The American Film Industry

16. United States versus Hollywood: The Case Study of an Antitrust Suit

Antitrust 16ERNEST BORNEMAN United States versus Hollywood: The Case Study of an Antitrust Suit The suit was first filed on July 20, 1938. Thurman Arnold was then in charge of the Department of Justice's Antitrust Division, and his brief, charging the majors with twenty-eight separate offenses, paired the principal objective of theater divorcement with the secondary objective of "abolishing all monopolistic practices in the motion picture industry." He asked for a permanent injunction, the appointment of trustees, and a court order canceling all contracts violating these objectives , while the defendants, on their side, steadily denied the very existence of monopoly. But in March 1939 the distributors, on their own, established a new Trade Practice Code which went some way toward meeting the government's purpose. In August 1939, however, Thurman Arnold ruled the new code illegal. In June 1940 the actual trial began, after thirteen postponements, and ended three days later with an adjournment to permit negotiation between the defendants and the plaintiff. For all practical purposes the case, in this manner, was "settled out of court," for in October of the same year a "consent decree" was published which was, in effect, a compromise, offering minor concessions to the government in exchange for the major concession of leaving theater control in the hands of the "Big Five." Sight and Sound 19 (February 1951), pp. 418-20+, and (March 1951), pp. 448-50. 449 450 Part IV / Retrenchment and Reorganization, 1948The defendants interpreted this temporary consent decree as a permanent approval of their trade practices, and were considerably put out when the government began to negotiate for a new decree. Thurman Arnold had become an appeals judge, and the majors had come to believe that the Justice Department had lost interest in them when, in August 1944, the assistant attorney general, Robert L. Wright, moved for a yial. On October 8, 1945, the trial opened in Foley Square. For twenty days Robert L. Wright hurled some three hundred documents , secretly and felicitously collected, at the startled galaxy of defendants' counsels. Letters from exhibitors, carbons ofcontract forms, witnesses' transcriptions, and an FBI investigation of five hundred towns of fewer than 25,000 inhabitants were included in the plaintiff's prima facie case. Concentrating on "divorcement," the government did not press charges of monopoly, but left them open for a possible appeal to the Supreme Court. The charges had not changed very greatly during the twenty-five years that had passed since the Federal Trade Commission, in 1921, had filed its first complaint against the predecessors of today's defendants , and the brief filed then might just as well have served Mr. Wright on the day he opened his attack upon the defendants at Foley Square: On July 22, 1919, the board of directors of Famous Players-Lasky Corporation ... for the purpose of... block-booking, as distinguished from the lease of individual pictures, and for the purpose of intimidating and coercing to lease and exhibit films produced and distributed by Famous Players-Lasky Corporation adopted a ... policy ofbuilding, owning or otherwise controlling theatres, especially ... first-run theatres in key cities.... Therefore it is made difficult for the small and independent producers or distributors of films to enter into or remain in the moving picture industry or market, or to lease indivdual pictures on merit. The period to which this 1921 brief referred was known in the industry as "the battle for the theaters." Strong-arm men and purchasing agents sent out by the majors became known among independent exhibitors as the "dynamite gang" and the "wrecking crew." Hundreds of exhibitors who had been in the industry since its infant days were driven out of business by methods which neither side in the battle now cares to remember. In 1920 the few remaining independents began to combine into the first of today's exhibitors' organizations, the Motion Picture Theatre Operators of America. For many a gaudy month the battle seesawed from coast to coast. The exhibitors held their ground as long as they owned it; they lost it when First National, largest of the exhibitors' organizations, was broken by Famous Players-Lasky. 16. Borneman: United States versus Hollywood 451 They lost it, characteristically, because Zukor bought out the key members of the pool, one after the other, till the whole organization collapsed from the inside. Sam Katz, the head of the Balaban and Katz theater chain in Chicago, who...