United States v. Twentieth Century-Fox Film Corp.

• Decision Date: 10 January 1956
• Docket Number: No. 14354.,14354.
• Citation: 137 F. Supp. 78
• Court: U.S. District Court — Southern District of California
• Parties: UNITED STATES of America, Plaintiff, v. TWENTIETH CENTURY-FOX FILM CORPORATION, Warner Bros. Pictures, Inc., Warner Bros. Distributing Corporation, Universal Pictures Company, Inc., United World Films, Inc., RKO Radio Pictures, Inc., Columbia Pictures Corporation, Screen Gems, Inc., Defendants.

137 F. Supp. 78

UNITED STATES of America, Plaintiff, v. TWENTIETH CENTURY-FOX FILM CORPORATION, Warner Bros. Pictures, Inc., Warner Bros. Distributing Corporation, Universal Pictures Company, Inc., United World Films, Inc., RKO Radio Pictures, Inc., Columbia Pictures Corporation, Screen Gems, Inc., Defendants.

No. 14354.

United States District Court S. D. California, Central Division.

December 5, 1955.

Findings and Judgment January 10, 1956.

COPYRIGHT MATERIAL OMITTED

Samuel Flatow, Sp. Asst. to Atty. Gen., James M. McGrath, Los Angeles, Cal., Daniel H. Margolis and Leonard R. Posner, Trial Attys., Antitrust Division, Dept. of Justice, Washington, D. C., for plaintiff.

Musick, Peeler & Garrett, O'Melveny & Myers, Homer I. Mitchell and Warren M. Christopher, Los Angeles, Cal., for defendant Twentieth Century-Fox Film Corp.

Freston & Files, O'Melveny & Myers, Homer I. Mitchell and Warren M. Christopher, Los Angeles, Cal., for defendants Warner Bros. Pictures Inc., and Warner Bros. Distributing Corp.

O'Melveny & Myers, Homer I. Mitchell and Warren M. Christopher, Los Angeles, Cal., for defendants Universal Pictures Co., Inc., and United World Films, Inc.

Mitchell, Silberberg & Knupp, Guy Knupp, Macklin Fleming and Robert Rifkind, Los Angeles, Cal., for defendants RKO Radio Pictures, Inc., Columbia Pictures Corp., and Screen Gems, Inc.

YANKWICH, Chief Judge.

The action was originally instituted by the Government¹ against six motion picture producers and six distributors of feature motion pictures, charging violation of § 1 of the Sherman Anti-Trust Act.² On September 12, 1955 a consent decree was entered against Republic Pictures Corp., a producer and its wholly owned subsidiary, Republic Productions, Inc., a distributor. On September 22, 1955 a consent decree was entered against Pictorial Films, Inc., and Films, Inc., distributors.

Involved in the case is the legality of the distributing methods of the defendants as they relate to the 16mm films.

Before outlining in greater detail the pleadings and issues in the case, we give the following accepted definitions of the trade terms used.

"Sixteen millimeter films" are motion picture films 16mm in width, in contrast with "standard films" which are 35mm in width. "Feature films" are motion pictures four or more reels in length other than those of strictly educational, religious or commercial character. "Theatres" are motion picture houses in which feature films are exhibited to the public for profit. "Theatrical exhibition" is any showing of a motion picture for the profit of an exhibitor. "Exhibitor" includes all persons, firms, corporations and public agencies engaged in the exhibition of motion pictures. "Clearance" is protection granted to an exhibitor or exhibitors by limiting the terms on which motion pictures may be exhibited by other exhibitors. "Merchants' free shows" are exhibitions of motion picture films sponsored by merchants to enhance their good will and to obtain publicity. They are open to the public, no admission being charged. "Roadshow men" are itinerant exhibitors who make a profit from showing motion pictures to the public for admission charges. "Coin-operated machine" is a mechanical device containing a 16mm film, automatically projecting it upon insertion of a coin and arranged so as to make the projection viewable by one person at a time. Other terms will be defined as the discussion progresses.

I The Pleadings and Issues

The corporate defendants are incorporated either under the laws of Delaware or New York. All except one, Republic Productions, Inc., have their principal place of business in New York City, New York, but each of them transacts business and is found in the Southern District of California.

The producing companies named as defendants remaining in the case are: Twentieth Century-Fox Film Corporation (to be referred to hereinafter as Fox); Warner Bros. Pictures, Inc. (to be referred to hereinafter as Warner); RKO Radio Pictures Inc. (to be referred to hereinafter as RKO); Columbia Pictures Corporation (to be referred to hereinafter as Columbia); and Universal Pictures Company, Inc. (to be referred to hereinafter as Universal).

