Federal Register / Vol. 73, No. 204 / Tuesday, October 21, 2008 / Notices 62543 

15 U.S.C. 4301 et seq. (‘‘the Act’’), 

Network Centric Operations Industry 

Consortium, Inc. has filed written 

notifications simultaneously with the 

Attorney General and the Federal Trade 

Commission disclosing changes in its 

membership. The notifications were 

filed for the purpose of extending the 

Act’s provisions limiting the recovery of 

antitrust plaintiffs to actual damages 

under specified circumstances. 

Specifically, LFV, Norrkoping, SWEDEN 

has been added as a party to this 

venture. Also, SRA International, 

Fairfax, VA has withdrawn as a party to 

this venture. 

No other changes have been made in 

either the membership or planned 

activity of the group research project. 

Membership in this group research 

project remains open, and Network 

Centric Operations Industry 

Consortium, Inc. intends to file 

additional written notifications 

disclosing all changes in membership. 

On November 19, 2004, Network 

Centric Operations Industry 

Consortium, Inc. filed its original 

notification pursuant to section 6(a) of 

the Act. The Department of Justice 

published a notice in the Federal 

Register pursuant to section 6(b) of the 

Act on February 2, 2005 (70 FR 5486). 

The last notification was filed with 

the Department on June 13, 2008. A 

notice was published in the Federal 

Register pursuant to section 6(b) of the 

Act on July 21, 2008 (73 FR 42367). 

Patricia A. Brink, 

Deputy Director of Operations, Antitrust 

Division. 

[FR Doc. E8–24806 Filed 10–20–08; 8:45 am] 

BILLING CODE 4410–11–M 

DEPARTMENT OF JUSTICE 

Antitrust Division 

Notice Pursuant to the National 

Cooperative Research and Production 

Act of 1993—Open DeviceNet Vendor 

Association, Inc. 

Notice is hereby given that, on 

September 5, 2008, pursuant to Section 

6(a) of the National Cooperative 

Research and Production Act of 1993, 

15 U.S.C. 4301 et seq. (‘‘the Act’’), Open 

DeviceNet Vendor Association, Inc. 

(‘‘ODVA’’) has filed written notifications 

simultaneously with the Attorney 

General and the Federal Trade 

Commission disclosing changes in its 

membership. The notifications were 

filed for the purpose of extending the 

Act’s provisions limiting the recovery of 

antitrust plaintiffs to actual damages 

under specified circumstances. 

Specifically, LinkBASE, Seoul, 

REPUBLIC OF KOREA; Keyence 

Corporation, Tokyo, JAPAN; RocKontrol 

Industry Co., Ltd., Shanxi, PEOPLE’S 

REPUBLIC OF CHINA; Nichigoh 

Communication Electric Wire Co., Ltd., 

Osaka, JAPAN; CSE Servelec, Sheffield, 

UNITED KINGDOM; and Fluke 

Networks, Inc., Everett, WA have been 

added as parties to this venture. 

Also, Spyder Controls Corp., 

Lacombe, Alberta, CANADA; APV 

Products Unna, Unna, DENMARK; and 

The Siemon Company, Watertown, CT 

have withdrawn as parties to this 

venture. 

No other changes have been made in 

either the membership or planned 

activity of the group research project. 

Membership in this group research 

project remains open, and ODVA 

intends to file additional written 

notifications disclosing all changes in 

membership. 

On June 21, 1995, ODVA filed its 

original notification pursuant to Section 

6(a) of the Act. The Department of 

Justice published a notice in the Federal 

Register pursuant to Section 6(b) of the 

Act on February 15, 1996 (61 FR 6039). 

The last notification was filed with 

the Department on June 4, 2008. A 

notice was published in the Federal 

Register pursuant to Section 6(b) of the 

Act on July 16, 2008 (73 FR 40882) 

Patricia A. Brink, 

Deputy Director of Operations, Antitrust 

Division. 

[FR Doc. E8–24801 Filed 10–20–08; 8:45 am] 

BILLING CODE 4410–11–M 

DEPARTMENT OF JUSTICE 

Antitrust Division 

United States v. Regal Cinemas, 

Incorporated; Response to Public 

Comments on the Proposed Final 

Judgment 

Pursuant to the Antitrust Procedures 

and Penalties Act, 15 U.S.C. 16(b)–(h), 

the United States hereby publishes the 

public comments received on the 

proposed Final Judgment in United 

States v. Regal Cinemas, Incorporated, 

Civil Action No. 1:08–cv–746, and the 

response to the comments. On April 29, 

2008, the United States filed a 

Complaint alleging that Regal Cinema, 

Inc.’s acquisition of Consolidated 

Theatres Holdings, GP violated Section 

7 of the Clayton Act, 15 U.S.C. 18. The 

proposed Final Judgment, filed on April 

29, 2008, requires the combined 

company to divest four movie theaters 

in three North Carolina metropolitan 

areas. Public comment was invited 

within the statutory 60-day comment 

period. Copies of the Complaint, 

proposed Final Judgment, Competitive 

Impact Statement, Public Comments, 

the United States’ Response to the 

Comments, and other papers are 

currently available for inspection in 

Suite 1010 of the Antitrust Division, 

Department of Justice, 450 5th Street, 

NW., Washington, DC 20530, telephone: 

(202) 514–2481, on the Department of 

Justice’s Web site (http:// 

www.usdoj.gov/atr), and the Office of 

the Clerk of the United States District 

Court for the District of the District of 

Columbia, 333 Constitution Avenue, 

NW., Washington, DC 20001. Copies of 

any of these materials may be obtained 

upon request and payment of a copying 

fee. 

Patricia A. Brink, 

Deputy Director of Operations, Antitrust 

Division. 

United States District Court for the 

District of Columbia 

[Civil Action No: 1:08–cv–00746] 

United States of America, Plaintiff, v. 

Regal Cinemas, Inc., and Consolidated 

Theatres Holdings, GP, Defendants; 

Response of the United States to Public 

Comments on the Proposed Final 

Judgment 

Judge: Leon, Richard J. 

Filed: 

Pursuant to the requirements of the 

Antitrust Procedures and Penalties Act, 

15 U.S.C. 16(b)–(h) (‘‘APPA’’ or 

‘‘Tunney Act’’), the United States 

hereby responds to two public 

comments received during the public 

comment period regarding the proposed 

Final Judgment in this case. One 

commenter argues for additional, more 

intrusive relief than the relief obtained 

by the United States. The other argues 

there was no harm from the transaction, 

and that the United States should not 

have filed its Complaint nor required 

any relief whatsoever. After careful 

consideration of the comments, the 

United States determined that the 

Proposed Final Judgment remains in the 

public interest. The United States will 

move the Court for entry of the 

proposed Final Judgment after the 

public comments and this Response 

have been published in the Federal 

Register, pursuant to 15 U.S.C. 16(d). 

I. Procedural History 

On April 29, 2008, the United States 

filed the Complaint in this matter 

alleging that defendant Regal Cinema, 

Inc.’s (‘‘Regal’’) acquisition of defendant 

Consolidated Theatres Holdings, GP 

(‘‘Consolidated’’), if permitted to 

proceed, would combine the two 

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62544 Federal Register / Vol. 73, No. 204 / Tuesday, October 21, 2008 / Notices 

1The other locations where Consolidated owned 

a theatre that was acquired by Regal did not present 

competitive problems. The Complaint contains no 

allegations regarding these areas and no one has 

commented on them. 

2The 2004 amendments substituted ‘‘shall’’ for 

‘‘may’’ in directing relevant factors for court to 

consider and amended the list of factors to focus on 

competitive considerations and to address 

potentially ambiguous judgment terms. Compare 15 

U.S.C. 16(e) (2004), with 15 U.S.C. 16(e)(1) (2006). 

leading, and in some cases only, 

operators of first-run, commercial movie 

theatres in parts of the metropolitan 

areas of Charlotte, Raleigh, and 

Asheville, North Carolina. The 

Complaint alleged that the likely effect 

of the acquisition would be to lessen 

competition substantially for first-run 

commercial movie exhibition in 

violation of Section 7 of the Clayton 

Act, 15 U.S.C. 18. The United States 

filed a proposed Final Judgment and a 

Stipulation signed by the United States 

and the defendants consenting to the 

entry of the proposed Final Judgment 

after compliance with the requirements 

of the APPA. Pursuant to those 

requirements, a Competitive Impact 

Statement (‘‘CIS’’) was filed in this court 

on April 30, 2008; the Proposed Final 

Judgment and CIS were published in the 

Federal Register on May 15, 2008; and 

a summary of the terms of the proposed 

Final Judgment and CIS, together with 

directions for the submission of written 

comments relating to the proposed Final 

Judgment, were published for seven 

days in the Washington Post on May 23, 

2008 through May 29, 2008. The 

defendants filed the statements required 

by 15 U.S.C. 16(g) on May 19, 2008 and 

June 18, 2008, respectively. 

The sixty-day comment period ended 

on July 28, 2008. Two comments, 

described below, were received. 

II. The United States’ Investigation and 

Proposed Resolution 

After Regal and Consolidated 

announced their plans to merge, the 

United States Department of Justice (the 

‘‘Department’’) conducted an extensive 

investigation into the competitive 

effects of the proposed transaction. As 

part of this investigation, the 

Department obtained documents and 

information from the merging parties, 

and conducted interviews with 

competitors and other individuals with 

knowledge of the industry. Among the 

third parties the Department 

interviewed during its investigation was 

one of the commenters, Mr. Bruner, who 

shared his concerns about the 

competitive impact of the proposed 

merger in the Charlotte area. 

On the basis of its investigation and 

prior experience with markets for firstrun commercial movie exhibition, the 

Department concluded that the 

proposed transaction would lessen 

competition for the theatrical exhibition 

of first-run, commercial movies in four 

North Carolina markets—Southern 

Charlotte, Northern and Southern 

Raleigh, and Asheville.1 As more fully 

explained in the Complaint and CIS, the 

proposed transaction likely would lead 

to higher ticket prices for moviegoers 

and would reduce the newly merged 

entity’s incentives to maintain, upgrade, 

and renovate its theatres in the relevant 

markets, to improve its theatres’ 

amenities and services, and to license 

the highest revenue movies, thus 

reducing the quality of the viewing 

experience in those four areas. As 

alleged in the Complaint, these 

outcomes are likely because, in each of 

the relevant markets, Regal and 

Consolidated were each other’s most 

important competitor, given the close 

proximity of their theatres to one 

another and to moviegoers. 

The proposed Final Judgment is 

designed to preserve competition in the 

four markets. It requires divestitures as 

viable ongoing businesses of a total of 

four theatres in three metropolitan 

areas: the Crown Point 12 in Southern 

Charlotte; the Raleigh Grand 16 in 

Northern Raleigh; the Town Square 10 

in Southern Raleigh; and the Hollywood 

14 in Asheville. Sale of these theatres 

will preserve existing competition 

between the defendants’ theatres that 

are or would have been each other’s 

most significant competitor in the 

theatrical exhibition of first-run movies 

in Southern Charlotte, Northern and 

Southern Raleigh, and Asheville. 

III. Standard of Review 

Upon the publication of the public 

comment and this Response, the United 

States will have fully complied with the 

Tunney Act and will move the Court for 

entry of the proposed Final Judgment as 

being ‘‘in the public interest.’’ 15 U.S.C. 

16(e), as amended. In making the 

‘‘public interest’’ determination, the 

Court should review the proposed Final 

Judgment in light of the violations 

charged in the complaint, see, e.g., 

Mass. Sch. of Law at Andover, Inc. v. 

