Motion Picture Herald (Mar-Apr 1947)

U. S. CALLS DECREE ILLEGAL; DEMANDS "ADEQUATE RELIEF" Appeal Brief Cites List of 25 Errors in Decision; Insists on Divorcement A basic and detailed attack on almost every provision of the final decree handed down December 31 by the New York Federal District Court in the Government's trust suit was made Feb. 21 by the Department of Justice when it filed its appeal from that decree in New York. The appeal contained a 17-page commentary, signed by George T. Washington, Acting Solicitor General, supplemented by a 25-point Assignment of Errors. Together they reiterated the Government's contention that complete divorcement of theatre interests is the only practicable remedy in the U. S. versus Paramount, et al, suit ; and that the court erred when it decided that divorcement at this time was not in the public interest. They hit at competitive bidding, characterized by the Department as merely regulating "the exercise of the major defendants' power to dominate the domestic motion picture industry." They attacked the clearance system. They protested the failure of the court to prohibit absolutely any further acquisition of theatre interests. They protested that the decree does nothing to "disturb the continuance of the defendants' domination of exhibition." They found that the court had virtually conceded its inability to regulate effectively the "illegal power found in the possession of the defendants." Competitive bidding was hit on a number of points. It was characterized as "unenforceable." And even if it were enforceable why did the New York court not decree that competitive bidding be conducted on a flat rental basis? The court erred in that respect, says the Department. And why was not a ban on cross licensing decreed? The court erred again, it said. The Government, it is reported, will not seek a stay of the competitive bidding system until the Supreme Court takes final action on the case. Basic Issue of Appeal Is "Judicial Power" The basic issue of the appeal, according to the Department, "is one of judicial power rather than the mere exercise of judicial discretion." "If." the Government stated, "the court is right in its assumption that the untried and unenforceable competitive bidding relief is an adequate substitute for the traditional divestiture relief and complete pro PARAMOUNT TESTS BIDS IN CHICAGO Paramount has inaugurated competitive bidding in Chicago in two situations. RKO and MGM have already instigated the practice there. According to Allen Usher, Paramount district manager, "Two Years Before the Mast" was awarded last week to the Imperial over the Four Star and to the Harmony over the Vision. hibition of future agreement among the guilty defendants — traditionally applied in situations of this character — then a proceeding under Section Four of the Sherman Act has become an instrument for protecting an established monopoly from either effective judicial or legislative correction." "We submit," the appeal concluded, "that the court's assumption is untenable and that reversal of its decision is required not only to secure adequate relief, but to maintain the validity of the equity suit as a mechanism of Sherman Act enforcement." The Government's appeal presents tour main questions. As listed by the Department, the} are : 1 "Accepting the expediting court's find-■-•ings as to the extent and nature of the violations involved in their entirety, it erred as a matter of law in failing to enter a judgment which dealt adequately with these violations. ^ "The court erred as a matter of law in 'concluding that the major defendants had not actually achieved a monopoly in exhibition, either singly or collectively, and that all of the defendants had not actually collectively achieved a monopoly of distribution, in violation of Section Two of the Sherman Act. 3 "The court erred as a matter of law in • concludi ug that tinv of the defendants may make a valid clearance agreement for the purpose of protecting any exhibitor from competition. A "The court, upon proper findings as to * the legal consequences of the defendants' violations, should have ordered the ultimate divorcement of the major defendants' theatre holdings from their distribution and production activities and should have restrained them from licensing films for exhibition in each other's theatres while such relief is being effectuated. It should also have enjoined all of the defendants from continuing to make clearance agreements." The Government stated that the New York District Court "exceeded the limits of its discretion" when it rejected theatre divorcement in favor of competitive bidding. Yet at the same time the Department concluded that the matter of divorcement might be a matter for Congress rather than the courts. Picking up the New York court's conclusion that divorcement would hurt the defendants and the public, the Department contended that "there is no evidence whatsoever that the theatre-going public would suffer hardship of any kind from a change of ownership or management of theatres now owned or managed by the major defendants." And then it went on : "Any conclusion as to the public desirability of avoiding such private injury as may result from relief necessary to achieve the objective of the Sherman Act appears to be for Congress rather than the courts. A specific legislative authorization would seem essential to substitute for dissolution of a monopoly which violates the Act mere regulation of its business practices." The court's recommendation for an adoption of an arbitration system was interpreted by the government as an indication of "the inability of a court to regulate effectively in the public interest the illegal power found in the possession of the defendants. ... It (the court) apparently recognized an inherent lack of power to establish and maintain a mechanism not approved by the defendants when it conditioned the incorporation of such a system (of arbitration) in its decree upon the consent of the parties. The fact that the Government and the defendants were unable to agree upon arbitration machinery . . . should have compelled the court to revise its relief in terms of prohibitions enforceable by contempt." Defendants' Domination Not Curtailed, Appeal Says The appeal stressed that nothing had been done to curtail the major defendants' domination of exhibition. The Government claims the majors dominate in all but four of the 92 cities in the U. S. with populations of more than 100,000 and in the great majority of those over 25,000. "The decree concededly does nothing to disturb the continuance of this dominance,'' the Government stated, "because the opinion did not find it to be unlawful, despite the fact that it had been acquired and maintained by unlawful means." The full list of the 25 points in the Assignment of Errors follows : The court erred in concluding that the relief granted was adequate to prevent the guilty defendants from unrea (Continned on page 18) 16 MOTION PICTURE HERALD, MARCH I, 1947