Source: http://www.justice.gov/atr/cases/f258800/258892.htm
Timestamp: 2014-03-11 06:20:42
Document Index: 118673943

Matched Legal Cases: ['§ 18', '§ 25', '§ 18', '§ 26', '§ 18', '§ 22', '§ 1331', '§ 22', '§ 1391', '§18']

Complaint : U.S. and Plaintiff States v. AMC Entertainment Holdings, Inc. and Kerasotes Showplace Theatres, LLC
UNITED STATES OF AMERICA	U.S. Department of Justice	Antitrust Division	450 Fifth Street, N.W., Suite 4000	Washington, DC 20530,
State of Illinois 100 West Randolph Street 13th Floor Chicago, Illinois 60601,
Office of the Colorado Attorney General 1525 Sherman St., Seventh Floor	Denver, Colorado 80203,	and
Consumer Protection Division	Office of the Indiana Attorney General Indiana Government Center South 302 W. Washington, 5th Floor Indianapolis, IN 46204,	Plaintiffs,
v. AMC ENTERTAINMENT HOLDINGS, INC., 920 Main Street
Kansas City, Missouri 64105	, and
KERASOTES SHOWPLACE	THEATRES, LLC,
224 North Des Plaines, Suite 200
) Civil Action No:
Case: 1:10-cv-00846
Assigned To:	Kennedy, Henry H.
Assign Date: 5/21/2010
Description: Antitrust
United States, and the States of Illinois, Colorado, and Indiana, acting through their Attorneys
General, bring this civil antitrust action to prevent AMC Entertainment Holdings, Inc. ("AMC")
from acquiring most of the assets of Kerasotes Showplace Theatres, LLC ("Kerasotes"). If the
acquisition is permitted, it would combine under common ownership the two leading, and in some
cases only, mainstream movie theatres showing first-run commercial movies in certain parts of the
metropolitan areas of Chicago, Denver, and Indianapolis. The transaction would substantially
lessen competition and tend to create a monopoly in mainstream theatres in these markets in
violation of Section 7 of the Clayton Act, 15 U.S.C. § 18. I. JURISDICTION AND VENUE
1.	This action is filed by the United States pursuant to Section 15 of the
Clayton Act, as amended, 15 U.S.C. § 25, to obtain equitable relief and to prevent a violation of
Section 7 of the Clayton Act, as amended, 15 U.S.C. § 18. The States of Illinois, Colorado and
Indiana bring this action under Section 16 of the Clayton Act, 15 U.S.C. § 26, to prevent the
defendants from violating Section 7 of the Clayton Act, as amended, 15 U.S.C. § 18.
2.	Defendants have consented to personal jurisdiction in this District. In
addition, defendant AMC, through its subsidiary, AMC Entertainment, Inc., operates theatres in
this District. The licensing and exhibition of first-run, commercial films is a commercial activity
that substantially affects, and is in the flow of, interstate trade and commerce. Defendants'
activities in purchasing equipment, services, and supplies as well as licensing films for their
theatres substantially affect interstate commerce. The Court has jurisdiction over the subject
matter of this action and jurisdiction over the parties pursuant to 15 U.S.C. §§ 22, 25, and 26, and
28 U.S.C. §§ 1331, 1337(a), and 1345.	3.	Venue in this District is proper under 15 U.S.C. § 22 and 28 U.S.C. § 1391(c).
II. DEFENDANTS AND THE PROPOSED TRANSACTION
4.	Defendant AMC is a Delaware corporation with its headquarters in Kansas City,
Missouri. It is the holding company of AMC Entertainment, Inc. AMC owns or operates 304
theatres containing 4,574 screens in locations throughout the United States and four foreign
countries. Measured by number of screens, AMC is the second-largest theatre circuit in the
5.	Defendant Kerasotes is a Delaware corporation with its principal place of business
in Chicago, Illinois. It owns or operates 96 theatres with 973 screens in various states. Kerasotes is the sixth-largest theatre circuit in the United States.
6.	On January 19, 2010, AMC and Kerasotes signed a purchase and sale agreement,
under which AMC acquired Kerasotes (with the exception of three theatres that will be retained
by the Kerasotes family) for approximately $275 million. III. BACKGROUND OF THE MOVIE INDUSTRY
7.	Theatrical exhibition of feature length motion picture films ("movies") provides a
major source of out-of-home entertainment in the United States. 8.	Viewing movies in the theatre is a popular pastime. Over 1.4 billion movie tickets
were sold in the United States in 2009, with total box office revenue exceeding $10.6 billion.