United States, 118 F.3d 776, 783 (D.C. 

Cir. 1997) (quoting United States v. 

Microsoft Corp., 56 F.3d 1448, 1462 

(D.C. Cir. 1995)), and be ‘‘deferential to 

the government’s predictions as to the 

effect of the proposed remedies.’’ 

Microsoft, 56 F.3d at 1461. 

The Tunney Act states that the Court 

shall consider in making its public 

interest determination: 

(A) the competitive impact of such 

judgment, including termination of 

alleged violations, provisions for 

enforcement and modification, duration 

of relief sought, anticipated effects of 

alternative remedies actually 

considered, whether its terms are 

ambiguous, and any other competitive 

considerations bearing upon the 

adequacy of such judgment that the 

court deems necessary to a 

determination of whether the consent 

judgment is in the public interest; and 

(B) the impact of entry of such 

judgment upon competition in the 

relevant market or markets, upon the 

public generally and individuals 

alleging specific injury from the 

violations set forth in the complaint 

including consideration of the public 

benefit, if any, to be derived from a 

determination of the issues at trial. 

15 U.S.C. 16(e). See generally United 

States v. SBC Commc’ns, Inc., 489 F. 

Supp. 2d 1, 11 (D.D.C. 2007) 

(concluding that the 2004 amendments 

to the Tunney Act ‘‘effected minimal 

changes’’ to the court’s scope of review 

under Tunney Act, and that review is 

‘‘sharply proscribed by precedent and 

the nature of Tunney Act 

proceedings’’).2

As the United States Court of Appeals 

for the District of Columbia Circuit has 

held, under the APPA a court considers, 

among other things, the relationship 

between the remedy secured and the 

specific allegations set forth in the 

government’s complaint, whether the 

decree is sufficiently clear, whether 

enforcement mechanisms are sufficient, 

and whether the decree may positively 

harm third parties. See Microsoft, 56 

F.3d at 1458–62 (D.C. Cir. 1995). With 

respect to the adequacy of the relief 

secured by the decree, a court may not 

‘‘engage in an unrestricted evaluation of 

what relief would best serve the 

public.’’ United States v. BNS, Inc., 858 

F.2d 456, 462 (9th Cir. 1988) (citing 

United States v. Bechtel Corp., 648 F.2d 

660, 666 (9th Cir. 1981)); see also 

Microsoft, 56 F.3d at 1460–62. Courts 

have held that: 

[t]he balancing of competing social and 

political interests affected by a proposed 

antitrust consent decree must be left, in the 

first instance, to the discretion of the 

Attorney General. The court’s role in 

protecting the public interest is one of 

insuring that the government has not 

breached its duty to the public in consenting 

to the decree. The court is required to 

determine not whether a particular decree is 

the one that will best serve society, but 

whether the settlement is ‘‘within the reaches 

of the public interest.’’ More elaborate 

requirements might undermine the 

effectiveness of antitrust enforcement by 

consent decree. 

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Federal Register / Vol. 73, No. 204 / Tuesday, October 21, 2008 / Notices 62545 

3Mr. Bruner made two written submissions 

during the comment period. His second comment, 

which he describes as a Supplement, makes largely 

the same points as the first comment, but provides 

additional information arising out of a lawsuit he 

filed against Consolidated and Regal in North 

Carolina state court. Mr. Bruner’s lawsuit does not 

allege that Regal’s acquisition of Consolidated 

violates the antitrust laws. Rather, Mr. Bruner’s 

claims are based entirely on the effect of the 

transaction on his contract with Consolidated 

pursuant to which that company has managed 

certain aspects of the Village Theatre’s operation. 

According to Mr. Bruner’s complaint, upon 

acquiring Consolidated, Regal informed Mr. Bruner 

that it would assign the management contract to 

another theatre chain, which Mr. Bruner believes 

violates his agreement. 

4For the Court’s convenience, we have attached 

as Exhibit A a map showing the locations of 

theatres in the Southern Charlotte area. 

Bechtel, 648 F.2d at 666 (emphasis 

added) (citations omitted). Cf. BNS, 858 

F.2d at 464 (holding that the court’s 

‘‘ultimate authority under the [APPA] is 

limited to approving or disapproving 

the consent decree’’); United States v. 

Gillette Co., 406 F. Supp. 713, 716 (D. 

Mass. 1975) (noting that, in this way, 

the court is constrained to ‘‘look at the 

overall picture not hypercritically, nor 

with a microscope, but with an artist’s 

reducing glass’’). See generally 

Microsoft, 56 F.3d at 1461 (discussing 

whether ‘‘the remedies [obtained in the 

decree are] so inconsonant with the 

allegations charged as to fall outside of 

the ‘reaches of the public interest’ ’’). In 

making its public interest 

determination, a district court ‘‘must 

accord deference to the government’s 

predictions about the efficacy of its 

remedies, and may not require that the 

remedies perfectly match the alleged 

violations because this may only reflect 

underlying weakness in the 

government’s case or concessions made 

during negotiation.’’ SBC Commc’ns, 

489 F. Supp. 2d at 17; see also 

Microsoft, 56 F.3d at 1461 (noting the 

need for courts to be ‘‘deferential to the 

government’s predictions as to the effect 

of the proposed remedies’’); United 

States v. Archer-Daniels-Midland Co., 

272 F. Supp. 2d 1, 6 (D.D.C. 2003) 

(noting that the court should grant ‘‘due 

respect to the [United States’] prediction 

as to the effect of proposed remedies, its 

perception of the market structure, and 

its views of the nature of the case’’). 

Court approval of a consent decree 

requires a standard more flexible and 

less strict than that appropriate to court 

adoption of a litigated decree following 

a finding of liability. ‘‘[A] proposed 

decree must be approved even if it falls 

short of the remedy the court would 

impose on its own, as long as it falls 

within the range of acceptability or is 

‘within the reaches of public interest.’ ’’ 

United States v. Am. Tel. & Tel. Co., 552 

F. Supp. 131, 151 (D.D.C. 1982) 

(citations omitted) (quoting United 

States v. Gillette Co., 406 F. Supp. 713, 

716 (D. Mass. 1975)), aff’d sub nom. 

Maryland v. United States, 460 U.S. 

1001 (1983); see also United States v. 

Alcan Aluminum Ltd., 605 F. Supp. 619, 

622 (W.D. Ky. 1985) (approving the 

consent decree even though the court 

would have imposed a greater remedy). 

To meet this standard, the United States 

‘‘need only provide a factual basis for 

concluding that the settlements are 

reasonably adequate remedies for the 

alleged harms.’’ SBC Commc’ns, 489 F. 

Supp. 2d at 17. 

Moreover, the district court’s role 

under the APPA is limited to reviewing 

the remedy in relationship to the 

violations that the United States has 

alleged in its complaint, and does not 

authorize the Court to ‘‘construct [its] 

own hypothetical case and then 

evaluate the decree against that case.’’ 

Microsoft, 56 F.3d at 1459. Because the 

‘‘court’s authority to review the decree 

depends entirely on the government’s 

exercising its prosecutorial discretion by 

bringing a case in the first place,’’ it 

follows that ‘‘the court is only 

authorized to review the decree itself,’’ 

and not to ‘‘effectively redraft the 

complaint’’ to inquire into other matters 

that the United States did not pursue. 

Id. at 1459–60. As this Court recently 

confirmed in SBC Communications, 

courts ‘‘cannot look beyond the 

complaint in making the public interest 

determination unless the complaint is 

drafted so narrowly as to make a 

mockery of judicial power.’’ SBC 

Commc’ns, 489 F. Supp. 2d at 15. 

In its 2004 amendments to the 

Tunney Act, Congress made clear its 

intent to preserve the practical benefits 

of utilizing consent decrees in antitrust 

enforcement, adding the unambiguous 

instruction ‘‘[n]othing in this section 

shall be construed to require the court 

to conduct an evidentiary hearing or to 

require the court to permit anyone to 

intervene.’’ 15 U.S.C. 16(e)(2). The 

language wrote into the statute what the 

Congress that enacted the Tunney Act in 

1974 intended, as Senator Tunney then 

explained: ‘‘[t]he court is nowhere 

compelled to go to trial or to engage in 

extended proceedings which might have 

the effect of vitiating the benefits of 

prompt and less costly settlement 

through the consent decree process.’’ 

119 Cong. Rec. 24,598 (1973) (statement 

of Senator Tunney). 

IV. Summary of Public Comments and 

the Response of the United States 

During the sixty-day comment period, 

the United States received two 

comments: one from Robert B. Bruner, 

the owner of the Village Theatre in 

Charlotte, North Carolina, and the other 

from The Voluntary Trade Council, Inc., 

a Virginia non-profit corporation. Both 

comments are attached in the 

accompanying Appendix. After 

reviewing both comments, the United 

States continues to believe that the 

proposed Final Judgment is in the 

public interest. The two comments 

received by the Department are 

summarized below: 

Public Comment From Mr. Bruner 3

Robert B. Bruner is the owner of the 

Village Theatre in Charlotte, North 

Carolina, located approximately three 

miles west of Regal’s Stonecrest 22. The 

Village Theatre is a five-plex, stadiumseating theatre located on the third floor 

of a mixed-use shopping center and 

offers reserved seating, beer and wine, 

and upscale concessions. The Village 

Theatre is one of the six theatres the 

Department alleged to compete in the 

Southern Charlotte market for first-run 

motion picture exhibition, and Mr. 

Bruner’s comment is limited to this 

geographic market. 

Mr. Bruner’s comment contends that 

the United States should have sought 

additional relief in the Southern 

Charlotte market, and he proposes in 

particular that appropriate relief would 

have included freeing the Village 

Theatre from pre-existing limitations 

(referred to as ‘‘clearances’’ and 

discussed below) on the films that 

distributors were willing to license to 

that theatre. 

Mr. Bruner first argues that divestiture 

of Regal’s Crown Point 12 (as required 

by the proposed Final Judgment) will 

not prevent the merger from increasing 

concentration in the Southern Charlotte 

market, in part because the market 

should have been alleged to exclude his 

Village Theatre and to include an 

additional theatre operated by 

Consolidated.4 He submits that, had the 

United States alleged the ‘‘proper’’ 

market, additional relief of the sort he 

proposes would be required to remedy 

sufficiently the increase in 

concentration from the merger. 

As explained below, Mr. Bruner’s 

comment should be given no weight in 

the context of this Tunney Act review 

of the remedy obtained by the United 

States. Mr. Bruner acknowledges that 

the required divestiture of the Crown 

Point 12 furthers the objective of 

remedying the harm to competition in 

Southern Charlotte alleged in the United 

States’ complaint; indeed, Mr. Bruner 

would retain this component of the 

United States’ remedy. Mr. Bruner does 

not allege that this remedy was 

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62546 Federal Register / Vol. 73, No. 204 / Tuesday, October 21, 2008 / Notices 

insufficiently related to the allegations 

in the Complaint, or was unclear, or that 

enforcement mechanisms are 

insufficient, or that the relief will harm 

third parties. See Microsoft, 56 F.3d at 

1457–58. Mr. Bruner’s argument is that 

the United States should have obtained 

additional relief, but this assertion does 

not satisfy the standards set forth in 

cases such as Bechtel, 648 F.2d. at 666, 

AT&T, 552 F. Supp. at 151, and Alcan, 

605 F. Supp. at 622, that the secured 

remedy is outside ‘‘the reaches of the 

public interest.’’ Moreover, in criticizing 

the United States’ allegations regarding 

market definition, Mr. Bruner is 

questioning the validity of the United 

States’ Complaint, an exercise that is 

beyond the scope of the Tunney Act 

review. See SBC Commc’ns, 489 F. 

