Documents from the Paramount Antitrust Case, 1938-1949
The U.S. Declares Hollywood Guilty of Antitrust Conspiracy
The Decision in the New York Equity Suit, 1947
The Federal Court for the Southern District of New York issued
its decision in the case of the United States vs. Paramount et al. late Tuesday
afternoon on December 31, 1946. It was New Years Eve and Judges Augustus Hand,
Henry Goddard and John Bright were in a positive mood.
The document, filed by a messenger with the court clerk in
Room 601 of the United States Courthouse on Foley Square, was a court Decree
establishing the rules under which the 21 defendants, comprising the eight major
motion picture distributors, may license feature pictures to exhibitors. The
Decree formalized the verdict handed down the previous June 11, when the court
found the Big Eight studios guilty of violating the antitrust laws.
The Decree, the judges said, would go into effect March 1,
1947 but would be stayed for 30 days, if an appeal was filed by either the
plaintiff or the defendants. Both sides appealed to the Supreme Court. The
competitive bidding provisions and the order for single sales "theatre by
theatre and picture by picture" which follows that in the June verdict,
would not become effective until July 1, 1947.
THE COURT ORDERS:
- No admission price fixing.
- No general system of clearance; clearance to be set for
each picture and each run.
- No unreasonable clearance; clearance only between theatres
in reasonable competition.
- No franchises, no master agreements.
- No license to be conditional on any other sale.
- Competitive bidding in competitive areas, when exhibitor
- No arbitrary refusal of the demand for any run except in
competitive area in which distributor defendant has a theatre.
- Twenty per cent cancellation when films are sold before
- No pooling agreements by distributor-exhibitors.
- No operating, booking or buying combinations by
distributor-exhibitors through any agent who acts for any other exhibitor,
independent or affiliate.
- No distributor to have less than 95 % interest in any
- Disposition or acquisition of any theatre interest by
distributors to be under strict supervision of court with distributors
required to prove that acquisition will not lessen competition.
- Abolition of consent decree and its arbitration system:
freedom to set up a new arbitration system.
Full Text of the Court Decree
United States District Court Southern District, New York
UNITED STATES OF AMERICA, Plaintiff,
against PARAMOUNT PICTURES, INC., et at., Defendants.
Memorandum in re: Findings and Decree
In order to meet some of the objections raised at the hearing to the system
of bidding for features described in the opinion of the court, we have modified
the system there proposed so that competitive bidding will only be necessary
within a competitive area and in such an area where it is desired by the
exhibitors. In other words, the decree provides an opportunity to bid for any
exhibitor in a competitive area who may desire to do so.
The arrangement for arbitration and an appeal board has been terminated
except as to unfinished litigations and other matters referred to in the decree,
because of the unwillingness of some of the parties to consent to their
continuance. Nevertheless, as we have indicated in the opinion, these tribunals
have dealt with trade disputes, particularly those as to clearances and runs,
with rare efficiency, as both government counsel and counsel for other parties
have conceded. Indeed, the arbitration system set up under the consent decree of
November 20, 1940, was created pursuant to the prayer of the amended and
supplemental complaint by the United States filed November 14, 1940, in which,
among other things, the plaintiff prayed that "a nation-wide system of
impartial arbitration tribunals or such other means of enforcement as the court
may deem proper be established pursuant to the final decree of this court in
order to secure adequate enforcement of whatever general and nation-wide
prohibitions of illegal practices may be contained therein.”
We strongly recommend that some such system be continued in order to avoid
cumbersome and dilatory court litigation and to preserve the practical
advantages of the tribunals created by the consent decree.
Dated: December 31, 1946.
AUGUSTUS N. HAND, United States Circuit Judge.
HENRY W. GODDARD, United States District Judge.
JOHN BRIGHT, United States District Judge.
