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United States v. Paramount Pictures, Inc. (full text) :: 334 U.S. 131 (1948) :: Justia U.S. Supreme Court Center Log In
› United States v. Paramount Pictures, Inc.
U.S. Supreme CourtUnited States v. Paramount Pictures, Inc., 334 U.S. 131 (1948)United States v. Paramount Pictures, Inc.No. 79Argued February 9-11, 1948Decided May 3, 1948*334 U.S. 131APPEAL FROM THE DISTRICT COURT OF THE UNITED STATES
2. Its injunction against defendants or their affiliates granting any license (except to their own theaters) in which minimum prices for admission to a theater are fixed, is sustained. Pp. 334 U. S. 142-144. Page 334 U. S. 132
6. The District Court's finding that the exhibitor defendants had "pooling agreements" whereby normally competitive theaters were operated as a unit, or managed by a joint committee or by one of the exhibitors, the profits being shared according to prearranged percentages, and that these agreements resulted in the elimination of competition pro tanto both in exhibition and in distribution of feature pictures, is sustained. P. 334 U. S. 149. Page 334 U. S. 133
10. The District Court's findings that certain "formula deals" covering the exhibition of feature pictures in entire circuits of theaters and certain "master agreements" covering their exhibition in two or more theaters in a particular circuit unlawfully restrain Page 334 U. S. 134 trade, and its injunction against the making or further performance of such arrangements, are sustained. Pp. 334 U. S. 153-155.
15. The District Court's findings that defendants had unreasonably discriminated against small independent exhibitors and in Page 334 U. S. 135 favor of large affiliated and unaffiliated circuits through various kinds of contract provisions, and that these discriminators resulted in restraints of trade in violation of the Sherman Act, are sustained. Pp. 334 U. S. 159-160.
(a) In determining the need for divestiture, it is not enough to conclude, as the District Court did, that none of the defendants Page 334 U. S. 136 was organized or has been maintained for the purpose of achieving a "national monopoly," nor that the five major defendants, through their present theater holdings "alone," do not and cannot collectively or individually have a monopoly of exhibition. P. 334 U. S. 171.
(j) Monopoly power, whether lawfully or unlawfully acquired, may violate § 2 of the Sherman Act though it remains unexercised; the existence of the power to exclude competition when it is Page 334 U. S. 137 desired to do so is itself a violation of § 2 if it is coupled with the purpose or intent to exercise that power. P. 334 U. S. 173.
(d) Likewise bearing on the question whether monopoly power is created by a vertical integration is the nature of the market to be served and the leverage on the market which the particular vertical integration creates or makes possible. P. 334 U. S. 23. Whether an injunction against the licensing of films among the five major defendants would, in the absence of competitive bidding, serve as a short-range remedy in certain situations to dissipate the effects of the conspiracy is a question for the District Court. P. 334 U. S. 175.
(b) Whether a voluntary system of arbitration should be inaugurated is for the discretion of the District Court . P. 334 U. S. 176. Page 334 U. S. 138
In a suit by the United States to restrain violations of §§ 1 and 2 of the Sherman Act by major motion picture producers, distributors, and exhibitors, the District Court granted an injunction and other relief. 66 F.Supp. 323; 70 F.Supp. 53. On appeal to this Court, affirmed in part, reversed in part, and remanded, p. 334 U. S. 178. Page 334 U. S. 140
The complaint charged that the producer defendants had attempted to monopolize and had monopolized the production of motion pictures. The District Court found to the contrary, and that finding is not challenged here. The complaint charged that all the defendants, as distributors, had conspired to restrain and monopolize and Page 334 U. S. 141 had restrained and monopolized interstate trade in the distribution and exhibition of films by specific practices which we will shortly relate. It also charged that the five major defendants had engaged in a conspiracy to restrain and monopolize, and had restrained and monopolized, interstate trade in the exhibition of motion pictures in most of the larger cities of the country. It charged that the vertical combination of producing, distributing, and exhibiting motion pictures by each of the five major defendants violated § 1 and § 2 of the Act. It charged that each distributor defendant had entered into various contracts with exhibitors which unreasonably restrained trade. Issue was joined, and a trial was had. [Footnote 3]
No film is sold to an exhibitor in the distribution of motion pictures. The right to exhibit under copyright is licensed. The District Court found that the defendants, in the licenses they issued, fixed minimum admission prices which the exhibitors agreed to charge, whether the rental of the film was a flat amount or a percentage of the receipts. It found that substantially uniform minimum prices had been established in the licenses of all defendants. Minimum prices were established in master agreements or franchises which were made between various defendants as distributors and various defendants as exhibitors, and in joint operating agreements made by the five majors with each other Page 334 U. S. 142 and with independent theater owners covering the operation of certain theaters. [Footnote 4] By these later contracts, minimum admission prices were often fixed for dozens of theaters owned by a particular defendant in a given area of the United States. Minimum prices were fixed in licenses of each of the five major defendants. The other three defendants made the same requirement in licenses granted to the exhibitor defendants. We do not stop to elaborate on these findings. They are adequately detailed by the District Court in its opinion. See 66 F.Supp. 334-339.