Supp. at 15; Microsoft, 56 F.3d at 1459. 

When considered in light of the 

applicable legal standards, the United 

States’ remedy more than satisfies the 

public interest requirements set forth in 

the Tunney Act. 

A. Divestiture of the Crown Point 12 

Adequately Restores Competition Lost 

as a Result of the Merger 

Mr. Bruner asserts that divestiture of 

the Crown Point 12 is inadequate relief 

to remedy the merger’s concentrating 

effect. Mr. Bruner claims that divestiture 

of this theatre does not sufficiently 

reduce the merger’s concentrating effect 

in Southern Charlotte, and that, even 

after the divestiture of the Crown Point, 

the Southern Charlotte market would 

still be so highly concentrated that 

additional relief is required. Mr. Bruner 

also argues that the Crown Point will 

not be an effective competitor against 

Regal because it is located on the 

eastern edge of the Southern Charlotte 

market, five miles from its nearest 

competitor, the Arboretum 12, with no 

other competing theatres to the north, 

south or east. 

Mr. Bruner is correct that divestiture 

of the Crown Point would not ensure 

that concentration levels in Southern 

Charlotte were no higher than their premerger level, but that fact does not mean 

that the relief obtained by the United 

States is inadequate. The Department 

determined that the anticompetitive 

effects of the transaction in Southern 

Charlotte would flow from the 

elimination of competition among three 

theatres that were most vigorously 

competing against each other premerger: Regal’s Crown Point, 

Consolidated’s Arboretum 12 (which, as 

Mr. Bruner correctly points out, is five 

miles from the Crown Point to the 

south), and Consolidated’s Philips 10 

(which is located approximately seven 

miles from the Crown Point to the west). 

The divestiture of the Crown Point to an 

independent viable competitor would 

restore the competition among those 

theatres that was lost due to the 

combination of Regal and Consolidated. 

With respect to the sufficiency of the 

proposed remedy, a district court must 

accord due respect to the United States’s 

views of the nature of the case, its 

perception of the market structure, and 

its predictions as to the effect of 

proposed remedies. E.g., SBC 

Commc’ns, 489 F. Supp. 2d at 17 

(United States is entitled to ‘‘deference’’ 

as to ‘‘predictions about the efficacy of 

its remedies’’). The United States ‘‘need 

only provide a factual basis for 

concluding that the settlements are 

reasonably adequate remedies for the 

alleged harms.’’ Id. 

Mr. Bruner places great emphasis on 

the concentration statistics in making 

his argument that the relief obtained is 

inadequate. While a merger’s impact on 

concentration in a market is a useful 

indicator of the likely potential 

competitive effects of a merger, it is by 

no means the end of the analysis. The 

Department gathered and considered 

considerable other evidence, much of 

which is not publicly available, bearing 

on the likely effects of combining Regal 

and Consolidated theatres in Southern 

Charlotte, and the effect of preserving 

the independence of the Crown Point 

theatre via an appropriate divestiture. 

The United States concluded, and 

subsequently alleged in the Complaint, 

that the merger would cause harm by 

eliminating competition for moviegoers 

between particular Regal and the 

Consolidated theatres in Southern 

Charlotte, rather than by considering 

market-wide concentration levels. The 

United States explained in its 

Complaint the competitive dynamics 

that would be impaired by Regal’s 

acquisition of Consolidated. 

Specifically, as noted above, the 

Department found that the principal 

competitor of both Consolidated 

theatres in Southern Charlotte—the 

Arboretum 12 and the Phillips 10—was 

Regal’s Crown Point theatre, and that 

the Phillips 10 also competed to a lesser 

degree with Regal’s Stonecrest theatre. 

The United States alleged that, without 

the merger, if these Regal or 

Consolidated theatres were to increase 

ticket prices, and the theatres of the 

other firm did not follow, the exhibitor 

that increased price would likely suffer 

financially as a substantial number of its 

patrons would patronize the other 

exhibitor’s theatre. See Complaint, ¶ 34. 

That competition would be lost as a 

result of an unremedied merger, because 

the newly-combined entity could 

increase prices at all of its theatres, or 

be sure that its other theatres would 

capture sales lost to the theatre that 

raised prices, thus making profitable 

price increases that would have been 

unprofitable pre-merger. Id. 

The United States also found that, for 

various reasons, the other theatres in 

Southern Charlotte would be unable to 

attract enough moviegoers that were 

served by the Regal and Consolidated 

theatres to make a post-merger price 

increase or reduction in quality 

unprofitable. For example, as alleged in 

the Complaint, those other theatres are 

located further away from those 

moviegoers, are smaller in size or have 

fewer screens, or offer a lower quality 

viewing experience than the Regal and 

Consolidated theatres. See Id. at ¶ 36. 

The relief obtained by the United States 

flowed directly from this analysis of the 

merger’s likely effects, and that relief 

will prevent those effects from being 

realized. Not only is Regal’s Crown 

Point 12 the principal competitor to 

Consolidated’s two theaters in Southern 

Charlotte, it is one of the largest theatres 

in the market, with 12 screens and 

stadium seating, making it competitive 

in quality with the other theatres in the 

area. 

B. Criticism of the United States’ 

Allegation of the Proper Geographic 

Market for First-Run Commercial Movie 

Exhibition of Southern Charlotte Is 

Beyond the Scope of Tunney Act Review 

Much of Mr. Bruner’s comment is 

devoted to arguments that the 

allegations in the United States’ 

complaint do not properly define the 

South Charlotte market. Mr. Bruner 

claims that the United States incorrectly 

excluded another Consolidated theatre 

from the market, and improperly 

included his Village Theatre in the 

market. Mr. Bruner asserts that these 

changes support a conclusion that the 

merger caused an even greater increase 

in concentration, and thus provide 

further support for his position that the 

relief obtained by the United States was 

inadequate. 

Mr. Bruner’s arguments should be 

rejected. In essence, Mr. Bruner is 

claiming that the United States should 

have brought a different case—founded 

upon different market allegations—than 

the one alleged in the Complaint. As 

explained by this Court, however, in a 

Tunney Act proceeding, the district 

court should not second-guess the 

prosecutorial decisions of the 

Department regarding the nature of the 

claims brought in the first instance; 

‘‘[r]ather, the court is to compare the 

complaint filed by the [United States] 

with the proposed consent decree and 

determine whether the [proposed 

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Federal Register / Vol. 73, No. 204 / Tuesday, October 21, 2008 / Notices 62547 

5Were a court to reject a proposed decree on the 

grounds that it failed to address harm not alleged 

in the complaint, it would offer the United States 

what the Court of Appeals for the D.C. Circuit 

referred to as a ‘‘difficult, perhaps Hobson’s 

choice,’’ in that the United States would have to 

either redraft the complaint and pursue a case it 

believed had no merit, or drop its case and allow 

conduct it believed to be anticompetitive to go 

unremedied. Microsoft, 56 F.3d at 1456. 

6 In any case, the Department properly excluded 

the Park Terrace from the relevant geographic 

market. Past investigations involving competition 

among movie theatres revealed that moviegoers 

typically will not travel more than 5 to 10 miles 

from their homes to see a movie. At approximately 

10 miles from Regal’s Crown Point, the Park Terrace 

is at the outer range. In addition, the Park Terrace 

is not located near a freeway exit, increasing the 

travel time. The Department’s examination of the 

merging parties’ data, as well as interviews with 

market participants, confirmed that the Park 

Terrace and the Crown Point draw moviegoers from 

very different areas. 

The Department also properly included Mr. 

Bruner’s Village Theatre in the market. Although 

that theatre may not show as many first-run movies 

as other theaters as result of the clearances that Mr. 

Bruner describes, it nevertheless provides some 

competition for the same group of moviegoers as the 

Stonecrest, which is less than three miles away. 

decree] clearly and effectively addresses 

the anticompetitive harms initially 

identified.’’ United States v. Thomson 

Corp., 949 F. Supp. 907, 913 (D.D.C. 

1996). Similarly, the Tunney Act review 

does not provide for an examination of 

possible competitive harms the United 

States did not allege. See, e.g., 

Microsoft, 56 F.3d at 1459 (stating that 

the district judge may not ‘‘reach 

beyond the complaint to evaluate claims 

that the government did not make’’) 5. 

The reviewing court may look beyond 

the scope of the complaint only when 

the complaint has been ‘‘drafted so 

narrowly as to make a mockery of 

judicial power.’’ SBC Commmc’ns, 489 

F. Supp.2d at 14. That is not the case 

here. The United States’ decision to 

allege a harm in a specific market is 

based on a case-by-case analysis that 

varies depending on the particular 

circumstances of each product and 

geographic market. The Complaint 

properly alleges the harm the 

transaction is likely to cause in the 

relevant product and geographic 

markets. Because Mr. Bruner is 

challenging the adequacy of the relief 

based on his definition of the relevant 

geographic market, rather than the 

geographic market alleged in the 

Complaint, his challenge should carry 

no weight.6

C. The Additional Relief Proposed by 

Mr. Bruner Would Be Inappropriate 

Mr. Bruner argues that the United 

States should obtain additional relief in 

the form of an order requiring his 

competitor, Regal, to waive any 

opportunities it has for ‘‘clearances’’ of 

first-run movies against the Village 

Theatre, which Mr. Bruner asserts will 

enhance the Village Theatre’s ability to 

compete against Regal’s Stonecrest 

theatre post-merger. In the motion 

picture industry, ‘‘clearance’’ refers to a 

practice whereby a distributor (i.e., 

movie studios) may elect to license only 

certain theatres in a geographical area to 

exhibit a first-run movie during some 

period of time. In such a case, the 

exhibitors that are licensed to show the 

movie are referred to as having 

‘‘clearance’’ against exhibitors that do 

not have such rights. According to Mr. 

Bruner, several distributors have opted 

to license first-run movies only to 

Regal’s Stonecrest Theatre in the portion 

(or ‘‘zone’’) of the Southern Charlotte 

market in which the Village Theatre is 

located, thus granting clearances against 

that theatre. 

Mr. Bruner would have this Court 

order Regal not to avail itself of the 

exclusive rights to exhibit a movie at the 

Stonecrest that a distributor wishes to 

grant. In Mr. Bruner’s view, this 

outcome would assure his theatre access 

to every first-run movie he desires and 

allow his five-plex theatre to compete 

better with Regal’s 22-screen Stonecrest, 

to the benefit of consumers. Mr. 

Bruner’s proposal is inappropriate for 

several reasons, and the United States’ 

remedy—divestiture of the Crown 

Point—is more effective in addressing 

the merger’s harm in Southern 

Charlotte. 

First, it is important to recognize that 

the practice of distributors granting the 

Stonecrest clearance against the Village 

Theatre is not a result of the merger. 

Whatever effects those practices have on 

competition in the Southern Charlotte 

market, they are unrelated to this case 

and the United States’ allegations of 

harm from the transaction at issue. 

Thus, factoring Mr. Bruner’s concern 

regarding clearances into the public 

interest assessment here would 

inappropriately construct a 

‘‘hypothetical case and then evaluate 

the decree against that case,’’ something 

the Tunney Act does not authorize. 

Microsoft, 56 F.3d at 1459. 

Second, Mr. Bruner’s relief likely 

would be unworkable and 

inappropriately limit the licensing 

freedom of third parties, since its 

effectiveness would hinge on movie 

distributors choosing to license the 

Village Theater despite Mr. Bruner’s 

assertion that they have not made such 

choices in the pre-merger world. 

