371 U.S. 38 (1962), 42, United States v. Lowe's Incorporated

Docket Nº:No. 42
Citation:371 U.S. 38, 83 S.Ct. 97, 9 L.Ed.2d 11
Party Name:United States v. Lowe's Incorporated
Case Date:November 05, 1962
Court:United States Supreme Court
 
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371 U.S. 38 (1962)

83 S.Ct. 97, 9 L.Ed.2d 11

United States

v.

Lowe's Incorporated

No. 42

United States Supreme Court

Nov. 5, 1962

Argued October 16, 1962

APPEAL FROM THE UNITED STATES DISTRICT COURT

FOR THE SOUTHERN DISTRICT OF NEW YORK

Syllabus

1. Section 1 of the Sherman Act was violated when individual distributors of copyrighted feature motion picture films for television exhibition engaged in block booking such films to television broadcasting stations -- i.e., conditioning the license or sale of the right to exhibit one or more feature films upon acceptance by each station of a package or block of films containing one or more unwanted or inferior films -- even in the absence of any combination or conspiracy between the distributors and any monopolization or attempt to monopolize. Pp. 39-50, 52.

2. The fact that, on the records in these cases, each defendant was found to have entered into a comparatively small number of illegal contracts did not make it improper for the District Court to grant injunctive relief. Pp. 50-51.

3. The block booking engaged in by one of the defendants cannot be justified or excused by its plea of business necessity, since the thrust of the antitrust laws cannot be avoided merely by claiming that the otherwise illegal conduct was compelled by contractual obligations to a third party. Pp. 51-52.

4. The decrees entered by the District Court should be amended so as to:

(a) Require the defendants to price films individually and offer them on a picture by picture basis. Pp. 52-54.

(b) Prohibit differentials in price between a film when sold individually and when sold as part of a package, except when such price differentials are justified by relevant and legitimate cost considerations. Pp. 54-55.

(c) Proscribe "temporary" refusals by a distributor to deal on less than a block basis, except that a distributor may briefly defer licensing or selling to a customer pending the expeditious conclusion

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of bona fide negotiations already being conducted with a competing station on a proposal wherein the distributor has simultaneously offered to license or sell films either individually or in a package. P. 55.

189 F.Supp. 373, judgments vacated and causes remanded.

GOLDBERG, J., lead opinion

MR. JUSTICE GOLDBERG delivered the opinion of the Court.

These consolidated appeals present as a key question the validity under § 1 of the Sherman Act1 of block booking of copyrighted feature motion pictures for television exhibition. We hold that the tying agreements here are illegal, and in violation of the Act.

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The United States brought separate civil antitrust actions in the Southern District of New York in 1957 against six major distributors of pre-1948 copyrighted motion picture feature films for television exhibition, alleging that each defendant had engaged in block booking in violation of § 1 of the Sherman Act. The complaints asserted that the defendants had, in selling to television stations, conditioned the license or sale of one or more feature films upon the acceptance by the station of a package or block containing one or more unwanted or inferior films. No combination or conspiracy among the distributors was alleged, nor was any monopolization or attempt to monopolize under § 2 of the Sherman Act averred. The sole claim of illegality rested on the manner in which each defendant had marketed its product. The successful pressure applied to television station customers to accept inferior films along with desirable pictures was the gravamen of the complaint.

After a lengthy consolidated trial, the district judge filed exhaustive findings of fact, conclusions of law, and a carefully reasoned opinion, 189 F.Supp. 373, in which he found that the actions of the defendants constituted violations of § 1 of the Sherman Act. The conclusional finding of fact and law was that

. . . the several defendants have each, from time to time and to the extent set forth in the specific findings of fact, licensed or offered [83 S.Ct. 100] to license one or more feature films to television stations on condition that the licensee also license one or more other such feature films, and have, from time to time and to the extent set forth in the specific findings of fact, refused, expressly or impliedly, to license feature films to television stations unless one or more other such feature films were accepted by the licensee.

189 F.Supp. at 397-398.

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The judge recognized that there was keen competition between the defendant distributors, and therefore rested his conclusion solely on the individual behavior of each in engaging in block booking. In reaching his decision, he carefully considered the evidence relating to each of the 68 licensing agreements that the Government had contended involved block booking. He concluded that only 25 of the contracts were illegally entered into. Nine of these belonged to defendant C & C Super Corp., which had an admitted policy of insisting on block booking that it sought to justify on special grounds.

