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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 2:  The Studios Prepare for the Antitrust Battle, 1939

The Justice Department Files Suit Against the Hollywood Majors

By the time the Paramount suit was announced on July 20, 1938, the major studios had already spent time fortifying. The Paramount suit was not a surprise to Hollywood; and the studios made sure they were prepared for the Roosevelt administration's anti-monopoly case. 

Hollywood's leaders visit the White House in 1938. From left to right: Barney Balaban (Paramount), George Schaefer (Paramount), Harry Cohn (Columbia), Sideny Kent (Twentieth Century-Fox), Nicholas Schenck (Leow's-MGM), Nate Blumberg (Universal), Will Hays (MPPDA President), Albert Warner (Warner Bros.), Leo Spitz (RKO). 

One month before the Justice Department announcement, the studios anticipated the suit by forming a committee of film executives to promote industry self-regulation. Sidney Kent, the Twentieth Century-Fox president who also defended block booking at the Senate hearings, served as chairman of the industry conciliation committee, and announced its formation following a June 25 meeting at the White House between President Roosevelt and industry leaders.

On the same day that the Justice Department filed its complaint, the Motion Picture Producers and Distributors of America released its statement from Will Hays, setting the tone for the industry with tact rather than harsh words. He welcomed "judicial clarification" in a language that whispered to those familiar with Hollywood history that the suit would be infested with months, or perhaps years, of conciliatory activity. Undeterred by the government suit, Sidney Kent also reflected the industry attitude "that the most intelligent and satisfactory solution to our problems eventually will be reached through self-regulation rather than through litigation." He assured the press, "We shall continue the work of our committee to that end."

The Paramount case defendants were given 20 days following the service of each subpoena to file their answers with the Justice Department. But with the large number of companies and officers to be served, the 20-day limit proved unrealistic. Just as in the Famous Players-Lasky case a decade before, the studios were granted extensions which gave the Hollywood conciliation committee time to formulate a compromise deal.

Attorneys predicted a two year trial if the case went to court. Both the studios and the government were eager to avoid such an expense. Widely circulated reports at the end of 1938 suggested that the committee would soon approach the government to settle the suit with a consent decree compromise. The Department of Justice reiterated its stance: after years of experience with Hollywood complacency and studio legal gambits, no deal would be considered unless it achieved all purposes of the suit including the elimination of block booking and complete theater divorcement.

The Theater Monopoly Cases

During 1939 the government refined its case as it advanced toward a trial date set the following year. As an indication of the complex nature of the Hollywood antitrust charges, the Justice Department filed suit against several large independent theater chains that acted as regional monopolies. Though not subsidiaries of the studios, these local circuits were accused of acting in collusion with the major Hollywood distributors to destroy competition. The government initiated three antitrust suits, directed at several large theater chains, which also implicated the major studios as co-defendants. The first suit, United States v. Griffith Amusement Co., came in April 1939, followed later that year with United States v. Schine Chain Theatres and United States v. Crescent Amusement Co., both in August.

The most famous of these, the Schine case, challenged the theater chain headquartered in Gloversville, New York (the suburb of Albany which was coincidentally familiar to film historians as emigrant Sam Goldwyn's adopted home town). Theater owner J. Myer Schine, who held a commanding position in upstate New York, had expanded his chain to 148 theaters in six states. (He later owned a hotel chain scattered from coast to coast which included the Boca Raton Club in Florida and Los Angeles' Ambassador Hotel.) Schine operated without competition in 60 U.S. towns where his companies owned all of the local theaters. The events of the Schine case paralleled the Paramount suit; it languished for years, and reached the Supreme Court around the same time in 1948.

These separate suits against large unaffiliated theater chains, indicated the complex nature of the film antitrust war that the U.S. government waged on many fronts in the 1930s and 1940s. The Justice Department hoped that each case would help provide momentum for the other. These theater suits also illustrate the exhibitor-based emphasis of the early stages of the Paramount case before the independent producers became heavily involved with the formation of SIMPP.



Justice Department initiates the Paramount suit: United States v. Paramount Pictures, Inc. et al, 334 U.S. 131 (1948); “The independent producer”: United States v. Paramount, petition filed July 20, 1938, p. 71; “Big Film Concerns Accused In U.S. Suit of Acting As Trust,” NYT, July 21, 1938, p. 1; “Govt. Files Anti-Trust Action: Eight Majors, Subsidiaries, Officers, Directors, Named In Justice Dept. N. Y. Bill,” HR, July 20, 1938, p. 1; “U.S. Wallup for Film Majors,” DV, July 20, 1938, p. 1; “Pic Stocks Down In Suit Reaction; Para. Pfd. Off $10,” HR, July 21, 1938, p. 1: Paramount stock down $10 to $90, Loews down 3 ¾ to 52 ¼.

Sidney Kent's conciliation committee: “Film Heads Seek To Aid Exhibitors,” NYT, June 29, 1938, p. 14; “The Statement Issued by Will Hays,” NYT, July 21, 1938, p. 6; “Picture Industry Pushes Its Inquiry,” NYT, July 26, 1938, p. 25; “Film Committee To Go On,” NYT, July 25, 1938, p. 18; “Business As Usual During Altercations,” MPH, July 30, 1938, pp. 14-15.

The three independent theater antitrust suits: United States v. Griffith Amusement Co., 223 U.S. 100 (1948); United States v. Schine Chain Theatres, 334 U.S. 110 (1948); United States v. Crescent Amusement Co., 323 U.S. 173 (1944); “Movie Chain Here Faces 'Trust' Suit,” NYT, August 7, 1939, p. 10; Associated Press, “Schine Movie Chain Sued As Monopoly,” NYT, August 8, 1939, p. 19; “Third Movie Suit Is Aimed at South,” NYT, August 11, 1939, p. 2; “Independents' Day,” Time, May 17, 1948, p. 91; Conant, Antitrust in the Motion Picture Industry, pp. 88-94.

See Bibliography.


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