Motion Picture News (Oct-Dec 1930)

20 .1/ o t i o n Picture X ew s N ov ember 29 , 1930 Prohibitions of Trust Statute Can't Be Evaded Individual Credit Sought to Offset Government Edict {Continued from page 19) with oue who tails to observe such a contract with any distributor, all with the mam lest purpose to coerce the exmbitor and limit the treedom 01 trade, i tie I nited States maintain that the necessary and inevitable tendency ot the outlined agreement and combination (.described with greater detail in the opinion below J is to produce material and unreasonable restraint of interstate commerce in violation of the Sherman Act. Eastern States Lumber Ass n vs. United States, 234 U, S. faoO, ol4; Binderup vs. Pathe Exchange, 363 U. S. 291, 312. The court below accepted this view and directed an appropriate injunction against future action under the uulawiul plan. We agree with its conclusion and the chal.enged decree must be affirmed. The appellants claim : (1) The Standard Exhibition Contract and Rules of Arbitration dated May 1, 1928, having been evolved after six years ol discussion and experimentation, are reasonable and normal regulations ; so that whatever restraint follows falls short of unlawful coercion. (2) Arbitration is well adapted to the needs of the motion picture industry. (3) The manner in which the Contract and Rules have worked out in practice, and the significant absence of complaints, reflect their reasonable character. (4j The decree is inconsistent with the stipulated facts, also with the court's findings of fact. "Founded upon broad conceptions of public policy, the prohibitions of the statute (Sherman Act) were enacted to prevent not the mere injury to an individual which would arise from the doing of the prohibited acts, but the harm to the general public which would be occasioned by the evi.s which it was con templated would be prevented, and hence not only the prohibitions of the statute, but the remedies which it provided were co-extensive with such conceptions. '' Wilder Mfg. Co. vs. Corn Products Co., 236 I'. S. 165, 174. "The purpose of the Sherman Act is to prohibit monopolies, contracts and combinations which probably would unduly interfere with the free exercise of their rights by those engaged, or who wish to engage, in trade and commerce— in a word, to preserve ttie right of freedom to trade." United States vs. Colgate & Co.. 250 U. S. 300, 307. "The fundamental purpose of the Sherman Act was to secure equality of opportunity and to protect the public against evils commonly incident to destruction of competition through monopoies and combinations in restraint of trade." Ramsay Co. vs. Bill Posters' Ass'n, 260 U. S. 501, 512. "The Sherman Act was intended to secure equality of opportunity and to protect the public against evils commonly incident to monopolies and those abnormal contracts and combinations which tend directly to suppress the conflict for advantage called competition — the play of the contending forces ordinarily engendered by an honest desire for gain." United States vs. American Oil Co., 262 U. S. 371, 388. The fact that the Standard Exhibition Contract and Rules of Arbitration were evolved after six years of discussion and experimentation does not show that they were either normal or reasonable regulations. That the arrangement existing between the parties cannot be classed among "those normal and usual agreements in aid of trade and commerce," spoken of in Eastern States Lumber Ass'n vs. United States, supra, 612, is manifest. Certainly it is unusual and we think it necessarily and directly tends to destroy "the kind of competition to which the public has long looked for protection." United States vs. American Oil Co., supra, 390. The Sherman Act seeks to protect the pub'ic against evils commonly incident to the unreasonable destruction of competition and no length of discussion or experimentation among parties to a combination which produces the inhibited result can give validity to their action. Congress has so legislated "as to prevent resort to practices which unduly restrain competition or unduly obstruct the free flow of such commerce, and private choice of means must yield to the national authority thus exerted." Eastern States Lumber Ass'n vs. United States, supra, 613. It may he that arbitration is well adapted to the needs of the motion picture industry; but when under the guise of arbitration parties enter into unusual arrangements which unreasonably suppress normal competition their action becomes illegal. In order to establish violation of the Sherman Act it is not necessary to show that the challenged arrangement suppresses all competition between the parties or that the parties themselves are disci m • tented with the arrangement. The interest of the public in the preservation of com pet it inn is the primary consideration. The prohibitions of the statute cannot "he evaded by good motives The law is its own measure of rieht and wrong, of what it permits, or forbids, and the judgment of the courts cannot be set up against it in a supposed accommodation of its policy with the trood intention of parties, and it mav he. of some good restt'ts." Standard Sanitary Mfg. Co. vs. United States. 226 U. S. 30. 