United States v. Griffith Amusement Co., Civil Action No. 172.

• Citation: 68 F. Supp. 180
• Decision Date: 09 October 1946
• Docket Number: Civil Action No. 172.
• Parties: UNITED STATES v. GRIFFITH AMUSEMENT CO. et al.
• Court: U.S. District Court — Western District of Oklahoma

68 F. Supp. 180

UNITED STATES v. GRIFFITH AMUSEMENT CO. et al.

Civil Action No. 172.

District Court, W. D. Oklahoma.

October 9, 1946.

Robert L. Wright, Milton A. Kallis, and Posey T. Kime, Sp. Assts. to Atty. Gen. (Wendell Berge, Asst. Atty. Gen., Walter W. K. Bennett, Sp. Asst. to Atty. Gen., and

Charles E. Dierker, U. S. Atty., and John A. Brett, Asst. U. S. Atty., both of Oklahoma City, Okl., on the brief), for plaintiff.

Henry S. Griffing, Charles B. Cochran, and John B. Dudley, all of Oklahoma City, Okl., and L. M. Rice, of Dallas, Tex., for defendants.

VAUGHT, District Judge.

On April 28, 1939, the United States of America filed its complaint against the defendants Griffith Amusement Company, Consolidated Theatres, Inc., R. E. Griffith Theatres, Inc., Westex Theatres, Inc., L. C. Griffith, H. J. Griffith, R. E. Griffith, Paramount Pictures, Inc., Metro-Goldwyn-Mayer Distributing Corporation of Texas, Loew's Incorporated, RKO Radio Pictures, Inc., Vitagraph, Inc., Universal Film Exchanges, Inc., Twentieth Century-Fox Film Corporation, Twentieth Century-Fox Film Corporation of Texas, United Artists Corporation, and Columbia Pictures Corporation, alleging violations of Sections 1 and 2 of Title 15 U.S.C.A., the Sherman Anti-Trust Act, and seeking relief under Section 4 thereof. Prior to the trial of the cause, the action was dismissed as to all of the defendants except Griffith Amusement Company, Consolidated Theatres, Inc., R. E. Griffith Theatres, Inc., Westex Theatres, Inc., L. C. Griffith, H. J. Griffith and R. E. Griffith. Defendant R. E. Griffith died in 1943 and the action was not revived against his personal representative or his estate.

On motion of the plaintiff, paragraphs 44 to 48, inclusive, were stricken from the complaint leaving paragraphs 39, 40, 41, 42, 43, 49 and 50, which charge violations of the Sherman Anti-Trust Act. All of the defendants remaining in the case are what are known in the moving picture industry as exhibitors. The alleged violations follow:

"39. For the past five years the defendant exhibitors have continuously combined with each other and with each of the defendant distributors to unreasonably restrain interstate trade and commerce in motion picture films and to monopolize and attempt to monopolize the first and second run exhibition of feature pictures and the operation of first and second run theatres in the Griffith Towns in violation of Sections 1 and 2 of the Sherman Act, in the following manner:

"40. Said exhibitors have refrained from competing with each other in the acquisition and operation of motion picture theatres in said towns pursuant to express or implied agreements to allocate said territory between them.

"41. During each of the past five years said exhibitors have collectively contracted with each of the defendant distributors for all of the feature pictures annually required for exhibition at all of the theatres operated by them in said towns, in advance of the production and distribution of such feature pictures and before such feature pictures or any of them, have been offered to any other exhibitor in said towns, with the purpose and effect of controlling and monopolizing the supply of feature pictures available for exhibition in said towns.

"42. By said contracts said exhibitors have combined with each other to compel each of the defendant distributors to grant to all of them in all of said towns the following exclusive privileges during the entire time they have operated theatres in said towns: (a) The exclusive privilege of selecting from the feature pictures released by said distributors such feature pictures as said exhibitors deemed suitable for exhibition in said towns, as and when prints thereof became available, before said pictures were released to any other exhibitors in said towns. (b) The exclusive privilege of receiving clearance on said feature pictures over competing theatres in said towns.