Finally, even if Mr. Bruner’s 

requested relief would serve to enhance 

the Village Theatre’s ability to compete 

in the market post-merger, such relief 

would inappropriately and 

unnecessarily involve the Court and the 

Department in supervising Regal’s 

ongoing marketplace conduct. Mr. 

Bruner’s proposal would limit Regal’s 

ability to compete with the Village 

Theatre for the exclusive right to show 

a movie at the Stonecrest or the 

Arboretum by offering studios a better 

deal. The Department of Justice’s 

Antitrust Division has previously made 

clear that it is unlikely to impose 

restrictions on a merged firm’s right to 

compete as part of a merger remedy. 

Such restrictions, even as a transitional 

remedy, are strongly disfavored as they 

directly limit competition in the short 

term, and any long-term benefits are 

inherently speculative. See Antitrust 

Division Policy To Guide To Merger 

Remedies, dated October 21, 2004 at 19. 

Structural remedies such as the 

divestiture the Department has required 

in this case, are preferred in merger 

cases because they are relatively clean 

and certain, and generally avoid 

government entanglement in the market 

that conduct remedies require. A 

carefully crafted divestiture decree is 

‘‘simple, relatively easy to administer, 

and sure’’ to preserve competition. 

United States v. E.I. du Pont de 

Nemours & Co., 366 U.S. 316, 331 

(1961). Divestiture of an ongoing 

business to a new, independent, and 

economically viable competitor has 

proved to be the most successful remedy 

in maintaining competition that would 

have been lost due to the merger. See 

California v. American Stores Co., 495 

U.S. 271, 280–81 (1990) (‘‘[I]n 

Government actions divestiture is the 

preferred remedy for an illegal merger or 

acquisition.’’). 

Public Comment From the Voluntary 

Trade Council, Inc. 

The Voluntary Trade Council (‘‘VTC’’) 

describes itself as ‘‘a research center 

dedicated to antitrust and competition 

regulation * * * working in the 

tradition of the Austrian School of 

Economics * * * offer[ing] free-market 

criticism of the Department of Justice, 

the Federal Trade Commission and 

other agencies that intervene to prevent 

the voluntary exchange of goods, 

services and ideas.’’ VTC argues that the 

Department should not have alleged a 

market for first-run movie distribution, 

contends that the Department should 

ignore any increase in price resulting 

from the transaction so long as 

consumers were willing to pay higher 

prices, and opposes any remedies to 

ameliorate the competitive harm that 

the United States alleges would 

otherwise occur as a result of Regal’s 

acquisition of Consolidated. VTC urges 

the Court to reject the proposed Final 

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62548 Federal Register / Vol. 73, No. 204 / Tuesday, October 21, 2008 / Notices 

7The Department’s conclusion that first-run, 

commercial movie exhibition is a proper relevant 

market, see Complaint at ¶ 17, was based on the 

application of standard antitrust principles to the 

visual entertainment options available to consumers 

in the areas where Regal and Consolidated operate 

movie theatres, as set forth in the Department’s 

Merger Guidelines. See Horizontal Merger 

Guidelines, 57 Fed. Reg. 41,552, 41,555, § 1.1 

(1992). Contrary to VTC’s assertion, the mere 

existence of other forms of visual entertainment 

would not prevent a monopolist movie exhibitor 

from profitably raising prices or reducing quality 

relative to competitive levels. 

Judgment as inconsistent with the 

public interest. 

It appears that VTC is philosophically 

opposed to the existence of and 

enforcement of the antitrust laws in any 

case. See http://voluntarytrade.org. All 

of VTC’s arguments in this case are 

directed toward the United States’ 

decision to file the Complaint alleging a 

Section 7 violation, and its related 

decision to require that the Defendants 

divest certain theatres in order to restore 

competition and avoid the need to 

litigate this matter.7 As such, none of 

VTC’s arguments is directed to any issue 

relevant under the Tunney Act, i.e., 

whether, in light of the violations 

charged in the Complaint, the terms of 

the proposed Final Judgment are 

inconsistent with the public interest. 

Microsoft, 56 F.3d at 1462. The Court 

should accordingly ignore VTC’s 

comment. 

V. Conclusion 

After careful consideration of the 

public comments, the United States 

concludes that the entry of the proposed 

Final Judgment will provide an effective 

and appropriate remedy for the antitrust 

violations alleged in the Complaint and 

is therefore in the public interest. 

Accordingly, after publication in the 

Federal Register pursuant to 15 U.S.C. 

16(b) and (d), the United States will 

move this Court to enter the Final 

Judgment. 

Dated: September 24, 2008. 

Respectfully Submitted, 

Gregg I. Malawer (DC Bar No. 481685), 

Anne Newton McFadden, 

U.S. Department of Justice Antitrust Division, 

450 5th Street, NW., Suite 4000, Washington, 

DC 20530, (202) 514–0230, Attorneys for 

Plaintiff the United States. 

BILLING CODE 4410–11–M 

BILLING CODE 4410–11–C 

Appendix 

Public Comment from Robert B. Bruner 

(June 26, 2008) ..................................... A 

Public Comment from Robert B. Bruner 

(July 22, 2008) ...................................... B 

Public Comment from Voluntary Trade 

Council, Inc. (July 13, 2008) ............... C 

A 

June 26, 2008 

John R. Read, Chief, 

Antitrust Division/Litigation III, 

450 5th Street, NW., Suite 4000, 

Washington, DC 20530. 

This letter is a public comment to the 

proposed Final Judgment regarding the 

merger of Regal Cinemas, Inc. (‘‘Regal’’) and 

Consolidated Theatres, GP (‘‘Consolidated’’) 

(the ‘‘Merger’’). More specifically it focuses 

on the competitive effect of the Merger in the 


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1The five screen Village Theatre is Charlotte’s 

only luxury theatre while Regal’s Stonecrest is a 22 

screen multiplex. 

2Since these calculations were based upon the 

2007 box office revenues and since the box office 

revenues for the Village Theatre should increase 

after the clearance is eliminated, the market share 

for the Village Theatre should increase and the 

competitive effect of the merger in the Southern 

Charlotte market will be reduced even further than 

that shown on Exhibit 5. 

3The Complaint did not define the term first-run 

commercial movies. Generally, as stated in the 

Complaint, art movies are released less widely than 

commercial first-run movies. For purposes of this 

Comment Letter, the term first-run, commercial 

movies will include those movies with an initial 

release of more than 1,500 prints. This is the lower 

end of a release of what is typically a first-run 

commercial movie. 

4The United States did not publish the details of 

their calculation of the HHI. Therefore, the numbers 

shown in this Public Comment Letter will not 

exactly match those of the United States; but there 

are no significant variations. 

Southern Charlotte, North Carolina, market 

area. 

As noted below, even after the divesture of 

the Crown Point 12 the HHI for the Southern 

Charlotte market will be 5,032 points, nearly 

three times the 1,800 point threshold for a 

highly concentrated market set forth in the 

Merger Guidelines. Further, the Merger will 

still cause a HHI increase of 1,281 points, 

more than 25 times the 50 point increase for 

highly concentrated markets that the 

guidelines specify potentially raise 

significant competitive concerns and more 

than 12 times the 100 point increase 

threshold that the guidelines specify create a 

presumption of the creation or enhancement 

of market power or the facilitation of its 

exercise. Merger Guidelines Sec. 1.51c. 

As discussed in detail below, to obtain an 

accurate view of the competitive effect of the 

Merger in the Southern Charlotte market, the 

inclusion of the Park Terrace Theatre in the 

market and the exclusion of the Village 

Theatre in the market is required. With these 

two adjustments, the Herfindahl Hirschman 

Index (‘‘HHI’’) will more accurately reflect 

the market concentration and the competitive 

effect of the Merger in Southern Charlotte. As 

this revised HHI clearly shows the divestiture 

by Regal of the Crown Point 12 does not 

eliminate the noncompetitive effects of the 

Merger in the Southern Charlotte market. 

Thus, additional changes to the proposed 

Final Judgment are necessary to reduce the 

market concentration of Regal in the 

Southern Charlotte market area. Because of 

its location, the entry of the Village Theatre 

into Southern Charlotte as a true first-run 

commercial movie theatre will, in reality, 

most likely be more beneficial to the 

consumers than the divestiture of Crown 

Point 12. The elimination or waiver of 

Regal’s Stonecrest’s clearance will allow the 

Village Theatre to enter the first-run 

commercial movie market in Southern 

Charlotte which will provide additional 

consumers a choice of venues 1 for first-run 

commercial movies in Southern Charlotte 

and help to deconcentrate the market and 

offset the anticompetitive effects of the 

Merger.2

The Complaint 

On April 29, 2008, the United States of 

America brought a civil antitrust action to 

enjoin the proposed Merger of Regal and 

Consolidated and to obtain equitable relief 

(the ‘‘Compliant’’). As stated by the United 

States in the Complaint, the Merger would 

substantially lessen competition and tend to 

create a monopoly in the theatrical exhibition 

of first-run commercial movies 3 in the 

Southern Charlotte market area in violation 

of Section 7 of the Clayton Act. Regal is the 

largest operator of theatres in the United 

States. Consolidated is the largest operator of 

theatres in the Southern Charlotte area. 

As stated in Paragraphs 14–17 of the 

Complaint, tickets at theatres exhibiting firstrun commercial movies usually cost 

significantly more than tickets at sub-run 

theatres. Art movies are released less widely 

than first-run commercial movies. The 

relevant product market within which to 

access the competitive effects of the Merger 

is the exhibition of first-run commercial 

movies. 

Paragraph 19 of the Complaint sets forth 

the theatres in Southern Charlotte that the 

United States used in its review of the 

competitive impact in this market area, 

including its calculation of the HHI. As 

discussed below, Paragraph 19 of the 

Complaint wrongly includes the five screen 

Village Theatre in the relevant market and 

excludes the six screen Park Terrace. 

Paragraph 30 of the Complaint states that 

the newly merged entity would control four 

of the six first-run commercial theatres in the 

Southern Charlotte area, with 56 out of 83 

total screens and a 75% share of the 2007 box 

office receipts. The market concentration as 

measured by the HHI would increase 2,535 

points to 6,050 points; substantially above 

the merger guidelines. 

The Complaint also states that the Merger 

is likely to lead to higher ticket prices for 

moviegoers (see Paragraph 34 of the 

Complaint) and that the entry of a first-run 

commercial movie theatre in the Southern 

Charlotte area is unlikely (see Paragraph 37 

of the Complaint). 

The Complaint states that the likely effect 

of the Merger would be to lessen competition 

substantially for first-run commercial motion 

picture exhibition in violation of Section 7 of 

the Clayton Act, 15 U.S.C. Section 18. 

The Proposed Final Judgment 

At the same time the Complaint was filed, 

the United States also filed a proposed Final 

Judgment stating that it will eliminate the 

anticompetitive effects of the Merger. In the 

Southern Charlotte market area, under the 

proposed Final Judgment, Regal is required 

to divest its ownership of the Crown Point 12 

theatre. 

In the Southern Charlotte market the 

exhibitors of film product are highly 

concentrated and the HHI for that area greatly 

exceeds the merger guidelines. Even after the 

divestiture of assets proposed by the United 

States the HHI in the Southern Charlotte 

market will increase by almost 130% from 

the pre-merger HHI. 

