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276 ^> ^ -^ The Motion Picture Industry
motion picture films distributed in this country, that these local Boards of Trade and the Boards of Arbitration "supplemented and exceeded" such instructions by various "understandings and agreements without the knowledge and against the general instructions of the defendant exhibitors and of the defendant associations",21 and that the plan as a whole constituted a means of unduly restraining the interstate commerce in films.
More specifically, the argument of the government fell into three well-defined phases: first, that compulsory arbitration was forced upon the exhibitors against their will; second, that certain provisions of the Standard Exhibition Contract were in themselves unfair to the independent exhibitors; and, third, that in consequence the system was in contravention to the law. These three arguments may be considered in turn.
The first of these allegations stated that the Standard Exhibition Contract and compulsory arbitration were forced upon the exhibitors without their consent. A great deal of evidence was introduced in support of the charge that the Standard Exhibition Contract of March, 1926, for example, was never regularly approved by the exhibitors, but on the other hand was actually condemned by various organizations representing the independent exhibitors. It was largely in consequence of such exhibitors' discontent over that contract that the Federal Trade Commission initiated the Trade Practice Conference of 1927. The Department of Justice maintained that the exhibitors at that conference had no power to commit other exhibitors to any course of action whatsoever, nor was any "attempt made so to do".
21 The government conceded that such agreements were entered into by the local Film Boards of Trade wholly of their own initiative. It would appear that such agreements were quite common at one time but that, subsequent to a conference at French Lick in June, 1927, between the general attorney for the Hays Organization and the distributor representatives on the Film Boards, they were abandoned. The Federal suit was brought on April 27, 1928, and the defendants contended that neither at that time nor at any subsequent time have such agreements existed. See Reply Memorandum for Defendants, pp. 35-39.