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.
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.