Comment—The Final Judgment Does Not 

Adequately Reduce or Eliminate the 

Anticompetitive Effects of the Merger in 

Southern Charlotte 

United States has found that the Merger 

would substantially lessen competition in the 

Southern Charlotte market and is in violation 

of Chapter 7 of the Clayton Act. See Exhibit 

1.4 The post-Merger HHI shows an excessive 

concentration of the market in Southern 

Charlotte as a result of the Merger. After 

divesture by Regal of the Regal Crown Point 

12 Theatre the post-Merger HHI would still 

be an extremely high 5,032 points, reflecting 

an excessive concentration of the market after 

the Merger. See Exhibit 2. 

In Paragraph 34 of its Complaint, the 

United States asserts that the Merger will 

enable price increases by the merged firm to 

be profitable because of the lack of remaining 

competition in the market Paragraph 37 of 

the Complaint notes the unlikelihood of new 

entry in Southern Charlotte to reduce the 

market power of the merged firm. However, 

the United States’ Competitive Impact 

Statement, which orders the divestiture of 

the Crown Point 12, provides no analysis or 

data as to how that action will reduce or 

eliminate the substantial market 

concentration and anticompetitive effects of 

the Merger in Southern Charlotte. It provides 

only a conclusionary statement that the 

divestiture will ‘‘preserve existing 

competition between the defendant’s theatres 

that are or would have been each others’ 

most significant competitor. * * *’’ This 

statement is in error with respect to the 

Southern Charlotte market because the 

Crown Point 12 is on the periphery of the 

market on the far eastern edge of the 

Southern Charlotte market area, 

approximately five miles from its nearest 

competitor, the Arboretum 12 located to the 

west of the Crown Point 12. There are no 

competing theatres to the north, south or 

east. 

Thus, the divestiture of the Crown Point 12 

will have no real effect on competition in the 

Southern Charlotte market. The merged firm, 

Regal, will still have the power to raise prices 

and the likelihood of new entry will remain 

unlikely. The HHI of over 4,577, still an 

increase of, at a minimum, 1,000 to a 

maximum (see below) of over 3,000 points is 

still overwhelmingly establishes a Section 7 

violation, particularly with entry barriers 

admittedly very high. 

Comment—Competitive Effects in the 

Southern Charlotte Market 

The review by the United States of the 

competitive effects of the Merger in the 

Southern Charlotte market is incomplete and 

inaccurate. The determination of which 

theatres show first-run commercial movies is 

important in assessing the competitive 

impact on the Southern Charlotte market. All 

facts and circumstances must be evaluated to 

determine the relevant market as a 

precondition to finding a violation of Chapter 

7 of the Clayton Act. In determining whether 

a particular theatre (which may not clearly be 

a ‘‘first-run commercial theatre’’) shall be 

considered a ‘‘first-run commercial theatre’’, 

the public interest compels inclusion of 

theatres which are truly first-run competitors 

and the exclusion of theatres which are not. 

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5Although Phillips Place has only 10 screens, 

from June 1, 2006 to present it has showed 235 firstrun commercial movies. This is compared to the 

325 first-run commercial movies shown on the 22 

screens at the Regal’s Stonecrest, its nearest 

competition. If Phillips Place and Park Terrace were 

not sharing movies then, because of required 

commitments to the film distributors to show a film 

for a certain length of time (typically four to five 

weeks), Phillips Place would have been able to 

show less than 150 films over this time period. 

6For example, on June 26, 2008 all six movies 

exhibited at Park Terrace were also on their firstrun at the AMC Carolina Pavilion, four of the six 

were on their first-run at Regal’s Stonecrest. 

7The industry standard for a film zone is a five 

mile radius around the theatre in question. The 

only exceptions to the five mile standard are urban 

areas that are densely populated like New York 

City. 

8Prior to the Merger, the Arboretum Theatre was 

a Consolidated theatre; Regal acquired ownership of 

the Arboretum Theatre as part of the Merger. 

9Competitive zones are calculated upon mileage 

‘‘as the crow flies’’ and not based upon road driving 

distance between the two theatres because the 

purpose of a competitive zone is to effect upon the 

moviegoers within that area. 

10The term ‘‘day and date’’ refers to the right of 

two or more theatres located within the same film 

zone to exhibit the same movie at the same time. 

In that case there can be no clearance. 

Consolidated’s Park Terrace Should be 

Included in the Relevant Market. The United 

States wrongly excludes the Park Terrace 

Theatre from the Southern Charlotte market. 

The Park Terrace Theatre, acquired by Regal 

in the Merger, primarily shows first-run 

commercial movies. The Park Terrace 

Theatre is located in the Southern Charlotte 

market near the Phillips Place Theatre. It has 

stadium seating and its ticket prices are the 

same as at other first-run commercial theatres 

in the Southern Charlotte market area. Prior 

to the Merger both the Park Terrace Theatre 

and the Phillips Place theatre were owned by 

Consolidated. Because the Park Terrace 6 is 

in the same film zone as Phillips Place 10 

(also a part of the Merger) and, more 

importantly, because the Phillips Place 

Theatre has only 10 screens, the Park Terrace 

6 and the Phillips Place 10 share films.5

Most films start their run at Phillips Place 

and conclude the required run (usually four 

to five weeks) at Park Terrace. See Paragraph 

12 of the Complaint. This relationship is 

critical. Since Phillips Place has only 10 

screens sharing films with Park Terrace 

allows Phillips Place to exhibit more first-run 

commercial movies than it otherwise could 

show. This arrangement allows the film 

distributors to license more first-run 

commercial movies to Phillips Place/Park 

Terrace. Without the ability to ‘‘move over’’ 

films from Phillips Place to Park Terrace a 

substantial portion of the Southern Charlotte 

market would be deprived of many of the 

best first-run commercial movies. The firstrun movies at the Park Terrace Theatre that 

are ‘‘moved over’’ from Phillips Place are still 

being shown on their first run at other firstrun commercial theatres in Southern 

Charlotte.6 Thus, Phillips Place 10 and Park 

Terrace 6 should be treated, for purposes of 

determining the competitive effect of the 

Merger in the Southern Charlotte market, as 

the Phillips Place/Park Terrace 16. Since the 

Park Terrace is a theatre that is being 

acquired by Regal in the Merger, its inclusion 

in the relevant market will result in a more 

accurate picture of the competitive effect of 

the Merger in the Southern Charlotte market. 

Village Theatre Should be Excluded from 

the Relevant Market. The United States 

wrongly includes the Village Theatre from 

the Southern Charlotte market. 

Background. The independently owned 

Village Theatre is a two year old five-plex 

stadium theatre with state of the art 

projectors and sound systems. The Village 

Theatre is the only luxury theatre in 

Southern Charlotte (and probably the entire 

Carolinas). It offers an array of amenities for 

the moviegoers, including valet parking, 

gourmet desserts, wine and beer, and luxury 

reserved seating. The Village Theatre has 

been voted the Critics’ Choice award as the 

best theatre in Charlotte. It is a showcase 

venue and had hosted numerous world 

premieres of non-commercial movies. 

Numerous restaurants are in the theatre 

building and fronting plaza, all with the 

option of outdoor seating. The Village 

Theatre is the centerpiece of a $75mm mixeduse shopping center. 

Regal’s Stonecrest Theatre is in a 

competitive film zone 7 with the Arboretum 

Theatre 8 and the Village Theatre. The 

distance from Regal’s Stonecrest to 

Arboretum is less than three miles (as the 

crow flies) and from Regal’s Stonecrest to the 

Village Theatre is approximately 2.6 miles (as 

the crow flies).9 The Arboretum was in 

operation before Regal’s Stonecrest was built. 

Upon Regal’s Stonecrest’s opening, there was 

an agreement between Regal’s Stonecrest and 

the Arboretum that there would be no 

clearance given to either theatre in that film 

zone and that each theatre would show the 

same movies on a ‘‘day-and-date’’ basis.10

Even though the Village Theatre has only five 

screens compared to the 22 screens at Regal’s 

Stonecrest, since the Village Theatre opened 

in March 2006 (much after the opening of 

Regal’s Stonecrest), Regal’s Stonecrest has 

invoked clearance against the Village Theatre 

on every first-run commercial movie shown 

at Regal’s Stonecrest while continuing to not 

invoke clearance against the bigger 

competitor—the 12 screen Arboretum 

Theatre. 

The Village Theatre is the most centrally 

located of all the first-run commercial movie 

theatres in the Southern Charlotte area. It has 

the ability to become an attractive option for 

customers desiring to see first-run 

commercial movies in this market. 

Exclude the Village Theatre. Village 

Theatre has desired to exhibit first-run 

commercial movies since it opened but 

because it is in a competitive or split zone 

with Regal’s Stonecrest and there has been no 

allocation of product between the Village 

Theatre and Regal’s Stonecrest, Regal’s 

Stonecrest has invoked the benefits of 

clearance to prevent the Village Theatre from 

showing virtually all first-run commercial 

movies. 

Thus, Regal’s Stonecrest’s use of clearance 

has effectively kept the Village Theatre from 

being a first-run commercial movie theatre. 

Since June 1, 2006 the Village Theatre has 

shown only three first-run commercial 

movies while Regal’s Stonecrest has shown 

over 300 first-run commercial movies. For 

example, for the summer of 2008 the Village 

Theatre has not been able to obtain Indiana 

Jones, Get Smart, The Hulk, Ironman, Sex 

and the City, Hancock or any other first-run 

commercial movie. Therefore, for purposes of 

determining the competitive effect of the 

proposed Merger, Village Theatre cannot be 

considered as a first-run commercial movie 

theatre and it should not be included in the 

relevant market or the calculation of the HHI. 

As discussed below, the Village Theatre 

should only be included in the calculation of 

HHI if the clearance of Regal’s Stonecrest is 

eliminated so that the Village Theatre can 

show first-run commercial movies on a ‘‘day 

and date’’ basis with the Regal’s Stonecrest 

Theatre. 

Impact on Market Concentration in the 

Southern Charlotte Market Area. Based on 

the facts above, the Park Terrace Theatre 

should have been included in the review of 

the competitive impact on market 

concentration in the Southern Charlotte 

market area and the Village Theatre should 

have been excluded. Exhibits 3 and 4 set 

forth the revised figures for the competitive 

effect of the Merger with the inclusion of the 

Park Terrace Theatre and the exclusion of the 

Village Theatre. Exhibits 3 and 4 show a 

major increase in the market concentration 

from that set forth in Paragraph 30 of the 

Complaint. The benchmark for determining 

the competitive effects of the Merger on the 

Southern Charlotte market is the HHI before 

the Merger. After giving effect to these 

changes (before the divestiture of Crown 

Point 12), after the Merger, Regal would 

control five of the six first-run, commercial 

theatres in the Southern Charlotte market 

area (instead of four of six as shown in the 

Complaint), with 62 out of 84 total screens 

(instead of 56 of 83 as shown in the 

Complaint), and a 78% share of the 2007 box 

office receipts (instead of 75% as shown in 

the Complaint). The market concentration as 

measured by the HHI would increase 2,867 

points to 6,618 points as compared to the 

increase of 2,535 points to 6,050 points as set 

forth in Paragraph 30 of the Complaint, a 

substantial additional increase in the Regal’s 

actual post-Merger market concentration. 

Exhibit 6 is a summary of the Competitive 

Effects of the Merger on the Southern 

Charlotte market. As discussed above, 

Paragraph 30 of the Complaint erroneously 

included the Village Theatre and excluded 

the Park Terrace Theatre. Exhibits 3 and 4 

accurately reflect the competitive effects 

before the Merger, after the Merger and after 

the divestiture of Crown Point 12 by 

including the Park Terrace Theatre and 

excluding the Village Theatre. 