UNITED STATES DISTRICT COURT SOUTHERN DISTRICT, NEW YORK
UNITED STATES OF AMERICA, Plaintiff,
PARAMOUNT PICTURES, INC., PARAMOUNT FILM DISTRIBUTING CORPORATION, LOEW'S
INCORPORATED, RADIO-KEITH-ORPHEUM CORPORATION, RKO RADIO PICTURES, INC.,
KEITH-ALBEE-ORPHEUM CORPORATION, RKO PROCTOR CORPORATION, RKO MIDWEST
CORPORATION, WARNER BROS. PICTURES, INC., VITAGRAPH, INC., WARNER BROS. CIRCUIT
MANAGEMENT CORPORATION, TWENTIETH CENTURY-FOX FILM CORPORATION, NATIONAL
THEATRES CORPORATION, COLUMBIA PICTURES CORPORATION, SCREEN GEMS, INC., COLUMBIA
PICTURES OF LOUISIANA, INC., UNIVERSAL CORPORATION, UNIVERSAL PICTURES COMPANY,
INC., UNIVERSAL FILM EXCHANGES, INC., BIG U FILM EXCHANGE, INC., and UNITED
ARTISTS CORPORATION, Defendants.
The court having rendered its opinion herein on June 11, 1946, having duly
considered the proposals of the parties and of amici curiae as to its
findings and judgment, and having filed its findings of fact and conclusions of
law, wherein certain of the defendants herein were found to have violated the
Act of Congress approved July 2, 1890, 26 Stat. 209, commonly known as the
IT IS HEREBY ORDERED, ADJUDGED AND DECREE, as follows:
1. The complaint is dismissed as to the defendants Screen Gems, Inc. and the
corporation named as Universal Pictures Company, Inc., merged during the
pendency of this case into the defendant Universal Corporation. The complaint is
also dismissed as to all claims made against the remaining defendants herein
based upon their act~ as producers, whether as individuals or in conjunction
Each of the defendant distributors, Paramount Pictures, Inc.; Paramount Film
Distributing Corporation; Loews, Incorporated; Radio-Keith-Orpheum Corporation;
RKO Radio Pictures, Inc.; Warner Bros. Pictures, Inc.: Warner Bros. Pictures
Distributing Corporation [formerly known as Vitagraph, Inc.]; Twentieth-Century
Fox Film Corporation; Columbia Pictures Corporation; Columbia Pictures of
Louisiana, Inc.; Universal Corporation; Universal Film Exchanges, Inc.; Big U
Film Exchange, Inc.; and United Artists Corporation; and the successors of each
of them, and any and all individuals who act in behalf of any thereof with
respect to the matters enjoined, and each corporation in which said defendants
or any of them own a direct or indirect stock interest of more than fifty per
cent, is hereby enjoined:
1. From granting any license in which minimum prices for admission to a
theatre are fixed by the parties, either in writing or through a committee, or
through arbitration, or upon the happening of any event or in any manner or by
2. From agreeing with each other or with any exhibitors or distributors to
maintain a system of clearances; the term "clearances" as used herein
meaning the period of time stipulated in license contracts which must elapse
between runs of the same feature within a particular area or in specified
3. From granting any clearance between theatres not in substantial
4. From granting or enforcing any clearance against theatres in substantial
competition with the theatre receiving the license for exhibition in excess of
what is reasonably necessary to protect the licensee in the run granted.
Whenever any clearance provision is attacked as not legal under the provisions
of this decree, the burden shall be upon the distributor to sustain the legality
5. From further performing any existing franchise to which it is a party and
from making any franchises in the future. The term “franchise” as used
herein means a licensing agreement or series of licensing agreements, entered
into as a part of the same transaction, in effect for more than one motion
picture season and covering the exhibition of pictures released by one
distributor during the entire period of agreement.
6. From making or further performing any formula deal or master agreement to
which it is a party. The term "formula deal" as used herein means a
licensing agreement with a circuit of theatres in which the license fee of a
given feature is measured for the theatres covered by the agreement by a
specified percentage of the feature's national gross. The term "master
agreement" means a licensing agreement, also known as a "blanket
deal" covering the exhibition of features in a number of theatres usually
comprising a circuit.
7. From performing or entering into any license in which the right to exhibit
one feature is conditioned upon the licensee's taking one or more other
features. To the extent that any of the features have not been trade shown prior
to the granting of the license for more than a single feature, the licensee
shall be given by the licensor the right to reject twenty per cent of such
features not trade shown prior to the granting of the license, such right of
rejection to be exercised in the order of release within ten days after there
has been an opportunity afforded to the licensee to inspect the feature.