"43. The foregoing exclusive privileges have enabled the defendant exhibitors to unreasonably restrain, suppress and entirely eliminate the competition offered by other theatre operators in said towns in the licensing and exhibition of feature pictures by: (a) Preventing them from obtaining enough first-class pictures for exhibition on any run to operate their theatres successfully. (b) Forcing them to maintain admission prices higher than those warranted by the quality of the entertainment they were able to offer; that is, feature pictures previously exhibited or rejected by the defendant exhibitors. (c) Preventing them from showing any feature pictures released by the defendant distributors with first-run clearance in any of said towns. (d) Preventing them from exhibiting any feature pictures released by the defendant distributors with second-run clearance in any of said towns where any of the defendant exhibitors operate one or more second-run theatres."

"49. Each of the defendant exhibitors is what is commonly referred to in the motion picture industry as a circuit of theatres. As a result of the acquisition and operation of numerous theatres as hereinbefore alleged, the said exhibitors and each of them have obtained what is commonly referred to in the motion picture industry as circuit buying power. Said circuit buying power has enabled them and each of them to obtain the exclusive privileges hereinbefore recited from the defendant distributors. Said circuit buying power has further enabled them and each of them to demand and receive from all distributors of motion pictures more favorable rental terms in licensing their motion pictures than can be obtained by competing individual exhibitors.

"50. Said circuit buying power is now so great that its continued existence will tend to subject competing exhibitors in the Griffith Towns to other and additional restraints in violation of the Sherman Act, even if the foregoing restraints are enjoined, unless said circuit buying power is eliminated."

The defendants deny generally these allegations and upon the issues thus joined the cause was tried to the court.

The record is quite voluminous, containing close to 4,000 pages of testimony and many hundreds of exhibits, and exhaustive briefs were filed, which necessitate a much more lengthy opinion than in ordinary cases.

The production, distribution and exhibition of moving picture films comprise an industry that has arisen and developed during the past thirty years. In order that we may better understand the situation here, as it has been developed in the trial, it is appropriate to give a brief resume of the background of the development of the industry as it pertains to the defendants, as disclosed by the testimony.

During the thirty-year period immediately preceding the filing of the complaint in this cause, the motion picture industry has undergone marvelous changes and development.

These changes have been very marked not only in the production and distribution of pictures, but also in the exhibition of pictures. The showhouse or theater in the smaller towns and in many of the larger ones, at the beginning of this period, consisted ordinarily of a remodeled storeroom equipped, often poorly, for exhibition purposes. Those originally engaged in the exhibition of pictures were persons of little or no experience in the business and usually their methods were as crude and inefficient as the houses in which they operated. The production of better and more attractive pictures called for more efficient methods in their exhibition. All of these developments have required substantial capital for the construction of modern theaters, installation of sound equipment, more efficient personnel, and advertising and exhibiting the production.

In many of the situations in the territory in question, the pioneer exhibitors have been slow to respond to the public demand for better showhouses, modern equipment and efficient service in the exhibition of pictures. This very positive progress in the development of the business not only has made the well-managed theater a good business proposition, but has resulted in an increased interest in the business by a more progressive element, willing to provide the capital and more efficient service to meet the public demand. In reviewing the evidence, the situations will be treated individually in order to determine whether or not the existing conditions are the natural and logical result of the gradual changes suggested by the demands of the public and the opportunities from a business standpoint, and will be considered only as affecting the territory involved in this action.

The testimony discloses that the moving picture industry, as it pertained to the exhibition of pictures, from its early inception until about 1928 or 1929 consisted of the exhibition of what is known as "silent films." During this period, very little effort was made by the exhibitors to construct showhouses or theaters adequate to accommodate the public. The accommodations were unsanitary, poorly planned and constructed, and were known throughout the industry as the "storehouse type" of theater. Particularly was this true as to the states of Oklahoma, New Mexico and the outlying districts of Texas. In the principal cities in Texas, however, many modern theater buildings were constructed. In 1928 or 1929 what is known as "sound equipment" was perfected and since that time we have had what is termed "talking pictures." The cost of the construction and equipment of a modern de luxe type of theater with sound equipment and a seating capacity of 600 to 1,000 was approximately $75,000. The successful installation of sound equipment in old buildings that had been converted into theaters necessitated much and expensive remodelling, at an approximate cost of $14,000. Stages in such buildings had to be reconstructed, ceilings raised or lowered, obstructions that would interfere with sound removed.

As the moving picture industry was so...