On this phase of the case, the main attack is on the decree, which enjoins the defendants and their affiliates Page 334 U. S. 143 from granting any license, except to their own theaters, in which minimum prices for admission to a theater are fixed in any manner or by any means. The argument runs as follows: United States v. General Electric Co., 272 U. S. 476, held that an owner of a patent could, without violating the Sherman Act, grant a license to manufacture and vend, and could fix the price at which the licensee could sell the patented article. It is pointed out that defendants do not sell the films to exhibitors, but only license them, and that the Copyright Act (35 Stat. 1075, 1088, 17 U.S.C. § 1), like the patent statutes, grants the owner exclusive rights. [Footnote 5] And it is argued that, if the patentee can fix the price at which his licensee may sell the patented article, the owner of the copyright should be allowed the same privilege. It is maintained that such a privilege is essential to protect the value of the copyrighted films.
"In agreeing to maintain a stipulated minimum admission price, each exhibitor thereby consents to Page 334 U. S. 144 the minimum price level at which it will compete against other licensees of the same distributor, whether they exhibit on the same run or not. The total effect is that, through the separate contracts between the distributor and its licensees, a price structure is erected which regulates the licensees' ability to compete against one another in admission prices."
Clearances are designed to protect a particular run of a film against a subsequent run. [Footnote 6] The District Court Page 334 U. S. 145 found that all of the distributor defendants used clearance provisions, and that they were stated in several different ways or in combinations: in terms of a given period between designated runs; in terms of admission prices charged by competing theaters; in terms of a given period of clearance over specifically named theaters; in terms of so many days' clearance over specified areas or towns; or in terms of clearances as fixed by other distributors.
"(2) The character and location of the theaters involved, including size, type of entertainment, appointments, transit facilities, etc.; "Page 334 U. S. 146
It reviewed the evidence in light of these standards, and concluded that many of the clearances granted by the defendants were unreasonable. We do not stop to retrace those steps. The evidence is ample to show, as the District Court plainly demonstrated, see 66 F.Supp. pp. 343-346, that many clearances had no relation to the competitive factors which alone could justify them. [Footnote 7] The clearances which were in vogue had, indeed, acquired a fixed and uniform character, and were made applicable to situations without regard to the special circumstances which are necessary to sustain them as reasonable restraints of trade. The evidence is ample to support the Page 334 U. S. 147 finding of the District Court that the defendants either participated in evolving this uniform system of clearances or acquiesced in it, and so furthered its existence. That evidence, like the evidence on the price-fixing phase of the case, is therefore adequate to support the finding of a conspiracy to restrain trade by imposing unreasonable clearances.
Some of the defendants ask that this provision be construed (or, if necessary, modified) to allow licensors in granting clearances to take into consideration what is reasonably necessary for a fair return to the licensor. We reject that suggestion. If that were allowed, then the exhibitor defendants would have an easy method of keeping alive at least some of the consequences of the effective conspiracy which they launched. For they could then justify clearances granted by other distributors in favor of their theaters in terms of the competitive requirements of those theaters, and at the same time justify the restrictions they impose upon independents in terms of the necessity of protecting their film rental as licensor. That is too potent a weapon to leave in the hands of those whose proclivity to unlawful conduct has been so marked. It plainly should not be allowed so long as the exhibitor defendants own theaters. For, in its baldest terms, it is in the hands of the defendants no less than a power to restrict the competition of others in the way Page 334 U. S. 148 deemed most desirable by them. In the setting of this case, the only measure of reasonableness of a clearance by Sherman Act standards is the special needs of the licensee for the competitive advantages it affords.
