Motion Picture Herald (May-Jun 1946)

U.S. COURT DECIDES ON NEW RULES; JUSTICE DEPT. WEIGHS APPEAL The first decision rendered in the Government's eight-year-long Sherman Act case against the majors of this industry was rendered by the special statutory court sitting in the Southern District of New York Tuesday afternoon. Twenty-fouf hours later, on the hour, it was indicated in Washington that the Department of Justice may take appeal. That piled uncertainty upon the uncertainties created by the decision. The findings of the judges, if sustained, would supplant the Consent Decree and are calculated to extend, amplify and particularize a continuing Government supervision of the motion picture and its trade practices. Either that, or the attitude indicated by the reported possibility the Department of Justice may appeal, would make certain that the motion picture is to continue a while in the courts. Defendants Study Verdict, With Varied Evaluations The Consent Decree was an interim document. Tuesday's document is a judgment, but open for further action. The defendant companies and their counsel went into consideration of the complex consequences, with a marked variance of evaluations of the situation and the consequences of the tomorrows. Clear indeed it was that many long established practices wou^d be subjected to revision. The decision, pending since the close of the trial, arrived with a certain dramatic unexpectedness, when an emmisary of the court walked into the office of the clerk of the court at the U. S. Court House in New York's Foley Square just after 3 o'clock, dropping a lone copy softly into the record, without flourish. Written by Circuit Judge Augustus N. Hand, the decision was approved by District Judges Henry W. Goddard and John Bright. The court refused the Government's plea for full divorcement, but ordered complete ownership for distributor theatres. The theatres may be retained if the distributors have or acquire 95 per cent or more ownership. If they own less than that percentage and more than five per cent, they must either buy from or sell to the co-owners. Partnership arrangements with independent exhibitors, therefore, will be broken up. Joint ownership of theatres by any of the defendants — Paramount, Loew's, 20thFox, RKO and Warner — ^with one another is forbidden. Minimum price provisions, either tacit or formal, are forbidden on the ground that the practice constitutes price-fixing. Maintenance of clearance systems by concerted action is outlawed, and no clearance shall be granted "in excess of what is reasonably necessary to protect the licensees in the rim granted." Formula deals, master agreements, and franchises are declared illegal. Distributors may exhibit their own pictures in their own theatres "on such terms as to admission prices and clearances and on such runs as they see fit." Distributors must offer pictures to other exhibitors on an "auction block" basis, licensing them to the highest bidder qualified financially and with adequate facilities to present them on the terms asked. Licenses are to be "solely upon the merits and without discrimination in favor of affiliates, old customers, or any person whatever." "Each license shall be offered and taken theatre by theatre and picture by picture." Single-picture sales are mandatory. Block selling will be permitted "provided the licensee shall have had the opportimity to bid for each feature separately and shall have made the best bid for each picture so included. Pictures may be licensed in groups before trade showings. The exhibitor, however, may cancel a percentage of such features, to be fixed by the decree, wdthin 10 days after an opportunity to view them. Pooling arrangements, and all under standings pertaining thereto are banned. Circuit expansion is denied the distributor, except by the purchase of co-owner interests, and then only after court approval. Theatres may be acqiiired to protect investments or enter a competitive market only upon application to an approval by the court. Distributors shall not book or buy for their theatres through an agent who also acts in such matters for any other affiliated or independent exhibitor. Arbitration is to continue of disputes "as to bids, clearances, runs, and any other subjects appropriate for arbitration" on a voluntary basis. The appeal board will be continued. Notice of 10 days will be given principals for action on the settlement of the decree. Proceedings are to be stayed pending appeal "or for the purp>ose of enabling the parties to adjust their business without an unfair burden." An invitation is extended to the parties for findings for the assistance of the court. A spokesman for the Justice Department said in Washington the divorcement provisions apparently did not entirely fulfill "the Department's mission," and that if this proved to be so the Government would appeal. He said the curbs placed on booking were satisfactory, but that the partial divorcement clause might encourage circuitdistributor combines by forcing companies to buy 100 per cent control of theatres. It was generally assumed by the Department that the majors would appeal, thereby making a demand for a re-trial and clearance to a higher court a joint action. In refusing the Government's plea for divorcement, the court commented at length 12 MOTION PICTURE HERALD, JUNE 15. 1946