Comment—New Entry Into the Southern 

Charlotte Market 

The entry of an additional first-run 

commercial movie theatre in the Southern 

Charlotte market is beneficial from a 

competitive effects point of view because the 

new entry will obtain a share of the market, 

thereby reducing Regal’s market 

concentration. More importantly it will give 

moviegoers in Southern Charlotte another 

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11The five screen Village Theatre is Charlotte’s 

only luxury theatre while Regal’s Stonecrest is a 22 

screen multiplex. 

12See Appendix A for a discussion of clearance 

as it relates to the Village Theatre. 

13The five screen Village Theatre is Charlotte’s 

only luxury theatre while Regal’s Stonecrest is a 22 

screen multiplex. 

14Since these calculations were based upon the 

2007 box office revenues and since the box office 

revenues for the Village Theatre should increase 

after the clearance is eliminated, the market share 

for the Village Theatre should increase and the 

competitive effect of the merger in the Southern 

Charlotte market will be reduced even further than 

that shown on Exhibit 5. 

15The use of clearance presumes that there is an 

allocation of first-run commercial movies between 

all of the theatres within the same film zone. 

Clearly, if one theatre is able to obtain the entire 

film product, there is no need for that theatre to 

have clearance to protect against another theatre’s 

showing of the film simultaneously in the same 

zone. As amply demonstrated above, in the instant 

case, the Village Theatre has no allocation of 

product, and Regal’s Stonecrest has no need for 

clearance against the Village Theatre. 

real choice of venues 11 for viewing first-run 

commercial movies in a market in which, as 

the United States states in Paragraph 37 of its 

Complaint, the entry of an additional firstrun commercial movie theatre in Southern 

Charlotte is very unlikely. 

However, there is an opportunity to have 

a new entry exhibiting first-run commercial 

movies in the Southern Charlotte market. 

With the elimination of clearance between 

Regal’s Stonecrest and the Village Theatre,12

the Village Theatre would enter the Southern 

Charlotte market as an additional first-run 

commercial movie theatre. The entry of the 

Village Theatre as an additional first-run 

commercial movie theatre in the Southern 

Charlotte market benefits competition 

because the Village Theatre will obtain a 

share of the market and thereby reduce 

Regal’s market concentration. The impact of 

this action on the market is shown on Exhibit 

5. It will benefit consumers by giving them 

an additional choice of venues for first-run 

commercial movies in a heavily concentrated 

market. Eliminating clearance is a more 

effective way to increase competition and 

give moviegoers a choice of venues than 

divesting the Crown Point 12. 

Comment—Conclusion 

The Competitive Impact Statement filed by 

the United States in United States v. Regal 

Cinemas, Inc. and Consolidated Theatres 

Holdings, GP is in error with respect to the 

Southern Charlotte first-run commercial 

movie market. It wrongly asserts that the 

divestiture of the Regal Crown Point 12 will 

preserve existing competition between the 

merging entities and eliminate the 

anticompetitive effects of the Merger. In 

point of fact, the divestiture will have little 

effect on the extremely concentrated market 

because of the location of the Crown Point 12 

on the periphery of the market. Further, the 

divestiture will not begin to overcome the 

presumption contained in the Merger 

Guidelines which follows from the very 

substantial increase in the HHI in a highly 

concentrated market like Southern Charlotte. 

The Competitive Impact Statement also 

wrongly excludes the six screen Park Terrace 

Theatre and includes the five screen Village 

Theatre in the Southern Charlotte market, 

rendering the market definition inaccurate 

and less concentrated than actually is the 

case. The post-Merger HHI is actually about 

6,618 points if the market is correctly defined 

and remains at an alarming 5,032 points even 

after the divesture of the Crown Point 12. 

Although the United States asserts that 

new entry for a first-run commercial movie 

theatre is unlikely there is one potential new 

entrant, the independently owned five screen 

Village Theatre, waiting in the wings in a 

prime location in the Southern Charlotte 

market. As shown on Exhibit 5, this new 

entry will have a positive effect on the postMerger market concentration of Regal. 

The United States should therefore act to 

assure a more competitive market and 

provide additional consumer choice by 

enabling the Village Theatre to become a 

viable first-run commercial movie venue in 

Southern Charlotte. To do so, clearance for 

first-run commercial movies that Regal’s 22 

screen Stonecrest exercises against the 

Village Theatre in Regal’s Stonecrest’s film 

zone must be eliminated. The elimination or 

waiver of Regal’s Stonecrest’s clearance will 

permit the Village Theatre to enter the firstrun commercial movie market in Southern 

Charlotte, will provide additional consumer 

choice of venues 13 for first-run commercial 

movies in Southern Charlotte, will eliminate 

Regal’s unreasonable restraint of trade, and 

will help to deconcentrate the market and 

offset the anticompetitive effects of the 

Merger.14

The Final Judgment should therefore be 

amended to enhance consumer choice and 

allow entry of the Village Theatre into the 

Southern Charlotte first-run commercial 

movie market by eliminating the exercise of 

clearance by Regal’s Stonecrest Theatre. 

Sincerely submitted, 

Robert B. Bruner, 

14825 John J. Delaney Dr., 

Suite 240, 

Charlotte, North Carolina 28277, 

704/369–5001. 

Appendix A—Clearance as It Relates to 

the Village Theatre 

Clearance in General. ‘‘Clearance’’ refers to 

an agreement between a theatre and a film 

distributor that a particular film will not be 

played simultaneously for a particular period 

of time at two different theatres located the 

same film zone. See United States v. 

Paramount Pictures, 334 U.S. 131, 145 

(1948). Clearance agreements are allowed in 

the film exhibition industry for the legitimate 

business purpose of ensuring that a particular 

theatre’s income from a film will not be 

greatly diminished because the film is also 

being shown at a nearby competing theatre. 

See id. If clearances are reasonable, they are 

considered allowable restraints of trade. See 

id. at 146. Clearances between theatres not in 

substantial competition are per se 

unreasonable. See id. at 145–46. 

Thus, clearance is a reasonable restraint of 

trade only when each of the following factors 

are met: (1) The clearance is used for the 

legitimate business purpose of ensuring the 

exhibitor that its income from a film will not 

be greatly diminished because the film is also 

being shown at a nearby competing theatre, 

and (2) the theatres which are subjected to 

clearance are in substantial competition. As 

discussed below, the clearance between 

Regal’s Stonecrest and the Village Theatre 

does not satisfy either condition. 

Regal’s Stonecrest and the Village Theater 

are not in Substantial Competition. As stated 

above, there should be no clearance between 

theatres not in substantial 

competition.15 United States v. Paramount, 

334 U.S. 131 at 145–46. 

The Village Theatre cannot be considered 

a first-run commercial movie theatre, since it 

has shown only three first-run commercial 

movies since June 1, 2006 as compared to 

Regal’s Stonecrest’s showing of 300-plus 

first-run commercial movies in the same 

period. Thus, Regal’s Stonecrest and the 

Village Theatre are not in substantial 

competition, and the use of clearance by 

Regal’s Stonecrest against the Village Theatre 

is an unreasonable restraint of trade and 

should be prohibited. 

Regal’s Stonecrest’s invocation of 

clearance against the Village Theatre is not 

for a proper business purpose. As stated 

above, even if Regal’s Stonecrest and the 

Village Theatre were determined to be in 

substantial competition, clearance can be 

reasonable only if it is necessary to ensure 

the exhibitor’s expected income will not be 

greatly diminished because the film is also 

being shown simultaneously or soon 

thereafter at a nearby competing theatre. See 

United States v. Paramount Pictures, 334 

U.S. 131 at 145. Regal’s Stonecrest’s 

invocation of clearance against the Village 

Theatre is unjustified. See Theee Movies of 

Tarzana v. Pacific Theatres Inc., 828 12d 

1395, 1399 (9th Cir. 1987). 

First, the Village Theatre has only five 

screens while Regal’s Stonecrest has 22 

screens. Having only five screens will reduce 

the number of first-run commercial movies 

that the Village Theatre will be able to 

exhibit at any one time. With 22 screens, 

Regal’s Stonecrest has the ability to exhibit 

practically every first-run commercial movie 

that is available. This summer Regal’s 

Stonecrest has shown some of the 

blockbuster movies (which are the most 

popular and thus the most profitable) on up 

to six screens. Obviously, with only five 

screens the Village Theatre cannot show a 

movie on six screens. Given the requirements 

of the film distributors that films show for a 

four to five week run, the Village Theatre 

does not have the capacity to greatly 

diminish the expected income at Regal’s 

Stonecrest. See Paragraph 12 of the 

Complaint. 

Second, Regal’s Stonecrest’s voluntary 

waiver of clearance against the Arboretum, a 

theatre with over twice the number of screens 

as the Village Theatre, demonstrates that 

Regal’s Stonecrest does not need clearance in 

its film zone to ensure that it’s expected 

income will not be greatly diminished. See 

Id. 

Third, Regal’s Stonecrest’s use of clearance 

discriminatorily against the Village Theatre 

while waiving it as to the Arboretum thus 

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16Even if Regal’s Stonecrest and the Village 

Theatre were in substantial competition and Regal’s 

Stonecrest had demonstrated a need to protect 

against diminution of its income, as opposed to 

demonstrating the opposite by waiving clearance 

against the Arboretum, the clearance Regal’s 

Stonecrest is invoking against the Village Theatre is 

unduly extended as to duration. See United States 

v. Paramount, 334 U.S. 131 at 145–46. The common 

duration of dearance is generally fourteen days. See, 

e.g., Westway Theatre v. Twentieth Century-Fox 

Film Corporation, 30 F.Supp. 830, 836 D.C. MD. 

1940. (fourteen-day period for clearance was not 

uncommon in duration and did not, under the 

particular facts of the case, constitute an 

unreasonable restraint of trade). 

operates to deprive movie consumers of 

choice, injures the Village Theatre and 

unreasonably restricts competition between 

the theatres in the zone. Id.; U.S. v. 

Paramount Pictures, 66 F. Supp. 323, 346 

(S.D.N.Y. 1946), opinion issued, 70 F. Supp. 

53 (S.D.N.Y. 1946) and judgment aff’d in 

part, rev’d in part on other grounds, 334 U.S. 

131, 68 S. Ct. 915, 92 L. Ed. 1260 (1948). 

Therefore, the use of clearance by Regal’s 

Stonecrest against the Village Theatre is an 

unreasonable restraint of trade and should be 

prohibited. 

The Clearance between Regal’s Stonecrest 

and the Village Theatre is an Unreasonable 

Restraint of Trade. The clearance between 

Regal’s Stonecrest and the Village Theatre 

cannot be justified on the grounds that the 

theatres are in substantial competition and 

that clearance is being used to assure Regal’s 

Stonecrest that a distributor will not license 

a competitor to show a movie at the same 

time or so soon thereafter that the Regal’s 

Stonecrest’s expected income will be greatly 

diminished. See Theee Movies of Tarzana, 

828 F.2d 1395 at 1399. 

Regal’s Stonecrest and the Village Theatre 

are not in substantial competition because 

the Village Theatre cannot be considered a 

first-run commercial move theatre. Moreover, 

clearance is not necessary to ensure Regal’s 

Stonecrest’s expected income will not be 

greatly diminished. See Id. This is obviously 

true because the Village Theatre has only five 

screens compared to the 22 at Regal’s 

Stonecrest. Also, Regal’s Stonecrest has 

voluntarily waived clearance against another 

theatre, the Arboretum Theatre, in the same 

film zone with which it is substantially 

competitive, and the invocation of clearance 

against the Village Theatre operates primarily 

to injure the Village Theatre and overly 

restrict competition between theatres in the 

zone.16 Id. The clearance is, therefore, an 

unreasonable restraint of trade. See United 

States v. Paramount, 334 U.S. 131 at 145–46; 

see Theee Movies of Tarzana, 828 F.2d 1395 

at 1399. 