We think that provision was justified. Clearances have been used along with price-fixing to suppress competition with the theaters of the exhibitor defendants and with other favored exhibitors. The District Court could therefore have eliminated clearances completely for a substantial period of time, even though, as it thought, they were not illegal per se. For equity has the power to uproot all parts of an illegal scheme -- the valid as well as the invalid -- in order to rid the trade or commerce of all taint of the conspiracy. United States v. Bausch & Lomb Optical Co., 321 U. S. 707, 321 U. S. 724. The court certainly then could take the lesser step of making them prima facie invalid. But we do not rest on that alone. As we have said, the only justification for clearances in the setting of this case is in terms of the special needs of the licensee for the competitive advantages they afford. To place on the distributor the burden of showing their reasonableness is to place it on the one party in the best position to evaluate their competitive effects. Those who have shown such a marked proclivity for unlawful conduct are in no position to complain that they carry the burden of showing that their future clearances come within the law. Cf. United States v. Crescent Amusement Co., 323 U. S. 173, 323 U. S. 188. Page 334 U. S. 149
There was another type of business arrangement that the District Court found to have the same effect as the Page 334 U. S. 150 pooling agreements just mentioned. Many theaters are owned jointly by two or more exhibitor defendants or by an exhibitor defendant and an independent. [Footnote 9] The result is, according to the District Court, that the theaters are operated "collectively, rather than competitively." And where the joint owners are an exhibitor defendant and an independent, the effect is, according to the District Court, the elimination by the exhibitor defendant of
The District Court ordered the exhibitor defendants to disaffiliate by terminating their joint ownership of theatres, Page 334 U. S. 151 and it enjoined future acquisitions of such interests. One is authorized to buy out the other if it shows to the satisfaction of the District Court, and that court first finds, that such acquisition "will not unduly restrain competition in the exhibition of feature motion pictures." This dissolution and prohibition of joint ownership as between exhibitor defendants was plainly warranted. To the extent that they have joint interests in the outlets for their films, each in practical effect grants the other a priority for the exhibition of its films. For, in this situation, as in the case where theaters are jointly managed, the natural gravitation of films is to the theaters in whose earnings the distributors have an interest. Joint ownership between exhibitor defendants then becomes a device for strengthening their competitive position as exhibitors by forming an alliance as distributors. An express agreement to grant each other the preference would be a most effective weapon to stifle competition. A working arrangement or business device that has that necessary consequence gathers no immunity because of its subtlety. Each is a restraint of trade condemned by the Sherman Act.
The exhibitor defendants are authorized to acquire existing interests of the independents in these theaters if they establish, and if the District Court first finds, that the acquisition "will not unduly restrain competition in the Page 334 U. S. 152 exhibition of feature motion pictures." All other acquisitions of such joint interests were enjoined.
We have gone into the record far enough to be confident that at least some of these acquisitions by the exhibitor defendants were the products of the unlawful practices which the defendants have inflicted on the industry. To the extent that these acquisitions were the fruits of monopolistic practices or restraints of trade, they should be divested. And no permission to buy out the other owner should be given a defendant. United States v. Crescent Amusement Co., supra, p. 323 U. S. 189; Schine Chain Theaters, Inc. v. United States, ante, p. 334 U. S. 110. Moreover, even if lawfully acquired, they may have been utilized as part of the conspiracy to eliminate or suppress competition in furtherance of the ends of the conspiracy. In that event, divestiture would likewise be justified. United Page 334 U. S. 153 States v. Crescent Amusement Co., supra, at 323 U. S. 189-190. In that situation permission to acquire the interest of the independent would have the unlawful effect of permitting the defendants to complete their plan to eliminate him.
A formula deal is a licensing agreement with a circuit of theaters in which the license fee of a given feature is measured, for the theaters covered by the agreement, by a specified percentage of the feature's national gross. The District Court found that Paramount and RKO Page 334 U. S. 154 had made formula deals with independent and affiliated circuits. The circuit was allowed to allocate playing time and film rentals among the various theaters as it saw fit. The inclusion of theaters of a circuit into a single agreement gives no opportunity for other theater owners to bid for the feature in their respective areas and, in the view of the District Court, is therefore an unreasonable restraint of trade. The District Court found some master agreements [Footnote 10] open to the same objection. Those are the master agreements that cover exhibition in two or more theaters in a particular circuit and allow the exhibitor to allocate the film rental paid among the theaters as it sees fit, and to exhibit the features upon such playing time as it deems best, and leaves other terms to the discretion of the circuit. The District Court enjoined the making or further performance of any formula deal of the type described above. It also enjoined the making or further performance of any master agreement covering the exhibition of features in a number of theaters.
