Motion Picture Herald (May-Jun 1946)

MOTION PICTURE HERALD nowise approximates a monopoly of film exhibition.^" 1° The following table is derived from Plaintiff's Exhibit 426 and Record pp. 2400-1: FEATURE FILMS RELEASED DURING THE 1943-44 SEASON BY ALL DISTRIBUTORS No. of Films Percentages of Total With With "Westerns" "Westerns" Included: Excluded: Fox 33 8.31% 9.85% Loew's 33 8.31% 9.85% Paramount 31 7.81% 9.25% RKO 38 9.57% 11.34% Warner 19 4.79% 5.67% Columbia 41 10.32% 12.24% United Artists 16 4.04% 4.78% Universal 49 12.34% 14.63% i>.„„m:„ I 29 features Republic ^ 30 ".-Westerns" 14.86% 8.66% Monogram { ?^ l'^-^^^" ^"^^^^ (16 Westerns PRC ^ 20 features 9.07% 5.97% i 16 "Westerns" Totals 397 100% 335 without "Westerns" 100% There has however been restraint of competition in exhibition by the five major defendants through ownership of theatres jointly with one another or if their interest be more than five per cent even where jointly held with independents whichj in our opinion, calls for a divestiture of such interests whether such partial interest is in fee or through stock ownership or otherwise. There is no evidence that in a city such as Cincinnati, in which a major defendant owns all of the first-run theatres, other exhibitors, affiliated or unaffiliated, have been prevented from also owning theatres for exhibition on first-run and there consequently is no monopoly in the legal sense, see United States v. Pullman Company, 64 F. Supp. 108, 112, and no reason for directing a divestiture. But when theatres are jointly owned by a major defendant and another party, it is evident that both joint owners wish to participate and indeed are directly or indirectly participating in the business of exhibiting motion pictures. In such case their joining of interests is illegal under the anti-trust laws for the reason that the major defendant thereby eliminates putative competition between itself and the other joint owner, who otherwise would be in a position to operate theatres independently. Such an elimination of competition is unreasonable in view of the defendant's being a powerful factor in the industry capable of exerting vast influence to its ends, and of the methods it has employed to restrain and control normal competition in distributing and exhibiting motion pictures through price-fixing, system of clearances, block-booking, pooling and the other practices we have alluded to. We find such joint interests in a great number of theatres, a summary of which is set forth below,^^ and hold that they must be terminated by a sale to, or purchase from the co-owner or owners, or by a sale to party not one of the other defendant-exhibitors. The decree or subsequent orders to be entered in conformity with this opinion will control sales or exchanges of such fractional interests for the purpose of restoring or creating a reasonable competition in the areas in question. ^ In so far as information could accurately be obtained from RKO's Exhibit 11, the numbers of theatres jointly owned by the defendants are approximately as follows: THEATRES JOINTLY OWNED WITH INDEPENDENTS: Paramount Warner Fox RKO Loew's 993 20 66 187 21 THEATRES JOINTLY OWNED BY TWO DEFENDANTS: Paramount — Fox 6 Paramount — Loew's 14 Paramount — Warnei 2S Paramount— RKO 150 Loew's-^RKO 3 Loew's — Warner S Fox— RKO 1 Warner— RKO 10 Of the above theatres jointly owned with independents, the following numbers will not be affected by the decree, since the defendant or co-owning independent owns less than a 5% interest: Paramount 177 RKO 32 Total 209 Theatres Total affected by the decree according to RKO's Exhibit 11 1,292 Theatres 1,501 Theatres General Considerations It may be said that such restrictions in commercial dealings as we would impose will interfere with the right of a copyright owner to choose his customers or contract for the disposition of his own property. The answer is that no such absolute right exists where its exercise will involve an extension of a copyright monopoly or an unreasonable interference with competition in the distribution and exhibition of moving pictures. A system of fixed admission prices, clearance and block-booking is so restrictive of competition in its tendency that it should be modified to comply with the terms of the Sherman Act. The modifications in practices we have indicated will relieve conditions that have grown up through the years. Indeed the practices are defended on the ground that business convenience and long usage ought to sanction them. But, 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 remedy we are giving against the infractions is certainly no more drastic in effect that the one the Supreme Court granted in Interstate Circuit v. United States, 306 U. S. 208, nor inore severe than the one it imposed in United States v. Crescent Amusement Co., 323 U. S. 173. 