9.	Companies that operate movie theatres are called "exhibitors." Some exhibitors
own a single theatre, whereas others own a circuit of theatres within one or more regions of the
United States. Established exhibitors include Regal, Carmike, and Cinemark, as well as AMC and
Kerasotes. 10.	Exhibitors set ticket prices for each theatre based on a number of factors, including
the presence and competitive decisions of nearby comparable theatres.
11.	Movies are a unique form of entertainment. The experience of viewing a movie in
a theatre differs 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). 12.	Home viewing of movies is not a reasonable substitute for viewing movies in a
theatre. When consumers watch movies in their homes, they typically lose several advantages of
the theatre experience, including the size of screen, the sophistication of sound systems, the
opportunity to watch in 3-D, and the social experience of viewing a movie with other patrons. Additionally, the most popular, newly released or "first-run" movies are not available for home
viewing. 13.	Differences in the pricing of various forms of entertainment also reflect their lack
of substitutability in the eyes of consumers. Ticket prices for movies are generally different from
prices for other forms of entertainment. Tickets for most forms of live entertainment are typically
significantly more expensive than movie tickets. Renting a DVD for home viewing is usually
significantly less expensive than viewing a movie in a theatre. 14.	AMC and Kerasotes operate movie theatres that exhibit first-run, commercial
movies ("mainstream theatres"). Mainstream theatres typically are multi-plex movie theatres that
show a wide variety of first-run, commercial movies in order to attract all ages of moviegoers,
from children to seniors. Mainstream theatres typically offer basic concessions, such as popcorn,
candy and soft drinks. 15.	Mainstream theatres do not compete significantly with "sub-run" theatres
specializing in exhibiting movies after the four-to-five-week first run has ended, with theatres
specializing in art movies or foreign language movies, or with "premiere" theatres which typically
offer full-service dining, alcoholic beverages, an adults-only environment, and other luxury
services and amenities not found in mainstream theatres. 16.	Tickets at mainstream theatres usually cost significantly more than tickets at sub-run theatres. Movies exhibited at sub-run theatres are no longer new releases, and moviegoers
generally do not regard sub-run movies as adequate substitutes for first-run movies. 17.	Theatres that show art movies and foreign language movies are also not reasonable
substitutes for mainstream theatres. Commercial movies typically appeal to different patrons than
other types of movies, such as art movies or foreign language movies. For example, art movies
tend to appeal more universally to mature audiences. Theatres that primarily exhibit art movies
often contain auditoriums with fewer seats than mainstream theatres. Typically, art movies are
released less widely than commercial movies. 18.	Premiere theaters do not typically serve as a competitive constraint on mainstream
theaters. Premiere theatres often show first-run, commercial movies, but typically have more
restrictive admission policies (e.g., minors must be accompanied by adults for all movies), charge
higher ticket prices (sometimes as much as double the admission charged by typical first-run
theatres), serve alcoholic beverages, and often offer full-service restaurants or in-service dining. Premiere theatres also differ from mainstream theatres in the luxury items and amenities they offer
to their guests. For instance, in addition to expanded food and beverage offerings, premiere
theatres often feature reserved seating, leather and reclining seats, wait service, and
complimentary refills of popcorn and sodas. Because of these differences, premiere theatres
attract an audience that is distinct from the audience for mainstream theatres. 19.	The relevant product market within which to assess the competitive effects of this
transaction is the exhibition of first-run, commercial movies in mainstream theatres. B. Geographic Markets
20.	Moviegoers typically are not willing to travel very far from their homes to attend a
movie. As a result, geographic markets for mainstream theatres are relatively local. Chicago, Illinois Area
21.	AMC and Kerasotes account for a substantial portion of the mainstream theatre
screens and ticket sales in three areas of the Chicago metropolitan area - the North Suburban
Chicago area, the Upper Southwest Suburban Chicago area, and the Lower Southwest Suburban
Chicago area. 22.	The North Suburban Chicago area, in and around the communities of Glenview
and Skokie, encompasses AMC's Northbrook Court 14, Kerasotes' Glen 10, AMC's Gardens 13,
Kerasotes' Village Crossing 18, and Kerasotes' Showplace 12 (Niles) theatres. There are no
other mainstream theatres in this North Suburban Chicago area. 23.	The Upper Southwest Suburban Chicago area, in and around the city of
Naperville, encompasses AMC's Cantera 30 and Kerasotes' Showplace 16 (Naperville) theatres. There are no other mainstream theatres in this Upper Southwest Suburban Chicago area. 24.	The Lower Southwest Suburban Chicago area, in and around the village of
Bolingbrook, encompasses AMC's Woodridge 18 and Kerasotes' Showplace 12 ( Bolingbrook)
theatres. There is only one other non-party mainstream theatre in this Lower Southwest
Suburban area - a 16-screen Cinemark. 25.	Moviegoers who reside in these three suburban Chicago, Illinois areas are reluctant
to travel significant distances out of each of these areas to attend a movie except in unusual
circumstances. The relevant geographic markets in which to assess the competitive effects of this
transaction are the North Suburban Chicago, Upper Southwest Suburban Chicago, and Lower
Southwest Suburban Chicago areas.