The findings of the District Court in these respects are supported by facts, its conclusion that formula deals and master agreements constitute restraint of trade is valid, and the relief is proper. The formula deals and master agreements are unlawful restraints of trade in two respects. In the first place, they eliminate the possibility of bidding for films theater by theater. In that way, they eliminate the opportunity for the small competitor to obtain the choice first runs, and put a premium on the size of the circuit. They are therefore devices for stifling competition and diverting the cream of the business to the large operators. In the second place, the pooling of the purchasing power of an entire circuit in bidding for films is a misuse of monopoly power Page 334 U. S. 155 insofar as it combines the theaters in closed towns with competitive situations. The reasons have been stated in United States v. Griffith, ante, p. 334 U. S. 100, and Schine Chain Theaters, Inc. v. United States, ante, p. 334 U. S. 110, and need not be repeated here. It is hardly necessary to add that distributors who join in such arrangements by exhibitors are active participants in effectuating a restraint of trade and a monopolistic practice. See United States v. Crescent Amusement Co., supra, at 323 U. S. 183.
Universal and United Artists object to the outlawry of franchise agreements. Universal points out that the charge of illegality of franchises in these cases was restricted to franchises with theaters owned by the major defendants and to franchises with circuits or theaters in a circuit, a circuit being defined in the complaint as a group of more than five theaters controlled by the same person or a group of more than five theaters which franchises with circuits or theaters in a films. It seems, therefore, that the legality of franchises to other exhibitors (except as to block-booking, a practice to which we will later advert) was not in issue in the litigation. Moreover, the findings on franchises are clouded by the statement of the District Court in the opinion that franchises "necessarily contravene the plan of licensing each picture, theater by theater, to the highest bidder." As will be seen hereafter, we eliminate from the decree Page 334 U. S. 156 the provision for competitive bidding. But for its inclusion of competitive bidding, the District Court might well have treated the problem of franchises differently.
Block-booking is the practice of licensing, or offering for license, one feature or group of features on condition that the exhibitor will also license another feature or group of features released by the distributors during a given period. The films are licensed in blocks before they are actually produced. All the defendants except United Artists have engaged in the practice. Block-booking prevents competitors from bidding for single features on their Page 334 U. S. 157 individual merits. The District Court held it illegal for that reason, and for the reason that it
That enlargement of the monopoly of the copyright was condemned below in reliance on the principle which forbids the owner of a patent to condition its use on the purchase or use of patented or unpatented materials. See Ethyl Gasoline Corporation v. United States, 309 U. S. 436, 309 U. S. 459; Morton Salt Co. v. Suppiger Co., 314 U. S. 488, 314 U. S. 491; Mercoid Corp. v. Mid-Continent Investment Co., 320 U. S. 661, 320 U. S. 665. The court enjoined defendants from performing or entering into any license in which the right to exhibit one feature is conditioned upon the licensee's taking one or more other features. [Footnote 11] Page 334 U. S. 158
It is said that reward to the author or artist serves to induce release to the public of the products of his creative genius. But the reward does not serve its public purpose if it is not related to the quality of the copyright. Where a high quality film greatly desired is licensed only if an inferior one is taken, the latter borrows quality from the former and strengthens its monopoly by drawing on the other. The practice tends to equalize, rather than differentiate, the reward for the individual copyrights. Even where all the films included in the package are of equal quality, the requirements that all be taken if one is desired increases the market for some. Each stands not on its own footing, but in whole or in part on the appeal which another film may have. As the District Court said, the result is to add to the monopoly of the copyright in violation of the principle of the patent cases involving tying clauses. [Footnote 12] Page 334 U. S. 159
The District Court found that defendants had discriminated against small independent exhibitors and in favor of large affiliated and unaffiliated circuits through various kinds of contract provisions. These included suspension of the terms of a contract if a circuit theater remained closed for more than eight weeks, with reinstatement without liability on reopening; allowing large privileges in the selection and elimination of films; Page 334 U. S. 160 allowing deductions in film rentals if double bills are played; granting moveovers [Footnote 13] and extended runs; granting road show privileges; [Footnote 14] allowing overage and underage; [Footnote 15] granting unlimited playing time; excluding foreign pictures and those of independent producers, and granting rights to question the classification of features for rental purposes. The District Court found that the competitive advantages of these provisions were so great that their inclusion in contracts with the larger circuits and their exclusion from contracts with the small independents constituted an unreasonable discrimination against the latter. Each discriminatory contract constituted a conspiracy between licensor and licensee. Hence, the District Court deemed it unnecessary to decide whether the defendants had conspired among themselves to make these discriminations. No provision of the decree specifically enjoins these discriminatory practices, because they were thought to be impossible under the system of competitive bidding adopted by the District Court.
