Theater Monopolies in Hollywood

The Griffith Case

Excerpt from Anti-trust in the Motion Picture Industry by Michael Conant

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

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