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The Independent Producers and the Paramount Case, 1938-1949
Part 3: The Consent Decree of 1940
The Trial Starts, Then Stops
On June 3, 1940, the Paramount case went to trial in Federal Court in
New York. Wanting to avoid the unpleasant public scrutiny, the studio heads
effected an eleventh-hour negotiation that suspended the trial on June 17 after
only two weeks of preliminary hearings. Private negotiations took place between
the studios and the Justice Department throughout the summer months in the midst
of a heatwave-stricken New York City.
By the end of the summer, newspapers disclosed details of a deal worked out
between government and studio attorneys. By all reports the Justice Department
had indeed caved on several key issues by allowing the studios to retain their
theater chains in exchange for a limitation on block booking. If the studios
would comply with several antitrust sanctions, a restrict block
booking to packages of no more than five films each, then the government
would release the major distributors from all pending antitrust actions. The Big
Five studios and the government agreed on a consent decree behind closed doors
during a two-day conference in October 1940. The Paramount case was
called off.
The Compromise Deal
Neither side claimed victory in the Consent Decree of 1940. Compromise was
evident on every issue, but the studio system came away from the first phase of
the Paramount case clearly intact. Block booking, one of the focal points
of the antitrust action, was regulated but not eliminated. The consenting
studios could continue to sell films in blocks of up to five features. Full-line
forcing, or the block booking of short subjects, was prohibited in the
arrangement. The Big Five also agreed to outlaw blind bidding in favor of trade
showing, a plan suggested by the Justice Department, requiring all films to
be shown to prospective buyers in each territory ahead of time.
Furthermore, Paramount, MGM, Twentieth Century-Fox, Warner Bros., and RKO
were allowed to keep their movie theaters. The government would not press the
divestiture issue if the vertically integrated majors promised to eradicate past
predatory practices and not expand their theater holdings without federal
approval.
While acknowledging the improvements brought about by the Consent Decree, the
independent exhibitors were generally dissatisfied with the results of the
compromise. The independent producers were enraged. The government was accused
of backpedaling their antitrust case as, remarkably, neither block booking nor
vertical integration was eliminated in the compromise. Granted, blocks of five
films each was a considerable change compared with the Zukor block booking
heyday. However for independent producers, the improvement was trifling. To the
producers, even a double feature was considered intolerable. As far as they were
concerned, under such a consent decree, one of their prestige films in a package
with four studio B-pictures was effectively the same as before.
However, there was an escape clause included in the Consent Decree when it
was signed on November 20 by Federal Judge Henry W. Goddard. Having nothing to
gain in the compromise, the Little Three caused a near breakdown in the
negotiations the previous July when they backed out of the consent decree
agreement. Universal and Columbia, which did not own theaters, relied heavily on
block booking. United Artists, which neither owned theaters nor block booked,
resented the deal altogether. The Little Three became dissenting parties to the
Consent Decree of 1940, and considered themselves exempt from the agreement.
So according to section seven of the Consent Decree, if the three dissenting
studios could not be persuaded to adopt the provisions of the decree by June 1,
1942, the Consent Decree itself would expire. The Big Five would be free to
resume their earlier activities; and the government would be permitted to reopen
the Paramount case.
The Consent Decree Controversy
The Consent Decree went into effect over the protests of the independent
exhibitors, on whose behalf the Justice Department initiated the Paramount
case. The Allied Theatre Owners of the Northwest sponsored a bill in Minnesota
that nullified the Consent Decree at the state level when it was passed by an
overwhelming vote in April 1941. This legislation precipitating a showdown
between the Big Five and the Minnesota exhibitors which the studios eventually
won. Meanwhile in the U.S. Congress, only a few weeks after the signing of the
Consent Decree, Senator Neely re-offered his anti-block
booking bill to try to declare block booking of any kind illegal once and
for all.
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Adela
Rogers St. Johns at Hearst Castle
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The well-regarded Hollywood journalist Adela Rogers St. Johns wrote a
commentary on the Consent Decree for Liberty magazine in November 1941.
"Not since the talkies came to Hollywood has there been so poignant a
crisis as now embroils the movie industry," she began her article.
