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Theater Monopolies in Hollywood
The Griffith Case
Excerpt from Anti-trust in the Motion Picture Industry by Michael
Conant
United States v. Griffith
The Griffith case was the second of the three cases against the
monopoly power of independent circuits in licensing films. In 1939, the four
interrelated exhibitor defendants operated more than 200 theaters in 85 towns in
Oklahoma, Texas, and New Mexico. Fifty-three of the towns, 62 per cent of the
total, were closed towns. In the other 32 towns there were competing theaters.
The four defendants first used a common agent and then two agents, each of
whom negotiated with distributors for two of the defendant exhibitors. They
combined the bargaining power of closed towns with that of the competitive towns
to negotiate master agreements. These agreements gave defendants preferential
first and second runs. By obtaining film license agreements which set minimum
total rental for the entire circuit, defendants were allowed to allocate the
rental to individual theaters and to play the film in any theater they chose.
The District Court first found this use of circuit bargaining power not to be in
unreasonable restraint of trade and that defendants did not monopolize or
attempt to monopolize the supply of films for first run.
On appeal, the Supreme Court pointed out the striking similarities between
the Crescent case and this one and reversed the District Court. The
District Court had distinguished the Crescent case by the fact that the
avowed purpose of acquiring a monopoly of theaters in several towns, which was a
finding of the Crescent case, was not present here. The Supreme Court
held, however, that it was not necessary to find a specific intent to restrain
trade or to build a monopoly in order to find a violation of the antitrust laws.
It held that it was sufficient to show that a restraint of trade or a monopoly
resulted as a consequence of defendant's conduct or business arrangements. In
the Griffith case the evidence pointed to the use of the circuits' monopoly
power to control the supply of films, to control admission prices of
independents, and to effect discriminatory clearances in their favor.
While the case was pending in 1945, two of the defendants sold a majority of
their theaters to a new firm, Theatre Enterprises, Inc. Eight of the organizers
of Theatre Enterprises were former officers of the two defendants. In 1948, this
firm operated 122 theaters, and by 1950 operated 131. The third defendant,
Griffith Amusement, was merged into the fourth defendant, Consolidated Theatres,
in 1946. By September, 1948, Consolidated owned 152 theaters in 49 towns,
including 7 in Lubbock, Texas, and II in Tulsa. Twenty-four of these were closed
towns. This must be compared with the 126 theaters in 53 towns operated by
Griffith Amusement and Consolidated in April, 1939. Twenty-seven of those were
closed towns.
The facts showed a continuation and expansion of the monopolistic market
structure that enabled the defendants to control first runs and to limit the
access of independent exhibitors to first run. Yet, on remand, the District
Court denied the government's request that Consolidated and Theatre Enterprises
be ordered to sell a number of theaters. It held that since the Supreme Court
decision, defendants had "not used their buying power to obtain
films." It found no effort had been made to link closed towns to
competitive towns in negotiating for films, but that each theater contracted for
films individually. Hence it held that injunctive relief ordering continuation
of individual film buying by each theater was adequate.
SOURCES:
Conant, Anti-trust in the Motion Picture Industry
See Bibliography
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