BILLING CODE 4410–11–M 


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BILLING CODE 4410-11-C 

B 

Sent: Tuesday, July 22, 2008 12:01 PM 

To: Malawer, Gregg 

Cc: Wamsley, Jennifer 

Subject: Regal—Consolidated Merger 

July 22, 2008 

Delivery Via E-mail & Overnight 

John R. Read, Chief, 


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62556 Federal Register / Vol. 73, No. 204 / Tuesday, October 21, 2008 / Notices 

1Formerly known as Citizens for Voluntary 

Trade. 

2For a compilation of VTC’s public comments, 

see http://www.voluntarytrade.org/joomla15/ 

index.php/docs/cat_view/12-voluntary-tradecouncil-documents/23-public-comments. 

3Complaint para. 11. 

4With apologies to Al Jean, Mike Reiss and Ken 

Keeler. 

Antitrust Division/Litigation III, 

450 5th Street, NW., Suite 4000, 

Washington, DC 20530. 

This letter is Supplement #1 to my letter 

dated June 26, 2008 (the ‘‘Comment Letter’’) 

commenting on the proposed Final Judgment 

regarding the merger of Regal Cinemas, Inc. 

(‘‘Regal’’) and Consolidated Theatres, GP 

(‘‘Consolidated’’) (the ‘‘Merger’’). The 

Comment Letter and this Supplement #1 

focus on the competitive effect of the Merger 

in the Southern Charlotte, North Carolina, 

market area. For purposes of this Supplement 

#1 all terms used herein shall have the same 

meanings as used in the Comment Letter. 

On July 9, 2008, in the case styled as 

Village Theatre, LLC, v. Consolidated 

Theatres Management, LLC, et al., Civil 

Action No. 008–CVS–11031, currently 

pending in the General Court of Justice, 

Superior Court Division, Mecklenburg 

County, North Carolina, Regal filed a Motion 

to Dismiss, Answer and Counterclaims, in 

which they declared as follows: 

‘‘The [Village] Theatre has been operated 

as an independent art film theatre since its 

March 2006 opening date.’’ 

Therefore, Regal admits that the Village 

Theatre, as it operates today, should not be 

treated as a ‘‘first-run commercial movie 

theatre’’ in the Southern Charlotte market. 

This allegation is in direct conflict with the 

Department of Justice’s proposed Final 

Judgment, which is predicated in part upon 

the fact that the Village Theatre was a ‘‘firstrun commercial movie theatre’’. Since this is 

not the case then the relevant market is 

incorrectly defined in the proposed Final 

Judgment. 

From an anti-trust point of view, the 

Merger remains highly suspect. The Merger 

was determined by the United States to be 

illegal and in violation of Section 7 of the 

Clayton Act. As stated in the Comment Letter 

and as shown in the Exhibits to the Comment 

Letter, the exclusion of the Village Theatre as 

a first-run commercial movie theatre further 

increases the market concentration of Regal’s 

Stonecrest Theatre in the Southern Charlotte 

market. Without the inclusion of the Village 

Theatre as a ‘‘first-run commercial movie 

theatre’’, the post-Merger market 

concentration of Regal in the Southern 

Charlotte area (even after the sale of the 

Crown Point 12 Theatre and irrespective of 

the treatment of the Park Terrace Theatre) 

will be excessively high. The United States 

should impose requirements on Regal 

necessary to reduce its market concentration 

in the Southern Charlotte market to as close 

to the pre-Merger level as is possible. 

The most obvious, and simplest, procompetitive, pro-consumer solution is to 

require Regal’s Stonecrest Theatre to waive 

clearance against the Village Theatre. This is 

obvious and simple because Regal’s 

Stonecrest Theatre has for years voluntarily 

waived clearance with respect to the 

Arboretum Theatre which is also in the 

Regal’s Stonecrest Theatre film zone. Regal’s 

Stonecrest Theatre’s voluntary waiver of 

clearance against the Arboretum Theatre 

demonstrates that Regal’s Stonecrest Theatre 

does not need clearance in this film zone. 

Since Regal’s Stonecrest Theatre has already 

waived clearance against the 12-screen 

Arboretum Theatre it is not too burdensome 

to require the waiver of clearance in the same 

film zone against the much smaller fivescreen Village Theatre. This small action will 

greatly increase consumer choice and 

increase competition. 

Clearance must be removed so that the 

Village Theatre can be considered a ‘‘first-run 

commercial movie theatre’’ and, thus, reduce 

Regal’s market concentration in the Southern 

Charlotte area. Requiring Regal to waive 

clearance with the five screen Village Theatre 

simply authenticates the proposed Final 

Judgment, greatly enhances consumer choice, 

and is necessary given the excessively high 

post-Merger market concentration of Regal. 

Sincerely submitted, 

Robert B. Bruner, 

14825 John J. Delaney Dr., Suite 240–17, 

Charlotte, North Carolina 28277, 704–369– 

5001. 

C 

United States District Court for the 

District of Columbia 

Case 1:08–cv–00746 

United States of America, Plaintiff, v. 

Regal Cinemas, Inc., and Consolidated 

Theatres Holdings, GP, Defendants; 

Public Comments of the Voluntary 

Trade Council, Inc. 

Before: Judge Richard J. Leon 

Filed: July 13, 2008. 

The Voluntary Trade Council, Inc., a 

Virginia non-profit corporation, 

respectfully files the following public 

comments regarding the Proposed Final 

Judgment in the above-captioned case. 

Introduction and Interest of Commenter 

On April 29, 2008, the Antitrust 

Division of the United States 

Department of Justice (the Division) 

filed with the Court a Complaint against 

Regal Cinemas, Inc. (Regal) and 

Consolidated Theatres Holdings, GP 

(Consolidated), alleging Regal’s contract 

to purchase Consolidated was illegal 

under 15 U.S.C. 18, commonly known 

as the Clayton Act. 

Regal and Consolidated did not 

contest the Division’s Complaint, and 

they acceded to the Division’s demand 

to sell certain assets in order to allow 

their merger to proceed. Accordingly, on 

May 15, 2008, the Division published a 

notice in the Federal Register 

containing a proposed Final Judgment 

and supporting documents. Under 15 

U.S.C. 16, the proposed Final Judgment 

is subject to a 60-day public comment 

period, and the Court is required to 

review any comments received, along 

with the Division’s response, before 

deciding whether entry of the Proposed 

Final Judgment is in the ‘‘public 

interest.’’ 

The Voluntary Trade Council, Inc.1

(VTC), is a research center dedicated to 

antitrust and competition regulation. 

Working in the tradition of the Austrian 

School of economics, VTC offers freemarket criticism of the Department of 

Justice, the Federal Trade Commission 

and other agencies that intervene to 

prevent the voluntary exchange of 

goods, services and ideas. In the past six 

years, VTC has filed public comments in 

dozens of DOJ antitrust cases, providing 

independent economic and legal 

analysis.2

Summary 

The Division claims it was necessary 

to intervene in Regal’s acquisition of 

Consolidated in order to preserve 

competition in the market for the 

‘‘theatrical distribution of feature length 

motion picture films’’ in the Charlotte, 

Raleigh and Asheville areas of North 

Carolina. The Division alleges a 

voluntary combination of Regal and 

Consolidated’s movie theaters in these 

markets would ‘‘eliminate competition’’ 

and likely lead to higher ticket prices 

and ‘‘reduced incentives to maintain, 

upgrade, and renovate their theaters.’’ 

To remedy these hypothetical harms, 

the proposed Final Judgment requires 

Regal and Consolidated to sell four 

movie theaters located in the three areas 

to a buyer approved by the Division. 

The Division’s claims of consumer 

harm are not supported by the facts or 

economic principles. The Complaint 

presents a false and misleading analysis 

of the marketplace and relies heavily on 

an irrelevant mathematical formula to 

justify the violation of Regal and 

Consolidated’s property rights. The 

‘‘public interest’’ in this case is best 

served by rejecting the Division’s 

meritless intervention. The Court 

should not enter the Proposed Final 

Judgment. 

Argument 

‘‘Movies are a unique form of 

entertainment,’’ according to the 

Division’s complaint.3 Beyond this 

unremarkable insight, the Division’s 

attempt to define a ‘‘relevant market’’ 

presents a work of economic fiction that 

is comparable to the fantastic movies of 

Steven Spielberg (or even his ‘‘nonunion Mexican equivalent’’ 4). The 

Division misrepresents the nature of 

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5 Federal Trade Commission v. Whole Food 

Market, Inc., Civil Action No. 07–1021 (D.D.C. Aug. 

16, 2007). 

6Thom Lambert, ‘‘Ignoring the Lessons of Von’s 

Grocery: Some Thoughts on the FTC’s Opposition 

to the Whole Foods/Wild Oats Merger,’’ eSapience 

Center for Competition Policy June 2007). 

7 Id. 

8 Kevin Meaney, ‘‘The 3–D Dilemma,’’ available at 

http://www.portfolio.com/culture-lifestyle/cultureinc/arts/2008/06/16/Hollywoods-3-D-CinemaDreams. 

9Complaint para. 11. 

consumer time preference, confuses 

products with methods of distribution 

and wastes an inordinate amount of 

energy on ‘‘special effects’’ in the form 

of a useless mathematical formula. In 

short, there is no economic substance to 

the Division’s complaint—and thus no 

rational basis for seeking the relief 

contained in the proposed Final 

Judgment. 

A. Method of Distribution Is Not a 

Distinct Product 

Thomas A. Lambert, an associate 

professor at the University of Missouri 

School of Law, responding to the 

Federal Trade Commission’s lawsuit 

against the merger of Whole Foods 

Market, Inc. and Wild Oats Markets, Inc. 

(which this court rejected 5), said, 

‘‘defining markets to consist of specific 

types of distribution channels, rather 

than groups of products and services, 

opens the door to finding narrow 

‘markets’ (and thus market power) 

everywhere.’’ 6 The essence of 

marketing, Lambert writes, is when 

sellers ‘‘distinguish their products or 

services by offering them differently 

than their competitors.’’ 7

The Division repeats the FTC’s Whole 

Foods error in this case by improperly 

defining a method of distribution as a 

distinct product market. Regal and 

Consolidated do not manufacture the 

product—motion pictures—but rather 

provide distinct venues for their 

distribution. Like Whole Foods, Regal 

and Consolidated offer a place where 

sellers (movie producers) and buyers 

(movie consumers) meet to engage in 

voluntary exchange. But the 

distinctiveness of the venue should not 

be confused with the nature of the 

products themselves. 

A motion picture can be distributed 

through several channels: First-run 

theatrical exhibition, sub-run theatrical 

exhibition, television (including overthe-air broadcast, basic cable, pay and 

premium cable, and satellite), and direct 

sales and rentals (VHS, DVD, Blu-Ray, 

iTunes). A theatrical producer can 

utilize one, several or all of these 

channels depending on the nature of the 

motion picture and its expected 

audience. Many films begin their 

journey to the consumer in first-run 

theatres like those operated by Regal 

and Consolidated. Others are marketed 

directly to the consumer, such as the 

Walt Disney Company’s practice of 

straight-to-video sequels of its classic 

animated films. However a particular 

film is marketed to the consumer, the 

product is the film and not the method 

of distribution. 

