|
|
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).
To
purchase Aberdeen photos for reprint purposes click
here.
|
|
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.
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.
More on the Famous Players-Lasky Antitrust Case
CLICK HERE to find out more about BLOCK BOOKING
Return to the Antitrust main page.
SOURCES:
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.
|
