Motion Picture Herald (May-Jun 1946)

A DAY IN FOLEY SQUARE upon the arguments. "We cannot accede to the prayer of the plaintiff that the major defendants should be divested of their theatres in order that no distributor shall be an exhibitor," it ruled. Agreeing that such divestiture would end the Government's "most urgent objections to the present methods of conducting the motion picture business," the court pointed out it virould "withdraw the defendant-distributors from competition in the exhibition field." This, the court held, "would create a new set of theatre owners which would be quite unlikely for some years to give the public as good service as the exhibitors they would have supplanted in view of the latter's demonstrated experience and skill in operating what must be regarded in general the largest and best equipped theatres." Complete Divestiture "Harsh Remedy" The opportunity for independents to compete under the bidding system for pictures and runs "renders such a harsh remedy as complete divestiture unnecessary, at least until the efficiency of that system has been tried and found wanting," the court suggested. The ruling discounted Government charges the distributors were guilty of a monopoly warranting the remedy asked. "It would seem unlikely," it was held, "that theatre owners having aggregate interests of little more than one-sixth of all the theatres in the United States are exercising such a monopoly of the motion picture business that they should be subjected to the drastic remedy of complete divestiture in order to effect a proper degree of free competition. "It is only in certain localities, and not in general, that an ownership even of first-run theatres approximating monopoly exists." If the market should be opened to the highest bidder and the builder of a new theatre could compete with other exhibitors for pictures, there could be no monopoly it was argued. "The only pictures that the present sole exhibitors in such localities could control would be their own, which they can always exhibit freely in their own theatres," the court added. "Greater Proof" Needed, Court Declares The decision denied there had been substantial proof that any of the defendants were organized or had been maintained for the purpose of achieving a national monopoly. It suggested that ownership by a single defendant of all first-runs in certain localities could as well have "arisen from the inertness of competitors, their lack of financial ability to build theatres comparable to those of the defendants, or from the preference of the public for the best equipped houses" as from any " 'inherent vice' on the part of these defendants." "It takes greater proof than that each of them possessed great financial strength, many theatres, and exhibited the greater number of first-runs to deprive it of the ordinary rights of ownership," the court declared. Under the ruling. Paramount would have The decision of the special statutory court in the Government's anti-trust suit against the majors arrived in sudden, unprecedented fashion Tuesday to produce commotion and confusion extraordinary in the motion picture community of New York, and in sequel across the nation. It was just a trifle after 3 o'clock in the afternoon when an emmisary of the special court walked into room 601 of the United States Court House in downtown New York's Foley Square to file the document of decision with the clerk of the United States District Court for the Southern District of New York. It was formal, official and routine. A single copy was filed. One other copy was made available to the press room. No. 12 on the first floor. By 4 o'clock the word was spreading through the offices of the lawyers for the defendant picture companies, and there was great wonderment about the content and purport of the court's findings. Eighteai reporters for the daily press and the wire services went pawing over the press room copy and presently one was delegated to read the thirty thousand words to the listening journalists. Meanwhile junior lawyers and law clerks poured into the courthouse. There was rampant haste to get copies for office study. Court reporters were employed to take the decision down from a reading of the file copy by a lawyer, tran to buy or sell 816 theatres it owns jointly with independent operators. Warner would have to make new deals for 20, 20th-Fox for 66, RKO for 155, and Loew's for 21. With 214 other theatres owned jointly by some of the defendants, a total of 1,292 circuit theatres are affected. The root of the difficulties, according to the court, "lies not in the ownership of many or most of the best theatres by the producerdistributors," but in the trade practices the decision abolishes or limits. It points out that if such practices were employed by independent circuits the same "undesirable results" would ensue. Replying to the defense of the practices on the ground that long usage and business convenience should sanction them, the court said : "In spite of their long continuance, we cannot escape the conclusion that in various ways the system stifles competition and violates the law and that business convenience and loyalty to former customers afford a lame excuse for depriving others of rights to compete and for perpetuating unreasonable restrictions." The court observed that the defendants "have built up great business enterprises in a very popular field. Yet they have carried on practices we have found unduly restrictive of interstate commerce and even though we do not suggest that they any more than 'those eighteen upon whom the tower of Siloam fell' have been 'sinners above all men', yet measures should be taken to restore the moving picture business to a condition of competition that will benefit both scribing in relays and delivering a page at a time. The carbons were dispatched by messengers to the waiting law offices. Meanwhile up on the fifteenth floor at the photostat plant of the Federal Bureau of Investigation, pressed into service, other copies by that process were coming a page at a time, while more lawyers, more law clerks, awaited in the corridor. Two hours after the filing the motion picture industry was still wondering what the decision was. By 6 o'clock a reasonably complete survey in first hasty pursuit had been achieved and as far up as Times Square and Radio City there was more than a slight inkling of the nature of the story. Far into the night the lights burned in the big law offices over studies of the new milestone document in the enduring litigation of government control. The long distance telephone was busy through the night to Hollywood and key cities, giving the news to the interested and concerned theatres and theatre partners. Meanwhile, when dawn came, the treatments of a confused metropolitan lay press arrived to contribute the confusions of confused reporters to the scene. By mid-day Wednesday a Motion Picture Daily special supplement delivered the full text of the decision to the motion picture offices of New York. competitors and the general public and to abate practices that are unlawful." Holding the distributors to be guilty of price-fixing in connection with minimum admission requirements, the court said the defendants "have agreed with their licensees to a system which determines minimum admission prices in all theatres where motion pictures licensed by them are exhibited. In this way are controlled the prices to be charged." Says Distributors Guilty Of Price Fixing The licenses are in effect "price-fixing arrangements among all the distributor-defendants, as well as between such defendants individually and their various exhibitors," the ruling held. "Such combinations we hold to be forbidden by the Sherman Act." It further charged that the effect was to give the prior run "as near a monopoly as possible" by narrowing the price differential between them and the subsequents. The right of one theatre to reasonable clearance over another was upheld. "It seems to us," said the court, "that a grant of clearance, when not accompanied by a fixing of minimum prices or not unduly extended as to area or duration, affords a fair protection to the interests of the licensee without unreasonably interfering with the interests of the public." It was suggested that the decision of local controversies over clearance might be settled by "local suits in the area concerned, or, even more appropriately, to litigation be (Continued on following page) MOTION PICTURE HERALD, JUNE 15, 1946 13