"Every silver screen theater is being affected by it. Every star and every
picture are involved. Already the changes are drastic, and you can see a few of
the results if you happen to go to a movie theater. A lot of things had been
simmering under the celluloid surface of Hollywood for some time. What brought
them all to a boil was that document of a few million words which for brevity's
sake people in Hollywood call the 'consent decree'." Despite the
dissatisfaction of the independent theater owners, St. Johns predicted that the
battle would gradually shift the balance of power to the exhibitors, and
ultimately to the public. The article was another notable example of the
emphasis given to the exhibitor problems early in the antitrust struggle.
The independent producers, who were still trying to distance themselves from
the studios, were regarded as the secondary beneficiaries of the Paramount
case. The individual efforts of Sam Goldwyn and
David Selznick reflected this. Their
publicity maneuvers had the antitrust flavor that would characterize the
activities of the Society of Independent Motion Picture Producers later on.
Unfortunately, their separate activities lacked the same effectiveness that
would come with the SIMPP unity. At this point, while the independent producers'
influence on the case appeared more or less nominal, the industry analysts
envisioned the future being lead by exhibitors. The antitrust battle took an
unexpected turn as the independent producers commandeered the Paramount
case, and won reforms that would usher in a new Hollywood built on a foundation
of independent filmmaking.
The Formation of SIMPP
The dissatisfaction of the independents with the effects of the Consent
Decree of 1940, lead directly to the formation of Society of Independent Motion
Picture Producers. By 1941, eight of the most prominent independents—Charlie
Chaplin, Walt Disney, Samuel
Goldwyn, Alexander Korda, Mary
Pickford, David O. Selznick, Walter
Wanger, and Orson Welles—joined together to form the SIMPP.
In 1942, the Society entered the antitrust battle.
CLICK HERE to read about the Formation
of SIMPP.
MORE:
SOURCES:
Paramount trial commencement and adjournment:
"Movie Suit Comes Up For Trial Tomorrow," NYT, June 2, 1940,
sec. III, p. 5; "Govt. Stops Anti-Trust Suit," HR, June 8,
1940, pp. 1, 4; "Movie Negotiations Continue," NYT, June 13,
1940, p. 29; Douglas W. Churchill, "Hollywood Looks For the Rainbow," NYT,
June 16, 1940, sec. IX, p. 3.
Costs of the Paramount trial: "Anti-Trust Trial
Starts Today: Millions Will Be Spent by Majors in Legal Battle to Dispose
Charges of Govt.," HR, June 3, 1940, pp. 1, 3. Mentions that the
heads of legal counsel alone cost an estimated $20,000 per day.
Consent Decree of 1940: "Govt. Approves Basis for
Decree," HR, June 12, 1940, pp. 1, 6; "Film Monopoly Trial Put
Off," NYT, July 23, 1940, p. 22; "Divorcement Threat If Para.
and 20th Don't Sign," HR, August 20, 1940, p. 1; "Plan Worked
Out To End Film Suit," NYT, August 24, 1940, p. 15; "Exhibs'
Squaks Won't Sway Decree Decision," HR, September 10, 1940, pp. 1,
4; "Accord Is Reached On Film Legislation," NYT, October 23,
1940, p. 26; Theodore Srauss, "Peace! Isn't It Wonderful," NYT,
January 19, 1941, p. 4; The Consent Decree: With the Interpretive Statement
of the Department of Justice and Arbitration Rules With Map of Jurisdiction
(New York: Quigley Publications, 1941).
The Little Three dissent: "Decree by August 1 or Trial
Goes on, Says U.S.," HR, July 15, 1940, pp. 1, 9.
Minnesota block booking: Thomas M. Prior, "By Way of
Report," NYT, May 4, 1941, sec. X, p. 4; new Neely bill:
"Congress Receives Big Grist of Bills," NYT, January 7, 1941.
"Not since the talkies came": Adela Rogers St. John,
"Who Runs Hollywood Now? Consent Decree Jitters!," Liberty,
November 29, 1941, p. 24.
See Bibliography.
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