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 in 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 competitors and the general public to abate practices that are unlawful. It is argued that the steps we have proposed would involve an interference with commercial practices that are generally acceptable and a hazardous attempt on the part of judges — ^unfamiliar with the details of business — to remodel its delicate adjustments which have hitherto provided the public with what is a new and great art. But we see nothing ruinous in the remedies proposed. Disputes which may arise under the bidding system are likely to relate to questions whether the bidder has a theatre adequate for the run for which he bids, whether the clearance requested is reasonable as regards his own theatre and those of others, and similar matters generally involved in comparing bids. If the defendants will consent to an arbitration system for the determination of such disputes of the kind that has worked so well under the consent decree, they will facilitate the adjustment of most of the differences that are likely to occur, with a large saving of time and money as compared with separate court actions. A suit in the district court for violation of the Sherman Act is doubtless an awkward way to cure such ills as have arisen, but it is perhaps the best remedy now available to the government. There surely are evils in the existing system, and the Sherman Act provides a mode of correction which is lawfully invoked. At all events, that which is written is written, and is controlling on us. It does not follow from the foregoing that we should wholly break up_ the exhibition business of each of the major defendants even though a "root and branch" decree might be legally possible. Such total divestiture would be injurious to the corporations concerned, and, if we are right in our analysis of the situation, we should still have to give relief against pricefixing, systems of clearance, formula deals, master agreements and franchises, block-booking, pooling agreements, and other agreements we have held invalid. The relief proposed we believe should suffice, while total divestiture would be damaging to the public as well as to the defendants and not accomplish any useful purpose at the present time. The Decree A decree is granted in accordance with the views expressed in the foregoing opinion to be settled on ten days' notice. It should provide for the dismissal of all claims asserted by the plaintiff against any of the defendants which act only as producers of motion pictures and for the dismissal of claims against any other defendants based on their acts as producers, whether as individuals or in conjunction with others. The granting of licenses by any of the defendant-distributors which fix minimum prices for admission to theatres either of the defendants or of any other exhibitor should be enjoined in which such minimum admission prices are fixed by the parties either in writing, or through a committee, or through arbitration, or upon the happenings of any event, or in any other wise. The defendants should be enjoined from concertedly agreeing to maintain a system of clearances as among themselves or with other exhibitors, and no clearances should be granted against theatres in substantial competition with the theatre receiving a license for exhibition in excess of what is reasonably necessary to protect the licensee in the run granted. Existing clearances in excess of what is reasonably necessary to protect the licensees in the runs awarded to them shall be invalid pro tanto. In determining what is a reasonable clearance the following factors should be taken into consideration : (1) The admission prices of the theatres involved, as set by the exhibitor; (2) The character and location of the theatres involved, including size, type of entertainment, appointments, transit facilities, etc.; (3) The policy of operation of the theatres involved, such as the showing of double features, gift nights, give-aways, premiums, cutrate tickets, lotteries, etc.; (4) The rental terms and license fees paid by the theatres involved and the revenues derived by the distributor-defendant from such theatres ; (5) The extent to which the theatres involved compete with each other for patronage; (6) The fact that a theatre involved is affiliated with a defendant-distributor or with an independent circuit of theatres should be disregarded ; and 1,7) ihere should be no clearance between theatres not in substantial competition. The further performance by any of the defendants of existing formula deals, master agreements to the extent that we have previously found them invalid, or franchises should be enjoined, and the defendants should also be enjoined from entering into or carrying out any similar agreements in the future. Defendants owning a legal or equitable interest in theatres of ninety-five per cent or more either directly or through subsidiaries may exhibit pictures of their own or of their wholly owned subsidiaries in such theatres upon such terms as to admission prices and clearances and on such runs as they see fit. No defendant or its subsidiaries shall exhibit its films other than on its own behalf or through wholly owned subsidiaries, or subsidiaries in which it has an interest of at least ninety-five per cent, without offering the license at a minimum price for any run desired by the operators of each theatre within the competitive area. The license desired shall in such case be granted to the highest responsible bidder having a theatre of a size and equipment adequate to show the picture upon the terms offered. The license shall be granted 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