49. Upntl examination of the record wc cannot say that the decree of the court below is inconsistent with the stipulated facts or with proper regard to what that court held in respect of the facts. The chaPence decree must be amrmed. The decree then cites the arbitration clause of the contract. {Continued from page 19) guise of arbitration parties enter into unusual arrangements which unreasonably suppress normal competition their actions become illegal. "In order to establish violation of the Sherman act it is not necessary to show that the challenged arrangement suppresses all competition between the parties or that the parties themselves are discontented with the arrangement." "Upon examination of the record we cannot say that the decree of the court below is inconsistent with the stipulated facts or with proper regard to what the court held in respect of the facts," the decision concluded. The Ruling on Credits Reversing Judge Thacher's decision in the credit committees case, the court held that the "obvious purpose" of their organization was that of "coercing certain purchasers of theatres" by requiring them to comply with certain rules regarding their acceptance of a requirement that they complete contracts held by former owners or operators, etc. "Ten producers and distributors, controlling 60 per cent of the entire film business, agreed to contract with exhibitors only according to a standard form and then appointed their 32 local film boards of trade with other distributors who with themselves controlled 98 per cent of the entire business," it was pointed out. Further, the court continued, "the film boards appointed credit committees and these operated under the rules above outlined. The obvious purpose of the arrangement is to restrict the liberty of those who have representatives on the film boards to secure their concerted action for the purpose of coercing certain purchasers of theatres by excluding them from the opportunity to deal in a free and untrammeled market. "The definite point of attack in this proceeding," the court said, "is the agreement for the creation and operation of credit committees and their use under prescribed rules to restrict freedom of sales by distributors and of purchases by exhibitors." Apart on Credit System The committees, it was pointed out, were set up in 1926. The declared purpose of the distributors in forming them was to safeguard themselves from evasion of contract by unsatisfied exhibitors who might quit themselves of responsibility bv disposing of their houses. The companies claimed that the contract and arbitration rules, having been evolved after six years of consideration and experimentation, were reasonable and normal regulations, and that arbitration was well adapted to the needs of the industry, and that the manner in which the rules and contract worked out in practice and the "significant absence" of complaints, reflected their reasonable character. These contentions were contested by the Government, which alleged that the arbitration provisions constituted a conspiracy in Allied Seeks End Of Protection, Block Booking i Continued from page 18) a right to choose what pictures they shall see, which is impossible under the block system in closed situations where only two or three changes are made per week. "A few round table conferences may be able to straighten out these difficulties. At least, I am hopeful, but in case distributors don't realize that block booking and protection must be eliminated from the industry at once, there is only one thing left to be done and that is for the independent exhibitor to prepare himself for a fight which must be carried through the press and to the public and every legislative body of the United States. Should Honor Contracts "It behooves the independent to give some serious thinking to old contracts, especially. Unless the independent is given some kind of assurance that he will be allowed to stay in business, I am afraid to think of the millions of dollars in contracts that w*ill be thrown out the window. This, in my opinion, would be a destructive step, and I believe can be avoided and ironed out if the proper parties are brought together for a series of serious conferences. "However, if the other branches of the industry do not see the advisability of lending their ear to independents for a little common sense, there is only one thing left for the independents and public to do : Bring to the attention of the powers-that-be that the unreasonable protection that the producers, through the Hays office, have foisted on the independents is just as unlawful and just as illegal as the old standard exhibition contract and compulsory arbitration as protection is being forced through concerted methods of local film boards in their respective territories." 45-Day Protection Is Granted in Denver Zone Denver — Meeting of the zoning committee is slated for Dec. 2 to zone the Scottsbluff, Neb., and Rock Springs. Wyo., territories. Complaints will be heard from a number of Denver exhibitors. Colorado Springs and Pueblo have been rezoned on the Denver plan of 45 days' protection for first-run houses. Phyllis Back to Coast Chris Phyllis, who came to New York for opening of his Spanish talker, "Alma de Gaucho," has returned to Hollywood. unlawful restraint of interstate commerce, that they were unjustly enforced, and that the evidence in the case indicates that a great majority of exhibitors whose theatres are not owned or controlled by distributors or producers disapproved of the provisions. The Federal Court at New York, in a decision rendered bv former Judge Thacher, ruled arbitration illegal and the companies appealed. In the credit committee case, in which Judge Thacher had ruled in favor of the distributors, the Government had appealed on the contention that to require that exhibitors acquiring theatres bind themselves to complete contracts made by previous owners or operators was in violation of the laws relating to restraint of trade.