These findings are amply supported by the evidence. We concur in the conclusion that these discriminatory practices are included among the restraints of trade which the Sherman Act condemns. See Interstate Circuit v. United States, supra, p. 306 U. S. 231; United States v. Crescent Amusement Co., supra, p. 323 U. S. 182-183. It will be for the Page 334 U. S. 161 District Court, on remand of these cases, to provide effective relief against their continuance, as our elimination of the provision for competitive bidding leaves this phase of the cases unguarded.
Paramount is the only one of the five majors who opposes the competitive bidding system. Columbia Pictures, Universal, and United Artists oppose it. The intervenors representing certain independents oppose it. And Page 334 U. S. 162 the Department of Justice, which apparently proposed the system originally, speaks strongly against it here.
"No two exhibitors are likely to make the same bid as to Page 334 U. S. 163 dates, clearance, method of fixing rental, etc. May bids containing such diverse factors be readily compared? May a flat rental bid be compared with a percentage bid? May the value of any percentage bid be determined unless the admission price is fixed by the license?"
We mention these matters merely to indicate the character of the job of supervising such a competitive bidding system. It would involve the judiciary in the administration of intricate and detailed rules governing priority, period of clearance, length of run, competitive areas, reasonable return, and the like. The system would be apt to require as close a supervision as a continuous receivership, unless the defendants were to be entrusted with vast discretion. The judiciary is unsuited to affairs of business management, and control through the power of contempt is crude and clumsy, and lacking in the flexibility necessary to make continuous and detailed supervision effective. Yet delegation of the management of the system to the discretion of those who had the genius to conceive the present conspiracy and to execute it with the subtlety which this record reveals could be done only with the Page 334 U. S. 164 greatest reluctance. At least such choices should not be faced unless the need for the system is great, and its benefits plain.
Our doubts concerning the competitive bidding system are increased by the fact that defendants who own theaters are allowed to preempt their own features. They thus start with an inventory which all other exhibitors Page 334 U. S. 165 lack. The latter have no prospect of assured runs except what they get by competitive bidding. The proposed system does not offset in any way the advantages which the exhibitor defendants have by way of theater ownership. It would seem, in fact, to increase them. For the independents are deprived of the stability which flows from established business relationships. Under the proposed system, they can get features only if they are the highest responsible bidders. They can no longer depend on their private sources of supply which their ingenuity has created. Those sources, built perhaps on private relationships and representing important items of goodwill, are banned even though they are free of any taint of illegality.
The system was designed, as some of the defendants put it, to remedy the difficulty of any theater to break into or change the existing system of runs and clearances. But we do not see how, in practical operation, the proposed system of competitive bidding is likely to open up to competition the markets which defendants' unlawful restraints have dominated. Rather real danger seems to us to lie in the opportunities the system affords the exhibitor defendants and the other large operators to strengthen their hold in the industry. We are reluctant to alter decrees in these cases where there is agreement with the District Court on the nature of the violations. United States v. Crescent Amusement Co., supra, p. 323 U. S. 185; International Salt Co. v. United States, 332 U. S. 392, 332 U. S. 400. But the provisions for competitive bidding in these cases promise little in the way of relief against the real evils of the conspiracy. They implicate the judiciary heavily in the details of business management if supervision is to be effective. They vest powerful control in the exhibitor defendants over their competitors if close supervision by the court is not undertaken. In light of these considerations, we conclude that the competitive Page 334 U. S. 166 bidding provisions of the decree should be eliminated so that a more effective decree may be fashioned.