Of the others, defendant Loew's, Incorporated, had in two negotiations that resulted in licensing agreements declined to furnish stations KWTV of Oklahoma City and WBRE of Wilkes-Barre with individual film prices, and had refused their requests for permission to select among the films in the groups. Loew's exacted from KWTV a contract for the entire Loew's library of 723 films, involving payments of $314,725.20. The WBRE agreement was for a block of 100 films, payments to total $15,000.

Defendant Screen Gems, Inc., was also found to have block booked two contracts, both with WTOP of Washington, D.C., one calling for a package of 26 films and payments of $20,800 and the other for 52 films and payments of $40,000. The judge accepted the testimony of station officials that they had requested the right to select films and that their requests were refused.

Associated Artists Productions, Inc., negotiated four contracts that were found to be block booked. Station WTOP was to pay $118,800 for the license of 99 pictures, which were divided into three groups of 33 films, based on differences in quality. To get "Treasure of the Sierra Madre," "Casablanca," "Johnny Belinda," "Sergeant York," and "The Man Who Came to Dinner," among others, WTOP also had to take such films as "Nancy Drew

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Troubleshooter," "Tugboat Annie Sails Again," "Kid Nightingale," "Gorilla Man," and "Tear Gas Squad." A similar contract for 100 pictures, involving a license fee of $140,000, was entered into by WMAR of Baltimore. Triangle Publications, owner and operator of five stations, was refused the right to select among Associated's packages, and ultimately purchased the entire library of 754 films for a price of $2,262,000 plus 10% of gross receipts. Station WJAR of Providence, which licensed a package of 58 features for a fee of $25,230, had asked first if certain films it considered undesirable could be dropped from the offered packages, and was told that the packages could not be split.

Defendant National Telefilm Associates was found to have entered into five block booked contracts. Station WMAR wanted only 10 Selznick films, but was told that it could not have them unless it also bought 24 inferior films from the "TNT" package and 12 unwanted "Fabulous 40's." It bought all of these, for a total of $62,240. Station WBRE, before buying the "Fox 52" package in its entirety for $7,358.50, requested and was refused the right to eliminate undesirable features. Station WWLP of Springfield, Massachusetts, inquired about the possibility of splitting two of the packages, was told this was not possible, and then bought a total of 59 films in two packages for $8,850. A full package contract for National's "Rocket 86" group of 86 films was entered into by KPIX of San Francisco, payments to total $232,200, after KPIX requested and was denied permission [83 S.Ct. 101] to eliminate undesirable films from the package. Station WJAR wanted to drop 10 or 12 British films from this defendant's "Champagne 58" package, was told that none could be deleted, and then bought the block for $31,000.

The judge found that defendant United Artists Corporation had in three consummated negotiations conditioned the sale of films on the purchase of an entire

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package. The "Top 39" were licensed by WAAM of Baltimore for $40,000 only after receipt of a refusal to sell 13 of the 39 films in the package. Station WHTN of Huntington, West Virginia, purchased "Award 52" for $16,900 after United Artists refused to deal on any basis other than purchase of the entire 52 films. Thirty-nine films were purchased by WWLP for $5,850 after an initial inquiry about selection of titles was refused.

Since defendant C & C was found to have had an overall policy of block booking, the court did not analyze the particular circumstances of the nine negotiations which had resulted in the licensing of packages of films. C & C's policies resulted in at least one station having to take a package in which "certain of the films were unplayable, since they had a foreign language sound track." 189 F.Supp. at 389.

The court entered separate final judgments against the defendants, wherein each was enjoined from

(A) Conditioning or tying, or attempting to condition or tie, the purchase or license of the right to exhibit any feature film over any television station upon the purchase or license of any other film;

(B) Conditioning the purchase or license of the right to exhibit any feature film over any television station upon the purchase or license for exhibition over any other television station of that feature film, or any other film;

(C) Entering into any agreement to sell or license the right to exhibit any feature film over any television station in which the differential between the price or fee for such feature film when sold or licensed alone and...

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