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The Society of Independent Motion Picture Producers

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The Independent Producers and the Paramount Case, 1938-1949

Part 3:  The Consent Decree of 1940

The Trial Starts, Then Stops

On June 3, 1940, the Paramount case went to trial in Federal Court in New York. Wanting to avoid the unpleasant public scrutiny, the studio heads effected an eleventh-hour negotiation that suspended the trial on June 17 after only two weeks of preliminary hearings. Private negotiations took place between the studios and the Justice Department throughout the summer months in the midst of a heatwave-stricken New York City.

By the end of the summer, newspapers disclosed details of a deal worked out between government and studio attorneys. By all reports the Justice Department had indeed caved on several key issues by allowing the studios to retain their theater chains in exchange for a limitation on block booking. If the studios would comply with several antitrust sanctions, a restrict block booking to packages of no more than five films each, then the government would release the major distributors from all pending antitrust actions. The Big Five studios and the government agreed on a consent decree behind closed doors during a two-day conference in October 1940. The Paramount case was called off.

The Compromise Deal

Neither side claimed victory in the Consent Decree of 1940. Compromise was evident on every issue, but the studio system came away from the first phase of the Paramount case clearly intact. Block booking, one of the focal points of the antitrust action, was regulated but not eliminated. The consenting studios could continue to sell films in blocks of up to five features. Full-line forcing, or the block booking of short subjects, was prohibited in the arrangement. The Big Five also agreed to outlaw blind bidding in favor of trade showing, a plan suggested by the Justice Department, requiring all films to be shown to prospective buyers in each territory ahead of time.

Furthermore, Paramount, MGM, Twentieth Century-Fox, Warner Bros., and RKO were allowed to keep their movie theaters. The government would not press the divestiture issue if the vertically integrated majors promised to eradicate past predatory practices and not expand their theater holdings without federal approval.

While acknowledging the improvements brought about by the Consent Decree, the independent exhibitors were generally dissatisfied with the results of the compromise. The independent producers were enraged. The government was accused of backpedaling their antitrust case as, remarkably, neither block booking nor vertical integration was eliminated in the compromise. Granted, blocks of five films each was a considerable change compared with the Zukor block booking heyday. However for independent producers, the improvement was trifling. To the producers, even a double feature was considered intolerable. As far as they were concerned, under such a consent decree, one of their prestige films in a package with four studio B-pictures was effectively the same as before.

However, there was an escape clause included in the Consent Decree when it was signed on November 20 by Federal Judge Henry W. Goddard. Having nothing to gain in the compromise, the Little Three caused a near breakdown in the negotiations the previous July when they backed out of the consent decree agreement. Universal and Columbia, which did not own theaters, relied heavily on block booking. United Artists, which neither owned theaters nor block booked, resented the deal altogether. The Little Three became dissenting parties to the Consent Decree of 1940, and considered themselves exempt from the agreement.

So according to section seven of the Consent Decree, if the three dissenting studios could not be persuaded to adopt the provisions of the decree by June 1, 1942, the Consent Decree itself would expire. The Big Five would be free to resume their earlier activities; and the government would be permitted to reopen the Paramount case.

The Consent Decree Controversy

The Consent Decree went into effect over the protests of the independent exhibitors, on whose behalf the Justice Department initiated the Paramount case. The Allied Theatre Owners of the Northwest sponsored a bill in Minnesota that nullified the Consent Decree at the state level when it was passed by an overwhelming vote in April 1941. This legislation precipitating a showdown between the Big Five and the Minnesota exhibitors which the studios eventually won. Meanwhile in the U.S. Congress, only a few weeks after the signing of the Consent Decree, Senator Neely re-offered his anti-block booking bill to try to declare block booking of any kind illegal once and for all.