There is a suggestion that the hold the defendants have on the industry is so great that a problem under the First Amendment is raised. Cf. Associated Press v. United States, 326 U. S. 1. We have no doubt that moving pictures, like newspapers and radio, are included in the press whose freedom is guaranteed by the First Amendment. That issue would be focused here if we had any question concerning monopoly in the production of moving pictures. But monopoly in production was eliminated as an issue in these cases, as we have noted. The chief argument at the bar is phrased in terms of monopoly of exhibition, restraints on exhibition, and the like. Actually, the issue is even narrower than that. The main contest is over the cream of the exhibition business -- that of the first-run theaters. By defining the issue so narrowly, we do not intend to belittle its importance. It shows, however, that the question here is not Page 334 U. S. 167 what the public will see, or if the public will be permitted to see certain features. It is clear that, under the existing system, the public will be denied access to none. If the public cannot see the features on the first-run, it may do so on the second, third, fourth, or later run. The central problem presented by these cases is which exhibitors get the highly profitable first-run business. That problem has important aspects under the Sherman Act. But it bears only remotely, if at all, on any question of freedom of the press, save only as timeliness of release may be a factor of importance in specific situations.
In the 92 cities of the country with populations over 100,000, at least 70 percent of all the first-run theaters are affiliated with one or more of the five majors. In 4 of those cities, the five majors have no theaters. In 38 of those cities, there are no independent first-run theaters. In none of the remaining 50 cities did less Page 334 U. S. 168 than three of the distributor defendants license their product on first run to theaters of the five majors. In 19 of the 50 cities, less than three of the distributor defendants licensed their product on first run to independent theaters. In a majority of the 50 cities, the greater share of all of the features of defendants were licensed for first-run exhibition in the theaters of the five majors.
The District Court held that the five majors could not be treated collectively so as to establish claims of general monopolization in exhibition. It found that none of them was organized or had been maintained "for the purpose of achieving a national monopoly" in exhibition. It found that the five majors, by their present theater holdings "alone" (which aggregate a little more than one-sixth of all the theaters in the United States), "do not and cannot collectively or individually have a monopoly of exhibition." The District Court also found that, where a single defendant owns all of the first-run theaters in a town, there is no sufficient proof that the acquisition was for the purpose of creating a monopoly. It found, rather, that such consequence resulted from the inertness Page 334 U. S. 169 of competitors, their lack of financial ability to build theaters comparable to those of the five majors, or the preference of the public for the best equipped theaters. And the percentage of features on the market which any of the five majors could play in its own theaters was found to be relatively small, and in nowise to approximate a monopoly of film exhibition. [Footnote 19]
Even in respect of the theaters jointly owned or jointly operated by the defendants with each other or with independents, the District Court found no monopoly or attempt to monopolize. Those joint agreements or ownership were found only to be unreasonable restraints of trade. The District Court, indeed, found no monopoly on any phase of the cases, although it did find an attempt to monopolize in the fixing of prices, the granting of unreasonable Page 334 U. S. 170 clearances, block-booking, and the other unlawful restraints of trade we have already discussed. The "root of the difficulties," according to the District Court, lay not in theater ownership, but in those unlawful practices.
It is clear, so far as the five majors are concerned, that the aim of the conspiracy was exclusionary, i.e., it was designed to strengthen their hold on the exhibition field. In other words, the conspiracy had monopoly in exhibition for one of its goals, as the District Court held. Price, clearance, and run are interdependent. The clearance and run provisions of the licenses fixed the relative playing positions of all theaters in a certain area; the minimum price provisions were based on playing position -- the first-run theaters being required to charge the highest prices, Page 334 U. S. 171 the second-run theaters the next highest, and so on. As the District Court found,
An example will illustrate the problem. In the popular sense, there is a monopoly if one person owns the only theater in town. That usually does not, however, constitute a violation of the Sherman Act. But as we noted in United States v. Griffith, ante, p. 334 U. S. 100, and see Schine Chain Theaters, Inc. v. United States, ante, p. 334 U. S. 110, even such an ownership is vulnerable in a suit by the United States under the Sherman Act if the property was acquired, or its strategic position maintained, as a result of practices which constitute unreasonable restraints of trade. Otherwise, there would be reward from the conspiracy through retention of its fruits. Hence, the problem of the District Court does not end with enjoining continuance of the unlawful restraints, nor with dissolving the combination which launched the conspiracy. Its function includes undoing what the conspiracy achieved. As we have discussed in Schine Chain Theaters, Inc. v. United States, ante, p. 334 U. S. 110, the requirement that the defendants restore what they unlawfully obtained is no more punishment than the familiar remedy Page 334 U. S. 172 of restitution. What findings would be warranted after such an inquiry in the present cases we do not know. For the findings of the District Court do not cover this point beyond stating that monopoly was an objective of the several restraints of trade that stand condemned.
