Department of Justice Reviews antitrust judgement, the Paramount Consent Decrees

By September 20, 2018Uncategorized

On August 2, 2018 the Department of Justice announced that it would review 1,300 legacy antitrust judgements including the Paramount Consent Decrees, a series of consent decrees that restricted certain behaviors by specific motion picture studios.

During this review the Department of Justice will determine if  the decrees should be terminated or modified The Department of Justice will review responses until October 4, 2018.

What are the Paramount Consent Decrees?

In 1938 the Department of Justice filed a lawsuit alleging that eight motion picture studios had conspired to control the motion picture industry. Following the trial the district court and Supreme Court found these studios guilty of a widespread conspiracy to illegally fix motion picture prices and monopolize film distribution and movie theatre markets. Following these rulings the defendants entered into the Paramount Consent Decrees, agreements with the Department of Justice that regulated specific behaviors related to motion picture distribution and exhibition.

Which studios are subject to the Paramount Consent Decrees?

The remaining studios that are subject to the Paramount Consent Decrees are MGM, Sony Pictures, 20th Century Fox, Universal Pictures, and Warner Bros. as well as their subsidiaries.

What behaviors do the Paramount Consent Decrees restrict?

  1.  Vertical Integration of motion picture distribution and exhibition: The decrees separated film distribution and exhibition and divested five studios of their theaters, requiring them to receive special court permission to acquire theaters in the future.
  2. Block Booking: The decrees regulated the practice of bundling multiple films into a single license — licensing one film or group of films on the condition that an exhibitor would also license another feature or group of features. Studios could no longer force exhibitors to book their entire slate, instead the decrees gave exhibitors the right to reject 20% of feature films not previously trade shown.
  3. Circuit Dealing: Studios were required to license each film individually, theater by theater without discrimination in favor of specific theaters.
  4. Resale Price Maintenance/ Price Fixing: The decrees prohibited studios from setting minimum prices for movie theater admission.  
  5. Overbroad Clearances: The decrees prohibited studios from granting clearances (exclusive film licenses) between theaters that are not in substantial competition.

What other antitrust laws regulate the motion picture industry?

Since 1890 the Sherman Antitrust Act has made certain types of anticompetitive and monopolistic behaviors illegal.  The Act outlawed concentrations of power that restrained trade or inhibited interstate commerce.

Take Action: Protect Quality Film Exhibition

It is an important time to voice your support for the regulation of the monopolization of  the motion picture industry.

As mission-driven, community-based cinemas we purposefully program and exhibit motion pictures in service of the towns, cities, and regions where we are based. Our sustained commitment to community-service — to recognizing the needs, questions, and concerns of specific people and places — improves the quality of film exhibition, contributes to the economic wellbeing of the cities and towns where we are located, and increases consumer choice.

The regulation of anticompetitive behaviors in the motion picture industry is absolutely essential to preventing market consolidation, ensuring fair pricing, and protecting quality film exhibition. Allowing a small, powerful group of motion picture producers and distributors to own theaters risks making independent theaters dependent upon their competitors for content. While allowing large studios to set prices, control clearances, and bundle films into a single license hampers the ability of small business to innovate, collaborate with other small business (particularly small distributors), develop eclectic screening series, and initiate programs intended to invigorate their local economies — in short, it could give consolidated, large corporations excessive influence over programming, strategy, and pricing — allowing them to withhold content and obstruct efforts to work with multiple distributors/ suppliers.

While enforcement of many of the provisions of the Paramount Consent Decrees has eroded over time, with a variety of studios receiving special permission to enter into the film exhibition business in the 1980s, and disputes over licensing and clearances becoming the subject of multiple lawsuits over the course of the last decade, this does not mean that anti-monopolistic  regulation no longer serves a purpose in the motion picture industry. Instead, it is a moment to consider how enhanced regulations could ensure that small, independent exhibitors are able to continue innovating, working with multiple distributors, and providing consumers across America with access to quality film exhibition.

What You Can Do:

Tell the Department of Justice why antitrust legislation is important.

Remember the Department of Justice’s inquiry is focused on how the Paramount Decrees protect market competition and efficiency. Since much antitrust regulation focuses on protecting competition, focus your response on the ways that regulation can enhance and protect consumer choice, fair pricing, competition, and commerce.

Check out our glossary below.

The DOJ is accepting comments on the following questions until October 4, 2018.

  • Do the Paramount Decrees continue to serve important competitive purposes today? Why or why not?
  • Individually, or collectively, are the decree provisions relating to (1) movie distributors owning movie theatres; (2) block booking; (3) circuit dealing; (4) resale price maintenance; and (5) overbroad clearances necessary to protect competition? Are any of these provisions ineffective in protecting competition or inefficient? Do any of these provisions inhibit competition or cause anticompetitive effects?
  • What, if any, modifications to the Paramount Decrees would enhance competition and efficiency? What legal justifications would support such modifications, if any?
  • What effect, if any, would the termination of the Paramount Decrees have on the distribution and exhibition of motion pictures?
  • Have changes to the motion picture industry since the 1940s, including but not limited to, digital production and distribution, multiplex theatres, new distribution and movie viewing platforms render any of the Consent Decree provisions unnecessary?
  • Are existing antitrust laws, including, the precedent of United States v. Paramount, and its progeny, sufficient or insufficient to protect competition in the motion picture industry?

Organizations can submit their commits via email to atr.mep.information@usdoj.gov

Read more about the review here.

Glossary

  • Competitive/ Market Competition Conditions in which different companies or economic entities sell or provide similar products or services and rival for consumers. According to the Federal Trade Commission “Aggressive competition among sellers in an open marketplace gives consumers — both individuals and businesses — the benefits of lower prices, higher quality products and services, more choices, and greater innovation.”
  • Monopoly When a company becomes the only provider of a good or service with no reasonable or tenable substitute.
  • Monopsony When a single entity becomes the only buyer for a good or service (imagine if all food suppliers sold to a single food retailer).
  • Price Fixing an agreement among competitors that raises, lowers, or stabilizes prices or competitive terms  (since the 1980s, regulation has primarily been concerned with raising consumer prices, less attention has been paid to when competitors lower prices)
  • Trust A group of businesses or companies tied together through contracts and cross-ownership.
  • Vertical Integration When a company controls multiple stages of the supply chain.  

Questions? Contact us.