Adela Rogers St. Johns at Hearst Castle

The well-regarded Hollywood journalist Adela Rogers St. Johns wrote a commentary on the Consent Decree for Liberty magazine in November 1941. "Not since the talkies came to Hollywood has there been so poignant a crisis as now embroils the movie industry," she began her article. "Every silver screen theater is being affected by it. Every star and every picture are involved. Already the changes are drastic, and you can see a few of the results if you happen to go to a movie theater. A lot of things had been simmering under the celluloid surface of Hollywood for some time. What brought them all to a boil was that document of a few million words which for brevity's sake people in Hollywood call the 'consent decree'." Despite the dissatisfaction of the independent theater owners, St. Johns predicted that the battle would gradually shift the balance of power to the exhibitors, and ultimately to the public. The article was another notable example of the emphasis given to the exhibitor problems early in the antitrust struggle.

The independent producers, who were still trying to distance themselves from the studios, were regarded as the secondary beneficiaries of the Paramount case. The individual efforts of Sam Goldwyn and David Selznick reflected this. Their publicity maneuvers had the antitrust flavor that would characterize the activities of the Society of Independent Motion Picture Producers later on. Unfortunately, their separate activities lacked the same effectiveness that would come with the SIMPP unity. At this point, while the independent producers' influence on the case appeared more or less nominal, the industry analysts envisioned the future being lead by exhibitors. The antitrust battle took an unexpected turn as the independent producers commandeered the Paramount case, and won reforms that would usher in a new Hollywood built on a foundation of independent filmmaking.

The Formation of SIMPP

The dissatisfaction of the independents with the effects of the Consent Decree of 1940, lead directly to the formation of Society of Independent Motion Picture Producers. By 1941, eight of the most prominent independentsóCharlie Chaplin, Walt Disney, Samuel Goldwyn, Alexander Korda, Mary Pickford, David O. Selznick, Walter Wanger, and Orson Wellesójoined together to form the SIMPP. In 1942, the Society entered the antitrust battle.

CLICK HERE to read about the Formation of SIMPP.




Paramount trial commencement and adjournment: "Movie Suit Comes Up For Trial Tomorrow," NYT, June 2, 1940, sec. III, p. 5; "Govt. Stops Anti-Trust Suit," HR, June 8, 1940, pp. 1, 4; "Movie Negotiations Continue," NYT, June 13, 1940, p. 29; Douglas W. Churchill, "Hollywood Looks For the Rainbow," NYT, June 16, 1940, sec. IX, p. 3.
Costs of the Paramount trial: "Anti-Trust Trial Starts Today: Millions Will Be Spent by Majors in Legal Battle to Dispose Charges of Govt.," HR, June 3, 1940, pp. 1, 3. Mentions that the heads of legal counsel alone cost an estimated $20,000 per day.
Consent Decree of 1940: "Govt. Approves Basis for Decree," HR, June 12, 1940, pp. 1, 6; "Film Monopoly Trial Put Off," NYT, July 23, 1940, p. 22; "Divorcement Threat If Para. and 20th Don't Sign," HR, August 20, 1940, p. 1; "Plan Worked Out To End Film Suit," NYT, August 24, 1940, p. 15; "Exhibs' Squaks Won't Sway Decree Decision," HR, September 10, 1940, pp. 1, 4; "Accord Is Reached On Film Legislation," NYT, October 23, 1940, p. 26; Theodore Srauss, "Peace! Isn't It Wonderful," NYT, January 19, 1941, p. 4; The Consent Decree: With the Interpretive Statement of the Department of Justice and Arbitration Rules With Map of Jurisdiction (New York: Quigley Publications, 1941).
The Little Three dissent: "Decree by August 1 or Trial Goes on, Says U.S.," HR, July 15, 1940, pp. 1, 9.
Minnesota block booking: Thomas M. Prior, "By Way of Report," NYT, May 4, 1941, sec. X, p. 4; new Neely bill: "Congress Receives Big Grist of Bills," NYT, January 7, 1941.
"Not since the talkies came": Adela Rogers St. John, "Who Runs Hollywood Now? Consent Decree Jitters!," Liberty, November 29, 1941, p. 24.

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