The findings of the District Court are deficient on that score, and obscure on another. The District Court, in its findings, speaks of the absence of a "purpose" on the part of any of the five majors to achieve a "national monopoly" in the exhibition of motion pictures. First, there is no finding as to the presence or absence of monopoly on the part of the five majors in the first-run field for the entire country, in the first-run field in the 92 largest cities of the country, or in the first-run field in separate localities. Yet the first-run field, which constitutes the cream of the Page 334 U. S. 173 exhibition business, is the core of the present cases. Section 1 of the Sherman Act outlaws unreasonable restraints irrespective of the amount of trade or commerce involved (United States v. Socony-Vacuum Oil Co., 310 U. S. 150, 310 U. S. 224-225, n. 59), and § 2 condemns monopoly of "any part' of trade or commerce." "Any part" is construed to mean an appreciable part of interstate or foreign trade or commerce. United States v. Yellow Cab Co., 332 U. S. 218, 332 U. S. 225. Second, we pointed out in United States v. Griffith, ante, p. 334 U. S. 100, that "specific intent" is not necessary to establish a "purpose or intent" to create a monopoly, but that the requisite "purpose or intent" is present if monopoly results as a necessary consequence of what was done. The findings of the District Court on this phase of the cases are not clear, though we take them to mean by the absence of "purpose" the absence of a specific intent. So construed, they are inconclusive. In any event, they are ambiguous, and must be recast on remand of the cases. Third, monopoly power, whether lawfully or unlawfully acquired, may violate § 2 of the Sherman Act though it remains unexercised (United States v. Griffith, ante, p. 334 U. S. 100), for, as we stated in American Tobacco Co. v. United States, 328 U. S. 781, 328 U. S. 809, 328 U. S. 811, the existence of power "to exclude competition when it is desired to do so" is itself a violation of § 2, provided it is coupled with the purpose or intent to exercise that power. The District Court, being primarily concerned with the number and extent of the theater holdings of defendants, did not address itself to this phase of the monopoly problem. Here also, parity of treatment as between independents and the five majors as theater owners, who were tied into the same general conspiracy, necessitates consideration of this question.
Exploration of these phases of the cases would not be necessary if, as the Department of Justice argues, vertical integration of producing, distributing and exhibiting Page 334 U. S. 174 motion pictures is illegal per se. But the majority of the Court does not take that view. In the opinion of the majority, the legality of vertical integration under the Sherman Act turns on (1) the purpose or intent with which it was conceived, or (2) the power it creates, and the attendant purpose or intent. First, it runs afoul of the Sherman Act if it was a calculated scheme to gain control over an appreciable segment of the market and to restrain or suppress competition, rather than an expansion to meet legitimate business needs. United States v. Reading Co., 253 U. S. 26, 253 U. S. 57; United States v. Lehigh Valley R. Co., 254 U. S. 255, 254 U. S. 269-270. Second, a vertically integrated enterprise, like other aggregations of business units (United States v. Aluminum Co. of America, 148 F.2d 416), will constitute monopoly which, though unexercised, violates the Sherman Act provided a power to exclude competition is coupled with a purpose or intent to do so. As we pointed out in United States v. Griffith, ante, p. 334 U. S. 107, n. 10, size is itself an earmark of monopoly power. For size carries with it an opportunity for abuse. And the fact that the power created by size was utilized in the past to crush or prevent competition is potent evidence that the requisite purpose or intent attends the presence of monopoly power. See United States v. Swift & Co., 286 U. S. 106, 286 U. S. 116; United States v. Aluminum Co. of America, supra, 148 F.2d at 430. Likewise bearing on the question whether monopoly power is created by the vertical integration is the nature of the market to be served (United States v. Aluminum Co. of America, supra, 148 F.2d at 430), and the leverage on the market which the particular vertical integration creates or makes possible.
