exhibitors for running the pictures ranged from $1 to $3 per film. Found "Agreements" Made in 1933 The commission, following an investigation, found that the respondents, since 1933, and particularly since 1937, had entered into agreements among themselves and with other film distributors as to screening rates, commissions and other terms in connection with the interstate distribution of films containing advertisements solicited from national advertisers. Pursuant to such agreements, the commission held, the distributors entered into individual contracts with exhibitors for the exclusive privilege of exhibiting advertising films in their theatres for a specified period, usually five years, and organized General Screen Advertising, Inc., as their only booking agency and only channel for solicitation of natinal advertising contracts from manufacturers throughout the entire country, except that two of the distributors also used the other booking agency, Screen Broadcast Corporation, as their exclusive national sales representative in part of the country.' The commission also found that the distributors, direct or through their booking agencies, and pursuant to their agreements, had fixed the display rates to be charged manufacturers, the rates, commissions, and other compensation to be paid the booking agencies, and the terms and conditions under which the films are to be shown in the various theatres with which they have contracts. Orders Companies to Cease Rate Fixing The order requires the respondents to cease and desist from engaging in any understandings or agreements to perform any of the following practices : 1. Fixing or maintaining screening or display rates to be charged national advertisers, or rates, commissions or other compensation to be paid booking agencies. 2. Entering into contracts with motion picture exhibitors for the exclusive privilege of exhibiting national advertisng films in their theatres. 3. Entering into, continuing or carrying out any agreements with the respondent booking agencies whereby the distributors agree not to accept national film advertising from any other source than such booking agencies in any designated territory, or whereby either of the booking agencies agrees to sell film advertising to national advertisers for screening in theatres under contract with the distributors according to screening or display rates cooperatively fixed and listed with such booking agencies by the respective distributors. 4. Furnishing to either of the booking agencies a list of theatres under contract with the distributors for classification by the agencies according to their size, circulation or weekly attendance, for the purpose or with the effect of determining display rates or charges to advertisers. 5. Declining to accept or release any film for a national advertising account unless it is booked through one of the booking agencies. 6. Observing any rate card issued by a booking agency for computing the screening or display rate or the amount of compensation due each distributor or theatre. 7. Adopting standard rates of compensation for use in dealing with national advertisers in connection with cooperative advertising programs. 8. Adopting or observing, in dealing with advertisers or theatres, rate books or similar devices issued by the trade association or by any booking agency. Hold Practices Tend to Prevent Competition In its original citation of charges last March, the commission said: "The acts and practices of the respondents as herein alleged are all to the prejudice of competitors of respondent distributors and of the public; have a dangerous tendency to hinder and prevent, and have actually hindered and prevented, competition in the sale, leasing, rental and distribution of commercial motion picture films in commerce within the intent and meaning of the Federal Trade Commission Act; have unreasonably restrained such commerce in commercial motion picture films and have a dangerous tendency to create in respondents a monopoly in the sale, leasing, rental and distribution of said films, and constitute unfair methods of competition in commerce within the intent and meaning of Section V of the Federal Trade Commission Act." The complaint also charged that under an agreement entered into in 1939 between Screen Broadcast Corporation and Motion Picture Advertising Service Company and United Film Ad Service, Inc., the former was exclusive national sales representative for the latter two and had the sole right to sell national film advertising to all national advertisers in the northeastern territory. General Screen Advertising, Inc., it said, had a somewhat similar arrangement with all the respondent distributors, under an agreement made in 1940, covering the rest of the United States. Close Chicago Office The Alexander Preview Company closed its Chicago office in July 1st, the company announced. It will handle the distribution of trailers hereafter from the home office at Colorado Springs.