8. From licensing in the future any feature for exhibition in any theatre,
not its own, in any manner except the following:
(a) A license to exhibit each feature released for public exhibition in any
competitive area shall be offered to the operator of each theatre in such area
who desires to exhibit it on some run [other than that upon which such feature
is to be exhibited in the theatre of the licensor] selected by such operator,
and upon uniform terms;
(b) Each license shall be granted solely upon the merits and without
discrimination in favor of affiliates, old customers or others;
(c) Where a run is desired, or is to be offered, upon terms which exclude
simultaneous exhibition in competing theatres, the distributor shall notify, not
less than thirty days in advance of the date when bids will be received, all
exhibitors in the competitive area, offering to license the features upon one or
more runs, and in such offer shall state the amount of a flat rental as the
minimum for such license for a specified number of days of exhibition, the time
when the exhibition is to commence and the availability and clearance, if any,
which will be granted for each such run. Within fifteen days after receiving
such notice, any exhibitor in such competitive area may bid for such license,
and in his bid shall state what run such exhibitor desires and what he is
willing to pay for such feature, which statement may specify a flat rental, or a
percentage of gross receipts, or both, or any other form of rental, and shall
also specify what clearance such exhibitor is willing to accept, the time and
days when such exhibitor desires to exhibit it, and any other offers which such
exhibitor may care to make. The distributor may reject all offers made for any
such feature, but in the event of the acceptance of any, the distributor shall
grant such license upon the run bid for to the highest responsible bidder,
having a theatre of a size, location and equipment adequate to yield a
reasonable return to the licensor. The method of licensing specified in this
subdivision shall not be required in areas where there is no competition among
theatres or in run, or in which there is no offer made by any exhibitor within
the time above mentioned. The words "exclude simultaneous exhibition”
shall be held to mean the exhibition of a specified run in one theatre with
clearance over other theatres in the competitive area. The words
"competitive area" shall refer to the territory occupied by more than
one theatre in which it may fairly and reasonably be said that such theatres
compete with each other for the exhibition of features on any run.
(d) Each license shall be offered and taken theatre by theatre and picture by
(e) A theatre is not a defendant's own theatre unless it owns therein a legal
or equitable interest of ninety-five per cent or more, either directly or
through affiliates or subsidiaries.
9. From arbitrarily refusing the demand of an exhibitor, who operates a
theatre in competition with another theatre not owned or operated by a defendant
distributor, or its affiliate or subsidiary, made by registered mail, addressed
to the home office of the distributor, to license a feature to him for
exhibition on a run selected by the exhibitor, instead of licensing it to
another exhibitor for exhibition in his competing theatre on such run. Such
demand shall be deemed to have been refused either upon the receipt by the
exhibitor of a refusal in writing or upon the expiration of ten days after the
receipt of the exhibitor’s demand.
Each of the defendant exhibitors, Paramount Pictures, Inc., Loews,
Incorporated, Radio-Keith-Orpheum Corporation, Keith-Albee-Orpheum Corporation,
RKO Proctor Corporation, RKO Midwest Corporation, Warner Bros. Pictures, Warner
Bros. Circuit Management Corporation, Twentieth Century Fox Film Corporation,
and National Theatres, Inc. is hereby enjoined and restrained:
(1) From performing or enforcing agreements referred to in paragraphs 5 and 6
of the foregoing section II hereof to which it may be a party.
(2) From making or continuing to perform pooling agreements whereby given
theatres of two or more exhibitors normally in competition are operated as a
unit or whereby the business polities of such exhibitors are collectively
determined by a joint committee or by one of the exhibitors or whereby profits
of the "pooled" theatres are divided among the owners according to
(3) From making or continuing to perform agreements that the parties may not
acquire other theatres in a competitive area where a pool operates without first
offering them for inclusion in the pool.
(4) From making or continuing leases of theatres under which it leases any of
its theatres to another defendant or to an independent operating a theatre in
the same competitive area in return for a share of the profits.
(5) From continuing to own or acquiring any beneficial interest in any
theatre, whether in fee or shares of stock or otherwise, in conjunction with
another defendant, and from continuing to own or acquire such an interest in
conjunction with an independent [meaning any former, present or putative motion
picture theatre operator which is not owned or controlled by the defendant
holding the interest in question,] where such interest shall be greater than
five per cent unless such interest shall be ninety-five per cent or more. The
existing relationships which violate this provision shall be terminated within
two years. The relationships between the defendants and independents which
violate this provision shall be terminated by a sale to, or purchase from the
co-owner or co-owners, or by a sale to a party not one of the other defendants.
