Motion Picture Herald (Nov-Dec 1944)

DECISION IN CRESCENT CASI STRENGTHENS U. S. SUITS Berge Sees Support for Divorcement in Ruling by Supreme Court The Department of Justice Monday won a complete victory in the Crescent Amusement Company anti-trust case when the U. S. Supreme Court handed down its five-to-one decision denying the defendants the relief they had sought from the Federal District Court in Nashville and granting the Government's request for an expanded decree. The decision will furnish strong support for the Government in its petition for modification of the New York case Consent Decree, and in the Schine and Griffith anti-trust cases, Wendell Berge, head of the Department of Justice's antitrust division, said Tuesday in Washington. The new decree prohibits the future acquisition of financial interest in additional houses outside Nashville, except after affirmative sho\^ing that such acquisition will not unreasonably restrain competition. Deny Divestiture Provision Punitive and Unreasonable In denying the contentions of Crescent and its affiliates that the Government's divestiture provisions are unreasonable and punitive, the opinion, written by Associate Justice William O. Douglas, asserted that the Government should not be confined to an injunction against future violations. Justice Douglas said further : "The fact that there may be somewhere in the background a greater conspiracy from which flow consequences more serious than we have here is no warrant for a refusal to deal with the lesser one which is before us." At another point the court said: "Dissolution of the combination will be ordered where the creation of the combination is itself the violation." Only one point of the defendants' cross-appeal, that contending the Government's first appeal was premature, was sustained by the court. Justice Douglas, early in the opinion, affirmed the applicability of the Sherman AntiTrust Act to the exhibition business, noting that contracts made by theatres with film salesmen are subject to approval by the distributors' home offices and that the films are shipped to various exchanges whence they are sent from one exhibitor to another. Findings Held Adequate to Prove Interstate Commerce "The findings are wholly adequate to establish that the business of the exhibitors involved a regular interchange of films in interstate commerce," he said. The court gave attention to the practices which, the Government charged, the defendants resorted to in their ei¥ort to eliminate competition. The Court said : "There was ample evidence that the combination used its buying power for the purpose either of restricting the ability of its competitors to license films or of eliminating competition by acquiring the competitor's property or otherwise." Included in the evidence cited were the defendant companies' insistence that the dis THREE JUSTICES ABSENT IN CRESCENT DECISION Chief Justice Harlan F. Stone and Associate Justices Wiley B. Rutledge, Hugo L Black and Stanley F. Reed joined Justice William O. Douglas in his majority opinion in the Crescent Amusement Company case. Associate Justice Owen J. Roberts dissented but did not write an opinion. Associate Justices Frank Murphy and Robert H. Jackson did not participate, presumably having disqualified themselves because they were Attorneys General when the case was on. Associate Justice Felix Frankfurter's absence was unexplained. tributors give them monopoly rights in towns where they had competition or be r&fused business in closed towns where they had no competition. A repeat-run clause in their contracts which prevented the sales of a second run to opposition theatres also was cited. Denying that the companies' independent competitors were eliminated in the course of normal competition, the opinion continued : "We may assume that if a single exhibitor launched such a type of economic warfare he would not run afoul of the Sherman Act. But the vice of this undertaking was the combination of several exhibitors in a plan of concerted action. They had unity of purpose and unity of action. They pooled their buying power for a common end. It will not do to analogize this to a case where purchasing power is pooled so that the buyers may obtain more favorable terms. The plan here was to crush competition and to build a circuit for the exhibitors." Criticize Findings as Leaving Much To Be Desired The court dismissed the companies' contention that the findings of the lower court were mainly taken verbatim from the Government's brief. Justice Douglas, however, did criticize the findings as leaving "much to be desired in the light of the function of the trial court," but sustained them as supported by evidence. In granting the request of the Government for .the broadening of the decree to require affirmative showing that future acquisitions would not be contrary to the requirements of the decree, Justice Douglas pointed out that the court ordinarily was reluctant to direct a recasting of a decree except on a showing of abuse of discretion, but said that the case was one where the court should act for adequate protection of the public interest. Justice Douglas went on to defend the change in the decree by saying that the combine had grown as a result of predatory practices condemned by the Sherman Act. The acquisition of a competing theatre terminates its competition and punishment for contempt did not restore the eliminated competition, he added. The companies' contention that the divestiture provisions of the decree are harsh and inequitable, and that they exceed any reasonable requirements to prevent future violations re ceived no sympathy from the court. J Douglas said: ' "The principle is adequate here to j divestiture of all interest in some of the I ates since that acquisition was part of the of the conspiracy. Business Inconvenience and Hardship Are Asserted "The fact that minority stockholders o affiliated companies are not parties to the is no legal barrier to a separation of the ii panics. No legal right of one stockholdj normally affected if another stockholder i ;i quired to sell his stock, and no exemptic that rule has been shown to exist here, i business inconvenience and hardships ar< serted." Taking up the defendants' appeal, the op c directed itself to the requirement of the di that the companies make no more contrac: ( franchises designed to suppress competi i The companies contended that these provi would aggrandize the distributors at tht pense of the exhibitors, depriving the I i of group purchasing power and of agreeii that are normal and necessary. "It is not for us, however, to pick and ch i; between competing business and econi theories in applying the law," Justice Dou a commented. "Congress has made that ch(j:j It has declared that the rule of trade and c ti merce should be competition, not combinai i Since Congress has made that choice, we not refuse to sustain a decree because by ^ other measure of the public good the may not seem desirable. "The chief weapons used by this comb . tion in its unlawful warfare were the fi • chise agreements and the licensing system. ,1 fact that those instruments could be lawf |l used does not mean that the defendants i i leave the court unfettered. Civil suits urj: the Sherman Act would indeed be idle gesti'^ if the injunction did not run against the ». tinuance or resumption of the practices." In defending the decree as a proper rem for the case before the court, the opinion si "And it is hard to see how the decree cc' be made less general and more specific. I is a burden which cannot be lightened by plication to the court for exercise of the p< er which it has reserved over the decree, i a burden which those who have violated Act must carry." . Claimed Original Wording Would Defeat Purpose The Government, in its request for modifi tion of the decree of the Federal District Co in Nashville, complained that Federal Ju( Elmer Davies' language in the original do ment would enable the defendant companies acquire additional theatres on a qualified ba> and thus afford no actual relief. The exhibit found guilty under Judge Davies' decree w the Crescent, Cumberland, Lyric, Cherok Kentucky, Muscle Shoals and Rockla Amusement companies. Although neither Tony Sudekum, preside of the Crescent Company, nor his attorne were inclined to discuss a possible rehearing the case, since the adverse decision by Juc Davies it has been indicated that the Cresc' stake is not sufficiently great to justify prolor ing the matter. 28 MOTION PICTURE HERALD, DECEMBER 16, I