RKO, in addition to producing motion pictures, also distributes them, including motion pictures in 16mm width. Warner, Columbia, and Universal each has a wholly-owned subsidiary engaged in the distribution of motion pictures, including 16mm pictures. These subsidiaries, named as defendants, are, respectively; Warner Bros. Pictures Distribution Corporation, Screen Gems, Inc., and United World Films, Inc. The two other distributing companies named as defendants are: Films, Inc., (to be referred to hereinafter as Films) and Pictorial Films, Inc. (to be referred to hereinafter as Pictorial). Both defendants Films and Pictorial are engaged primarily in the distribution of 16mm motion picture films. Films distributes the 16mm product of, among others, the defendants Fox and Warner.

Six exhibitor associations and an organization representing all phases of the industry (Council of Motion Pictures Organizations, Inc., to be referred to hereinafter as COMPO) are named as co-conspirators in this action. Of the six exhibitor associations, two, Theatre Owners of America, Inc. (to be referred to hereinafter as TOA) and Allied States Association of Motion Picture Exhibitors (to be referred to hereinafter as Allied) are national trade associations composed primarily of local, regional or state associations of theatre owners. The other four exhibitor organizations, Independent Theatre Owners Association, Inc., Metropolitan Motion Picture Theatres Association, Inc., Southern California Theatre Owners Association and Pacific Coast Conference of Independent Theatre Owners, are regional exhibitor associations.

The complaint charges that beginning some years prior to 1945, the exact date being unknown, and continuously since 1945, the defendants have been and are now engaged in an unlawful conspiracy in restraint in interstate trade and commerce in 16mm feature films. More specifically, it is charged:

"29. During the period of time covered by this complaint, and for the purpose of effectuating the aforesaid combination and conspiracy, the defendants did the things alleged in paragraph 28 hereof and entered into written and oral agreements containing restrictions hereinafter set forth, limiting the purposes for, locations at, times when and conditions under which sixteen millimeter films may be exhibited.

"30. The aforesaid restrictions on sixteen millimeter feature film exhibitions consist of the following:

"(a) Refusing to license any one to telecast sixteen millimeter feature films;

"(b) Refusing to license others to exhibit sixteen millimeter feature films in locations which are open to the public within a zone, usually ten miles in radius, around any established 35 millimeter theatre;

"(c) Restricting licenses for exhibition of sixteen millimeter feature films in churches, schools, clubs, hotels, and drive-in theatres by limitations upon admission prices, advertising, categories of persons to be admitted, or hours of showing.

"(d) Imposing arbitrary and excessive clearances between the first release of a feature motion picture of 35 millimeter width and its exhibition on sixteen millimeter films;

"(e) Refusing to license others to exhibit sixteen millimeter feature films at free merchants' shows, taverns, or in coin-operated machines and refusing to license roadshow men;

"(f) Reserving for each of the defendants severally, or for some of them jointly, the right to approve or disapprove each location for the exhibition of sixteen millimeter feature films produced or distributed by such defendant or defendants, before or after the licensing of such location by distributors or dealers, coupled with the right to arbitrarily abrogate any license granted pursuant to a given location approval; and

"(g) Granting or withholding licenses to exhibit sixteen millimeter feature films in conformity with lists of locations `approved' or `disapproved' by the defendants or some of them.

"31. The defendants have maintained an intricate system to police and enforce, and with the assistance of Theatre Owners of America, Inc., have policed and enforced, the license restrictions imposed upon exhibitors of sixteen millimeter feature films, and have blacklisted or boycotted exhibitors who disregard such restrictions."

The effects claimed for the alleged illegal actions of the conspirators are stated, generally, to be: (a) suppression of telecasting of the better feature films to television audiences; (b) unreasonable restraint of competition in the interstate distribution of feature films; (c) foreclosing actual and potential exhibitors of 16mm feature films from significant parts of the United States market, and (d) denying to persons living in theatreless towns or in institutions (both governmental and other) which prohibit their inhabitants to leave their premises the opportunity to see anything but outmoded feature films.

In their separate answers the defendants denied these allegations. Their proof in the record was directed to showing that whatever restrictive practices existed as to the exploitation of 16mm feature films were the result not of concerted action between the producers or the producers and distributors, and/or unindicted co-conspirators, but were dictated by the particular exigencies and needs of the market of each producing company, and that they were "reasonable" in the circumstances.

II The Concept of Reasonableness

The object of the Sherman Act was stated in one of the older cases to be

"to preserve the right of freedom to trade."³ Later cases have stressed this object.⁴ However, the Sherman Act condemns only "unreasonable" restraints.⁵ The Supreme Court has read the concept of "reasonableness" as it existed at common law into the Act.⁶ This concept applies to all practices which were not at...