The Division argues there’s a 

‘‘significant difference between viewing 

a newly-released, first-run movie and an 

older sub-run movie,’’ because first-run 

theatres usually charge higher ticket 

prices. Sub-run theatres show films that 

‘‘are no longer new releases, and 

moviegoers generally do not regard submovies as an adequate substitute for 

first-run movies * * *’’ It’s not clear 

what ‘‘moviegoers’’ the Division 

interviewed or surveyed to reach this 

conclusion. Without any empirical data 

or deductive arguments, the Division 

simply concludes there are wholly 

distinct markets for ‘‘first-run’’ and 

‘‘sub-run’’ moviegoers, and never the 

two shall meet. This argument is just 

plain wrong. 

What distinguishes one moviedistribution channel from another is 

consumers’ aggregate time preference. 

Many consumers will pay a premium to 

see a ‘‘first-run’’ movie when it is first 

released, while others may wait and 

spend less to view the film in a ‘‘subrun’’ theatre; and others will wait even 

longer and spend even less to view the 

film on home video. 

The problem, which the Division fails 

to acknowledge, is that time preference 

varies from product to product—that is, 

from movie to movie. Some films 

perform poorly in first-run theatres only 

to enjoy greater success in later 

distribution channels (hence the 

phenomenon of ‘‘cult’’ films). Other 

films enjoy overwhelming first-run 

success and spawn one or more sequels, 

such as the James Bond, Star Trek and 

Star Wars films. In the case of these 

movie franchises, time preference is 

such that moviegoers will purchase 

tickets well in advance of these films’ 

release. In other cases, an unknown film 

may start out with modest sales and 

gather momentum as ‘‘word of mouth’’ 

spreads. 

First-run theatres clearly compete 

against other distribution channels by 

persuading consumers that their 

entertainment demand is best satisfied 

by paying a premium to see a particular 

movie now rather than paying less to 

see it in another distribution channel 

later. To that end, first-run theatres 

always have an incentive to improve the 

quality of their product regardless of the 

number of first-run theatres in a given 

geographical area. The Division itself 

makes a big deal about movie theaters 

having ‘‘stadium seating’’—which was 

an innovation developed in response to 

competition from other distribution 

channels such as home video and pay 

per view cable. 

Similarly, movie producers are now 

promoting 3D projection as the future of 

first-run exhibition. Jeffrey Katzenberg, 

CEO of DreamWorks Animation, 

recently announced that his studio’s 

future films will be exclusively in 3D. 

Disney and its subsidiary Pixar 

Animation Studios also plan to release 

(and re-release) future films in 3D. (And 

the same weekend as this comment was 

filed, Walden Media released a 3D 

version of ‘‘Journey to the Center of the 

Earth’’.) Kevin Maney explains in the 

July 2008 issue of Portfolio that, 

Studios are latching onto 3–D for much the 

same reason that Bob Dole took Viagra. Most 

of Hollywood’s businesses are making 

money—for all Katzenberg’s complaining, 

DreamWorks’ first-quarter profit was up 69 

percent—but the sector that makes 

Hollywood feel best about itself, theatrical 

showings, is deflating, in large part because 

the difference between seeing a movie in your 

local multiplex and on a 52-inch highdefinition TV in your family room is not that 

vast. 

The Motion Picture Association of America 

claims that 2007 was a good year for the 

cinema business, with U.S. box office 

revenue up 5 percent to $9.6 billion. But 

that’s unsupportable spin. The jump can be 

almost entirely attributed to a bump in ticket 

prices. The number of tickets sold in the U.S. 

stayed flat from 2006 to 2007, at 1.5 billion. 

(In 1950, while TV was taking off, US. 

theaters sold 3 billion tickets a year—and the 

population was half what it is today.) 

Meanwhile, 379 screens were added between 

2006 and 2007. Do the math and movies are 

doing worse than ever in theaters.8

(Emphasis added) 

The Division incorrectly believes that 

intra-theater competition between Regal 

and Consolidated drive innovation and 

hold ticket prices down. That’s not the 

case, and the Court should not accept 

the Division’s ‘‘market definition’’ at 

face value. 

B. The Division’s Market Definition 

Improperly Excluded Other Types of 

Motion Pictures and Entertainment 

The Division argues, ‘‘The experience 

of viewing a movie in a theatre is an 

inherently different experience from 

live entertainment (e.g., a stage 

production), a sporting event, or 

viewing a movie in the home (e.g., on 

a DVD or via pay-per-view),’’ 9 But the 

question isn’t whether these are 

different experiences; it’s whether they 

are competing experiences that 

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10See ‘‘Box office number-one films of 2008 

(USA),’’ http://en.wikipedia.org/wiki/ 

Box_office_number-one_films_of_2008_(USA). 

11Complaint para. 30. 

12 Id. 

13 Dominick T. Armentano Antitrust: The Case for 

Repeal, at 85–86 (2d ed., Ludwig von Mises 

Institute 1999). 

14Complant para. 37. 

individuals consider when allocating 

scarce time and money towards 

entertainment. The Division treats 

consumers as a monolith that considers 

only first-run movie theaters to the 

exclusion of all other forms of 

entertainment. This approach insults 

consumers by reducing them to a 

reactionary mob and has no empirical or 

deductive foundation. 

In the Division’s perfect economic 

world, no consumer ever asks, ‘‘Should 

I go to a movie tonight or stay home and 

watch the football game?’’ Nor does 

anyone think, ‘‘I really don’t want to see 

that chick flick with my wife and her 

friends, so I’ll shoot pool with the 

guys.’’ Perfect consumers behave in 

unison—like background characters in 

an animated film—and in direct, 

negative response to short-term price 

increases. 

The Division goes to great lengths to 

explain why ‘‘moviegoers do not 

regard’’ art and foreign language movies 

‘‘as adequate substitutes for first-run 

commercial movies,’’ thus justifying 

their exclusion from the market 

definition. Again, the Division misses 

the point. Every consumer has 

individual preferences. Sure, many 

consumers don’t watch art and foreign 

films. But other consumers never watch 

animated films. Or war films. Or ‘‘chick 

flicks.’’ Or films featuring Mike Myers. 

And it’s unlikely that any moviegoer 

anytime, anywhere has said, ‘‘Honey, I 

want to see a first-run commercial 

movie tonight, and nothing else will 

suffice!’’ 

The Division’s attempted market 

definition also ignores the crosscompetition that occurs within the 

entertainment industry. ‘‘First-run 

commercial movies’’ are not a closed 

system. Many popular commercial films 

are derived from other entertainment 

sources. In 2008 alone, several numberone U.S. box office films were derived 

from non-film sources: Hellboy II, The 

Incredible Hulk and Iron Man were 

based on popular comic books; Sex and 

the City was based on a long-running 

premium cable series (which itself was 

based on a compilation of popular 

newspaper columns); and Horton Hears 

a Who! and The Chronicles of Narnia: 

Prince Caspian were based on popular 

books.10 Demand for non-film 

entertainment drives demand for motion 

pictures, and vice versa. And once 

again, the number of first-run theatres in 

a given geographic area is irrelevant to 

the market’s competitiveness. 

C. The Herfindahl Index Proves Nothing 

Aside From the Division’s Ability To 

Perform Basic Multiplication 

Relying on its misleading market 

definition, the Division offers a lengthy 

series of random numbers purportedly 

representing the ‘‘Herfindahl-Hirschman 

Index’’ (HHI), which the Division claims 

is a ‘‘measure of market 

concentration.’’ 11 For example, in part 

of Charlotte, North Carolina, the 

Division alleges the Regal Consolidated 

merger would ‘‘yield a post-merger HHI 

of approximately 6,058, representing an 

increase of roughly 2,535 points.’’ 12 The 

implication is that a higher HHI 

indicates a greater likelihood of postmerger consumer ‘‘injury’’ in the form of 

higher prices. But even assuming that 

the HHI figures given in the complaint 

are valid, this alone does not prove the 

existence of ‘‘market power’’ or justify 

the Division’s proposed Final Judgment. 

As economics professor Dominick T. 

Armentano has explained, there is no 

economic merit to the HHI: 

Although the general public has the 

impression that there must be some good 

reason for the antitrust authorities’ choice of 

particular limits in the Herfindahl Index of 

market concentration, those limits are 

completely arbitrary. No one—and certainly 

not the antitrust authorities—can ever know 

whether a merger of firms that creates, say, 

a 36-percent market share, or one that raises 

the Herfindahl Index by 150 points, can 

create sufficient economic power to reduce 

market output and raise market price. No one 

knows, or can know, whether monopoly 

power begins at a 36 percent market share or 

a 36.74-percent market share. Neither 

economic theory nor empirical evidence can 

justify any merger guideline or prohibition.13

D. Consumers Were Never in Danger of 

the Type of ‘‘Injury’’ Alleged in the 

Complaint 

Ultimately, the Division’s complaint 

rests on the ridiculous proposition that 

consumers would have been injured by 

higher post-merger prices but for the 

redistribution of property mandated in 

the proposed Final Judgment. The 

Division’s argument is that ‘‘[o]ver the 

next two years, the demand for more 

movie theatres in [the identified 

geographic areas] is not likely to support 

entry of a new theatre,’’ and without 

additional theaters there would be ‘‘an 

increase in movie ticket prices or a 

decline in theatre quality.’’ 14 The 

decline in quality issue has already been 

addressed and dismissed above. As for 

a hypothetical increase in ticket prices, 

it’s unclear how this would ‘‘injure’’ 

consumers who are willing to pay. 

There’s no question of fraud: Ticket 

prices are generally posted and well 

known to the customer before purchase. 

Nor has the Division explained how 

‘‘competitive’’ ticket prices should be 

determined outside of, well, the 

competitive process of the market. The 

Division simply draws an arbitrary line 

where pre-merger prices are assumed to 

be ‘‘competitive’’ and any hypothetical 

future increase—regardless of cause—is 

‘‘anticompetitive.’’ By this reasoning, 

the most logical course of action would 

be for the Division to simply fix ticket 

prices, which of course would violate 

Section 1 of the Sherman Act. 

The Division’s real concern, which it 

states, is that it fears consumers won’t 

immediately respond to an increase in 

ticket prices by reducing demand 

sufficiently to make the increase 

‘‘unprofitable.’’ But that has nothing to 

do with consumer injury. Consumers 

are not legally obligated to adjust their 

spending habits to accommodate the 

Division’s mathematical models. Nor 

should sellers be punished because 

there’s insufficient demand to support 

the number of competing sellers that the 

Division deems ideal. Ultimately, real 

markets don’t function according to the 

whims of government lawyers. 

Conclusion 

The proposed Final Judgment is built 

on a series of false, misleading and 

laughably nonsensical arguments. Just 

as the ‘‘movie palaces’’ of the 1930s 

gave way to the multiplexes of the late 

20th century, which in turn yielded to 

the ‘‘stadium seating’’ megaplexes at 

issue in this case, the subset of the 

entertainment industry dedicated to 

first-run theatrical exhibition 

continually evolves to satisfy shifting 

consumer demand. This process works 

best with a minimum of government 

intervention, especially from 

unqualified mid-level Justice 

Department attorneys. The Court can 

best serve the public interest by 

rejecting the proposed Final Judgment 

and ordering the Division to spend less 

time pretending they’re movie theatre 

executives and more time * * * well, 

going to the movies. 

Dated: July 13, 2008. 

Respectfully Submitted, 

S.M. Oliva, 

President, The Voluntary Trade Council, Inc., 

Post Office Box 100073, Arlington, Virginia 

22210, (703) 740–8309, 

info@voluntarytrade.org. 

[FR Doc. E8–23357 Filed 10–20–08; 8:45 am] 

BILLING CODE 4410–11–M 

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