Hi, and welcome back to Legal Geek. This week, we review how theater owner trade groups are trying to stop the Department of Justice from removing rules that have governed conduct of the major film studios they deal with for over 70 years.
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Back in the 1930's and 40's, various antitrust enforcement actions by the U.S. government against major film studios led to what is known as the Paramount Consent Decrees. These decrees bar several major studios from owning both the distribution and exhibition operations for films, while also banning a number of specific distribution practices such as setting of minimum prices for movie tickets and forcing theaters to license multiple films bundled together instead of individual films. The decrees were intended to separate theater providers from film studios while also making the film studios "play fair" in distributing films to theaters for viewer consumption.
These decrees have been active since 1949 and are one of over 1300 antitrust judgments with no expiration date. Periodically the Department of Justice reviews these active judgments on the books to determine if all are still necessary, the most recent such review happening in late 2018. That review resulted in the Paramount Consent Decrees being identified as one judgment that the DOJ no longer considered necessary. As such, the DOJ made a court action to terminate these decrees with a two-year sunset period on some of the current bans.
Which brings us to the present, and the counter motions and briefs filed by the theater owner trade groups. The trade groups argue that these provisions have maintained a thriving film exhibition and distribution market where independent smaller studios can properly compete for screen time, even in towns and regions with fewer screens per theater. The trade groups specifically call out the block booking rule as crucial, noting that bigger studios could force out competitors and smaller studios by demanding a group of their films be licensed by a theater in order to have access to the big moneymaking blockbuster.
The trade groups also argue that the government hasn't followed the technical standard for removing such consent decrees from the books, which requires a showing that it's in the public interest to remove such decrees. I expect the DOJ will craft a response arguing that removing this decree is in the public interest to try and overcome this technical legal challenge.
Of course, the trade groups do not directly address the government's position regarding the change in the movie industry with streaming services and the like as alternatives. This sets up to be the potential core of the court decision, as the theater owners have a legitimate concern about potentially being bullied by major film studios, but they may not really be how small independent studios distribute anymore in the age of streaming services. It's a close call, in my legal opinion, and the shifting movie consumption landscape makes this a ripe question for handling in 2020.
The Bottom Line is: antitrust law and consent decrees have an important place in our regulatory scheme to protect against monopolies and unfair business practices. However, times change in industry and when change occurs, the same protections from the past may not be applicable. It will be fascinating to see if the courts think the movie distribution industry has changed enough to take the reins of control off the major film studios.
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