In dissolving relationships among defendants and between defendants and
independents which violate this provision, one defendant may acquire the
interest of another defendant or independent if such defendant desiring to
acquire such interest shall show to the satisfaction of the court, and the court
shall first find, that such acquisition will not unduly restrain competition in
the exhibition of feature motion pictures. Each of the defendants shall submit
to this court within six months a statement outlining the extent to which it has
complied and the manner in which it proposes to comply with this provision,
setting forth in detail the names, locations, and general descriptions of the
theatres, corporate securities, and beneficial interests of any kind involved,
the sales thereof that it has made, and such interests as it proposes to
acquire, with a statement of facts regarding each competitive situation involved
in such proposed acquisition sufficient to show the probable effect of such
acquisition on that situation. Similar reports shall be made quarterly
thereafter until this provision shall have been fully complied with. Reasonable
notice of such acquisition plans shall be served upon the Attorney General and
plaintiff shall be given an opportunity to be heard with respect thereto before
any such acquisition shall be approved by the court.
(6) From expanding its present theatre holdings in any manner whatsoever
except as permitted in the preceding paragraph.
(7) From operating, booking, or buying features for any of its theatres
through any agent who is known by it to be also acting in such manner for any
other exhibitor, independent or affiliate.
Nothing contained in this Decree shall be construed to limit, in any way
whatsoever, the right of each distributor-defendant to license, or in any way to
arrange or provide for, the exhibition of any or all the motion pictures which
it may at any time distribute, in such manner, and upon such terms, and subject
to such conditions as may be satisfactory to it, in any theatre in which such
distributor defendant has or may acquire pursuant to the terms of this Decree, a
proprietary interest of ninety-five per cent or more either directly or through
The provisions of the existing consent decree are hereby declared to be of no
further force or effect, except insofar as may be necessary to conclude
arbitration proceedings now pending and to liquidate in an orderly manner the
financial obligations of the defendants and the American Arbitration
Association, incurred in the establishment of the consent decree arbitration
systems. Existing awards and those made pursuant to pending proceedings shall
continue to be enforceable. But this shall in no way preclude the parties or any
other persons from setting up a reasonable system of arbitration either through
the use of the present boards or any others as among themselves.
For the purpose of securing compliance with this Decree, and for no other
purpose, duly authorized representatives of the Department of Justice shall, on
written request of the Attorney General or the Assistant Attorney General in
charge of antitrust matters, and on notice to any defendant, reasonable as to
time and subject matter, made to such defendant at its principal office, and
subject to any legally recognized privilege, (1) be permitted reasonable access,
during the office hours of such defendant, to all books, ledgers, accounts,
correspondence, memoranda and other records and documents in the possession or
under the control of such defendant, relating to any of the matters contained in
this Decree, and that during the times that the plaintiff shall desire such
access, counsel for such defendant may be present, and (2) subject to the
reasonable convenience of such defendant, and without restraint or interference
from it, be permitted to interview its officers or employees regarding any such
matters, at which interview counsel for the officer or employee interviewed and
counsel for such defendant company may be present.
Information obtained pursuant to the provisions of this section shall not be
divulged by any representative of the Department of Justice to any person other
than a duly authorized representative of the Department of Justice, except in
the course of legal proceedings to which the United States is a party, or as
otherwise required by law:
Paragraphs 7 and 8 of section II of this judgment shall not become effective
until July 1, 1947.
Jurisdiction of this cause is retained for the purpose of enabling any of the
parties to the judgment and no others, to apply to the court at any time for
such orders or direction as may be necessary or appropriate for the
construction, modification, or carrying out of the same, for the enforcement of
compliance therewith, and for the punishment of violations thereof, or for other
or further relief.
The operation of this judgment is stayed for sixty days from the date hereof,
and, if an appeal is taken, for thirty days thereafter in order to enable any
appellant to move before the Supreme Court for a stay in respect to any portion
of the judgment from which an appeal has been taken.
Dated, December 31, 1946.
AUGUSTUS N. HAND, United States Circuit Judge.
HENRY W. GODDARD, United States District Judge
JOHN BRIGHT, United States District Judge
Motion Picture Herald, January 4, 1947, pages 10a-10d.
MORE: Documents from the Paramount Antitrust