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The Famous Players-Lasky Antitrust Case

Introduction: The First "Paramount Case"

Excerpt from Hollywood Renegades by J. A. Aberdeen

Movie Weekly feature article on Adolph Zukor, 11 March 1922.

Paramount's antitrust problems began when the Federal Trade Commission investigated block booking in 1921. In a complaint filed on August 30 of that year, the FTC charged Famous Players-Lasky with restraint of trade by forcing exhibitors to buy unwanted films. Though the case focused on block booking, the investigation also brought studio-ownership of theaters under fire, and accused Famous Players-Lasky of using theater acquisition to intimidate exhibitors into block booking arrangements for Paramount movies.

For example, in one exhibitor grievance from Middleton, New York, an independent theater owner claimed that when his movie house rejected a five-year block booking deal with Paramount, the distributor used predatory tactics to run the exhibitor out of business. The theater owner withstood threats and goon-squad intimidation, in descriptive accounts befitting of the old Edison Trust. Finally, Paramount built a movie house across the street in Middleton, and resorted to temporary price cutting and overbuying in order to destroy competition.

After 17,000 pages of testimony and 15,000 pages of exhibits, the FTC concluded in 1927 that block booking was indeed an unfair trade practice. The case Federal Trade Commission v. Famous Players-Lasky Corporation, et al resulted in a cease and desist order for block booking on July 9, 1927, as well as a demand for reform on Paramount theater purchasing. The three respondents —Famous Players-Lasky Corporation, Adolph Zukor, and Jesse L. Lasky— were given 60 days to comply with the findings or to provide the FTC with written explanations.

Adolph Zukor makes the cover of Time magazine as the U.S. government tried unsuccessfully to curb his power. 14 January 1929. (J.A. Aberdeen Collection).

Famous Players-Lasky ignored the cease and desist order. Unable to embrace reform, the studio decided to stall. When their report to the FTC came due, the three respondents were granted two extensions to the original 60-day limit.

On April 15, 1928 the Paramount-Famous-Lasky Corporation finally submitted its final report of compliance to the Federal Trade Commission. The studio was perched in a position of economic strength, and getting bigger all the time through merger. They disputed the charges, and even denied that Paramount practiced block booking as it had been described by the FTC. Famous Players-Lasky's defiance attracted attention in the press, and was interpreted as a sign of arrogance. The FTC rejected the report, and announced that they would resort to government antitrust action to force compliance.

As the Federal Trade Commission attacked Famous Players-Lasky in the 1920s, the exhibitor complaints indicated that a much bigger problem was afoot in the industry, and seemed to point to a conspiracy in Hollywood that monopolized the entire domestic film industry. When the FTC rejected Famous Players-Lasky's compliance report in April 1928, they resolved to go after the entire studio system. Action came within days.

On April 27, 1928, the Department of Justice filed two antitrust cases, which were combined into one equity suit by 1930. The government accused ten members of the MPPDA — Paramount - Famous - Lasky Corporation, First National Pictures Inc., Metro - Goldwyn - Mayer Distributing Corporation, Universal Film Exchanges Inc., United Artists Corporation, Fox Film Corporation, Pathé Exchange, Inc., FBO Pictures Corporation, Vitagraph, Inc., and Educational Film Exchanges, Inc. — of monopolizing ninety-eight percent of domestic distribution. The case also intended to challenge the validity of compulsory arbitration by prosecuting the 32 territorial arbitration boards for conspiracy in violation of antitrust law.

Jesse L. Lasky - Photo in New York, 1915,  one year before the famed merger of the Lasky Feature Play Company with Zukor's Famous Players. (Aberdeen collection). 

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In October 1929, the Federal District Court in New York City declared compulsory arbitration illegal, but refused to sanction reforms that would eliminate block booking. The studios and the government were each dissatisfied, and when the judge handed down the decision in early 1930, both sides appealed to the Supreme Court (a situation that would also repeat itself 17 years later in the Paramount case). In the Supreme Court decision rendered on November 25, 1930, the ten Hollywood distributors were found guilty of violating antitrust law, and block booking was identified as the fundamental problem.

The days of block booking appeared to be at an end, but the Supreme Court decision in the Famous Players-Lasky case was never enforced because of the economic troubles of the Great Depression that surmounted the industry in a short period of time. As the Hollywood studios suffered deep fiscal losses, the Roosevelt administration felt it was not in the best interests of the national economy or the public's morale to hobble such a vital industry while it struggled financially. In 1933 the MPPDA participated in a much-contested deal with the United States government by seeking sanctuary under the National Industrial Recovery Act. The government agreed to nullify the court decree, and call-off the antitrust case, in exchange for the studios' promise to adopt a progressive attitude toward labor unionization.

Adolph Zukor founder of Famous Players. Photo c. 1937.  (Aberdeen collection). 

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After years of antitrust conflict, the government temporarily gave its blessing to block booking and vertical integration while the financially vulnerable Hollywood studios got back on their feet. The NIRA even allowed the Motion Picture Producers and Distributors of America to draft its own written code that officially endorsed a number of monopolistic practices, including block booking and blind bidding. The studios were protected until the National Industrial Recovery Act was declared unconstitutional by the Supreme Court in 1935. By that time, not only had the studios successfully postponed the antitrust case, the Big Eight had further evolved their oligopoly which operated to the detriment of the independent exhibitors and producers.

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Federal Trade Commission investigation of Paramount and block booking: Federal Trade Commission Decisions, November 5, 1926 to January 29, 1928, Volume XI, United States Government Printing Office, Washington, D.C., 1930, pp. 193-208; "Government Sues Film Distributors," NYT, April 28, 1928, p. 4; "Paramount Enters Denial," NYT, May 9, 1928, p. 3; Middleton, New York: "$5,130,000 Damages Asked In Film Suit," NYT, November 25, 1930, p. 22; Paramount compliance rejected: "Rejects Film Plea on Block Booking," NYT, May 8, 1928, p. 30.
Famous Players-Lasky antitrust case: Associated Press, "Will Ask Court Order To Stop Block Booking," NYT, May 15, 1928, p. 2; "Government Rests Second Film Suit," NYT, March 15, 1929, p. 25; "Anti-trust Decree Filed in Film Suit," NYT January 23, 1930, p. 20; "Government Appeals Movie Film Case," NYT, April 30, 1930, p. 28; "Movies in a Trust High Court Finds," NYT, November 25, 1930, pp. 1, 22; Paramount Famous Lasky Corporation et al v. United States, 282 U.S. 30 (1930); United States v. First National Pictures, Inc., et al, 282 U.S. 44 (1930). The ten defendants were Paramount-Famous-Lasky Corporation, First National Pictures Inc., Metro-Goldwyn-Mayer Distributing Corporation, Universal Film Exchanges Inc., United Artists Corporation, Fox Film Corporation, Pathé Exchange, Inc., FBO Pictures Corporation, Vitagraph, Inc., and Educational Film Exchanges, Inc.
Hollywood and the NIRA: Balio, United Artists: The Company Built by the Stars, pp. 96-104; Schatz, Genius of the System, pp. 159-161.

See Bibliography.


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