United States vs. Paramount Pictures Inc.

United States vs. Paramount Pictures Inc.

A landmark Supreme Court Case that decided the fate of movie studios owning their own theaters and being able to chose where their movies were played with exclusivity rights.

It has also changed the way Hollywood movies are produced, distributed, and viewed. This case was argued under the

United States antitrust law, which is a collection of federal and state government laws, which regulates the conduct and organization of business corporations, generally to promote 'fair' competition for the benefit of consumers. The main statutes are the Sherman Act (1890), the Clayton Act (1914) and the Federal Trade Commission Act (1914).

Relevant Constitutional Issues

Paths of appeal to the Supreme Court

Facts cont.

Impact on Society

• This case was argued under the United States Antitrust Law which is is a collection of federal and state government laws, which regulates the conduct and organization of business corporations, generally to promote fair competition for the benefit of consumers. The main statutes are the Sherman Act 1890 (mainly used), the Clayton Act 1914 and the Federal Trade Commission Act 1914 (as previously mentioned).

Since this case was The United States vs. a defendant, it held a higher importance and did not start in a lower court before it was moved up to the Supreme Court.

The federal government's case, filed in 1938, was settled with a consent decree in 1940,which allowed the government to reinstate the lawsuit if, in three years' time, it had not seen a satisfactory level of compliance. Among other requirements, the consent decree included the following conditions:

• The Big Five studios could no longer block-book (a system of selling multiple films to a theater as a unit) short film subjects along with feature films (known as one-shot, or full force, block booking);
• the Big Five studios could continue to block-book features, but the block size would be limited to five films;
• blind buying (buying of films by theater districts without seeing films beforehand) would now be outlawed and replaced with "trade showing," special screenings every two weeks at which representatives of all 31 theater districts in the United States could see films before they decided to book a film; and
• the creation of an administration board to enforce these requirements.

• These Acts restrict the formation of cartels and prohibit other collusive (secret cooperation) practices regarded as being in restraint of trade.

• Second, they restrict the mergers and acquisitions of organizations which could substantially lessen competition.

• The inability to block-book an entire year's worth of movies caused studios to be more selective in the movies they made, resulting in higher production costs and dramatically fewer movies made. Less movies are able to be viewed each year as a result.
• When the studios were forced to sell their theaters, the result was higher rental rates charged to exhibitors (rising from an average of approximately 35% to its current level of approximately 50%), so the studios could recoup their expenses. This also increased higher prices on tickets for viewers.

Citations

• The film industry did not satisfactorily meet the requirements of the consent decree, forcing the government to reinstate the lawsuit—as promised—three years later, in 1943. The case went to trial—with now all of the Big Five as defendants—on October 8, 1945, one month and six days after the end of World War II.

• Third, they prohibit the creation of a monopoly and the abuse of monopoly power.

• The case reached the U.S. Supreme Court in 1948. The verdict went against the movie studios, forcing all of them to divest themselves of their movie theater chains. In addition to Paramount, RKO Radio Pictures, Inc., Loew's, 20th Century-Fox Film Corporation, Columbia Pictures Corporation, Universal-International, Warner Bros., the American Theatres Association and W.C. Allred (the former of which no longer exists as a film studio) were named as defendants.
• This, coupled with the advent of television and the attendant drop in movie ticket sales, brought about a severe slump in the movie business, a slump that would not be reversed until 1972, with the release of The Godfather, the first modern blockbuster.

Relevant Legal Precedents

My Legal Opinion

Facts

• I find that the interpretation of the Supreme Court was Constitutional and looking at the big picture, the conclusion they came to was the correct one.

• Bigelow v. RKO Radio Pictures, Inc.(1946) - The Supreme Court held that major Hollywood distributors had engaged in an antitrust conspiracy preventing certain independent movie houses from showing first run films (new movies that had not been in theaters previously). These movies were held by certain cinemas in Chicago which prevented many small theater owners could not show the films . The Supreme Court found that it was "indisputable that the jury could have found that ... a first run theater possessed competitive advantages over later run theaters" and that this discriminatory release was "damaging to petitioners". This case was also argued with the United States Antitrust Laws.

• The defendants fall into five groups: Paramount Pictures Inc., Loew's Incorporated, Radio-Keith-Orpheum Corporation, Warner Bros. Pictures Inc., Twentieth Century-Fox Film Corporation, which produce motion pictures, and their subsidiaries or affiliates who distribute and exhibit films. ( These are known as the five major defendants or exhibitor- defendants, or 'The Big Five studios'.)

• http://supreme.justia.com/cases/federal/us/334/131/case.html
• http://images1.wikia.nocookie.net/__cb20111120052230/logopedia/images/a/a5/Paramounttelevisionnetwork.jpg
• http://raycheesemester2.files.wordpress.com/2012/04/1950s-3d-movies.jpg
• http://en.wikipedia.org/wiki/United_States_v._Paramount_Pictures,_Inc.
• http://www.cobbles.com/simpp_archive/paramountdoc_1948supreme.htm
• http://en.wikipedia.org/wiki/Bigelow_v._RKO_Radio_Pictures,_Inc.
• http://en.wikipedia.org/wiki/International_Salt_Co._v._United_States
• http://en.wikipedia.org/wiki/United_States_Constitution
• http://en.wikipedia.org/wiki/United_States_antitrust_law

• I think that the fact that more independent producers and studios are now able to produce their films free of major studio interference is definitely a good thing, it shows that the government can look out for the little guys too.

• The legal issues originated in the silent era, when the Federal Trade Commission began investigating film companies for potential violations under the Sherman Antitrust Act of 1890.

• The major film studios owned the theaters where their motion pictures were shown, either in partnerships or outright.

• International Salt Co. v. United States (1947) - was a case in which the United States Supreme Court held that the Sherman Act prohibits all tying arrangements in which a product for which a seller has a legal monopoly and considers them as 'per se' violations (the act is inherently illegal). The defendant (Int. Salt Co.) had patented a machine which they used to inject salt into various foods. They required whoever bought said machine, to also purchase salt made by the company with it. The United States charged the company in violation of the Antitrust Acts by tying their products together.

• Specific theater chains showed only the films produced by the studio that owned them simply because they could.

• However, I do feel it is unfortunate that production companies are no longer able to own their own theaters, because prices for tickets would have undoubtedly been lower (even today), and more movies would be shown yearly.The inability to block-book an entire year's worth of movies after this decision was made, caused studios to be more selective in the movies they made, resulting in higher production costs and dramatically fewer movies made.

• The studios created the films, had the writers, directors, producers and actors on staff under contract, owned the film processing and laboratories, created the prints and distributed them through the theaters that they owned: In other words, the studios were vertically integrated (where the supply chain of a company is owned by that company).

• By 1945, the studios owned either partially or outright 17% of the theaters in the country, accounting for 45% of the film-rental revenue.