These matters were not considered by the District Court. For that reason, as well as the others we have mentioned, the findings on monopoly and divestiture which we have discussed in this part of the opinion will be set aside. There is an independent reason for doing Page 334 U. S. 175 that. As we have seen, the District Court considered competitive bidding as an alternative to divestiture in the sense that it concluded that further consideration of divestiture should not be had until competitive bidding had been tried and found wanting. Since we eliminate from the decree the provisions for competitive bidding, it is necessary to set aside the findings on divestiture so that a new start on this phase of the cases may be made on their remand.
The Department of Justice maintains that, if total divestiture is denied, licensing of films among the five majors should be barred. As a permanent requirement, it would seem to be only an indirect way of forcing divestiture. For the findings reveal that the theaters of the five majors could not operate their theaters full time on their own films. [Footnote 21] Whether that step would, in absence of competitive bidding, serve as a short range remedy in certain situations to dissipate the effects of the conspiracy (United States v. Univis Lens Co., 316 U. S. 241, 316 U. S. 254; United States v. Bausch & Lomb Co., supra, p. 321 U. S. 724; United States v. Crescent Amusement Co., supra, p. 323 U. S. 188) is a question for the District Court. Page 334 U. S. 176
Certain associations of exhibitors and a number of independent exhibitors, appellant-intervenors in Nos. 85 and 86, were denied leave to intervene in the District Page 334 U. S. 177 Court. They appeal from those orders. They also filed original motions for leave to intervene in this Court. We postponed consideration of the original motions and of our jurisdiction to hear the appeals until a hearing on the merits of the cases.
We need not consider the merits of that argument. Even if we assume that the intervenors are correct in their Page 334 U. S. 178 position, intervention should be denied here, and the orders of the District Court denying leave to intervene must be affirmed. Now that the provisions for competitive bidding have been eliminated from the decree, there is no basis for saying that the decree affects their legal rights. Whatever may have been the situation below, no other reason appears why, at this stage, their intervention is warranted. Any justification for making them parties has disappeared.
"* * * *" "(d) To perform or represent the copyrighted work publicly if it be a drama or, if it be a dramatic work and not reproduced in copies for sale, to vend any manuscript or any record whatsoever thereof; to make or to procure the making of any transcription or record thereof by or from which, in whole or in part, it may in any manner or by any method be exhibited, performed, represented, produced, or reproduced, and to exhibit, perform, represent, produce, or reproduce it in any manner or by any method whatsoever. . . ."
On this guiding consideration, the Court, earlier this Term, sustained a Sherman Law decree which was not the outcome of a long trial involving complicated and contested facts and their significance, but the formulation of a summary judgment on the bare bones of pleadings. International Salt Co. v. United States, 332 U. S. 392, 332 U. S. 400-401. The record in this case bespeaks more compelling respect for the decree fashioned by the District Court of three judges to put an end to violations of the Sherman Law, and to prevent the recurrence, than that which led this Court not to find abuse of discretion in the decree by a single district judge in the International Salt case. Page 334 U. S. 179
The crucial legal question before us is not whether we would have drawn the decree as the District Court drew it, but whether, on the basis of what came before the District Court, we can say that, in fashioning remedies, it did not fairly respond to disclosed violations, and therefore abused a discretion the fair exercise of which we should respect and not treat as an abuse. Discretion means a choice of available remedies. As bearing upon this question, it is most relevant to consider whether the District Court showed a sympathetic or mere niggling awareness of the proper scope of the Sherman Law and the range of Page 334 U. S. 180 its condemnation. Adequate remedies are not likely to be fashioned by those who are not hostile to evils to be remedied. The District Court's opinion manifests a stout purpose on the part of that court to enforce its thoroughgoing understanding of the requirements of the Sherman Law as elucidated by this Court. And so we have before us the decree of a district court thoroughly aware of the demands of the Sherman Law and manifestly determined to enforce it in all its rigors.
I cannot bring myself to conclude that the product of such a painstaking process of adjudication as to a decree appropriate for such a complicated situation as this record discloses was an abuse of discretion, arrived at as it was after due absorption of all the light that Page 334 U. S. 181 could be shed upon remedies appropriate for the future. After all, as to such remedies, there is no test, ultimately, except the wisdom of men judged by events.