26.	AMC and Kerasotes account for a substantial portion of the mainstream theatre
screens and ticket sales in two areas of the Denver metropolitan area. 27.	The Upper Northwest Denver area, in and around the cities of Louisville and
Broomfield, encompasses Kerasotes' Colony Square 12 and AMC's Flatiron Crossing 14
theatres. There are no other mainstream theatres in this Upper Northwest Denver area. 28.	The Lower Northwest Denver area, in and around the cities of Westminster and
Arvada, encompasses AMC's Westminster Promenade 24 and Kerasotes' Olde Town 14 theatres. There are no other mainstream theatres in this Lower Northwest Denver area. 29.	Moviegoers who reside in these two Denver, Colorado areas are reluctant to travel
significant distances out of each of these areas to attend a movie except in unusual circumstances. The relevant geographic markets in which to assess the competitive effects of this transaction are
the Upper Northwest Denver and Lower Northwest Denver areas.
30.	AMC and Kerasotes account for a substantial portion of the first-run movie
screens and ticket sales in two areas of the Indianapolis metropolitan area. 31.	The North Indianapolis area, in and around the community of Glendale,
encompasses AMC's Castleton Square 14 and Kerasotes' Glendale Town 12 theatres. There is
only one other non-party mainstream theatre in this North Indianapolis area - a Regal theatre with
14 screens. 32.	The South Indianapolis area, in and around the city of Greenwood, encompasses
AMC's Greenwood 14 and Kerasotes' Showplace 16 and IMAX. There are no other mainstream
theatres in this South Indianapolis area.
33.	Moviegoers who reside in these Indianapolis, Indiana areas are reluctant to travel
significant distances out of each of these areas to attend a movie except in unusual circumstances. The relevant geographic market in which to assess the competitive effects of this transaction are
the North Indianapolis and the South Indianapolis areas.
C. The Relevant Markets
34.	A small but significant post-acquisition increase in movie ticket prices at
mainstream theatres in the relevant geographic markets would not cause a sufficient number of
customers to shift to other alternatives, including to other forms of entertainment, to non-mainstream theatres, or to mainstream theatres outside the relevant geographic markets described
above in sufficient numbers to make such a price increase unprofitable for the newly combined
entity. Therefore, the relevant markets in which to assess the competitive effects of this
transaction are the mainstream theatres in the North Suburban Chicago, Upper Southwest
Suburban Chicago, Lower Southwest Suburban Chicago, Upper Northwest Denver, Lower
Northwest Denver, North Indianapolis, and South Indianapolis areas.
V. COMPETITIVE EFFECTS
35.	Exhibitors compete on multiple dimensions to attract moviegoers to their theatres
over the theatres of their rivals. They compete over the quality of the viewing experience. They
compete to offer the most sophisticated sound and viewing systems, best picture clarity, nicest
seats with best views, and cleanest floors and lobbies for moviegoers. Exhibitors also compete on
price, knowing that if they charge too much (or do not offer sufficient discounted tickets for
matinees, seniors, children, etc.), moviegoers might visit rival theatres.
36.	In the geographic markets of the North Suburban Chicago area, the Upper
Southwest Suburban Chicago area, the Lower Southwest Suburban Chicago area, the Upper
Northwest Denver area, the Lower Northwest Denver area, the North Indianapolis area, and the
South Indianapolis area, AMC and Kerasotes compete head-to-head for moviegoers. These
geographic markets are concentrated, and in each market AMC and Kerasotes are the other's
most significant competitor, given their proximity to one another and similarity in size and quality
of viewing experience. Competition between AMC and Kerasotes spurs each to improve its
quality and keeps prices in check.	Chicago, Illinois area
37.	In the North Suburban Chicago area, the proposed transaction would give the
combined entity control of all five mainstream theatres in that area, with 83 out of 83 total screens
and a 100% share of 2009 box office revenues, which totaled approximately $24.9 million. Using
a measure of market concentration called the Herfindahl-Hirschman Index ("HHI"), explained in
Appendix A, the transaction would yield a post-transaction HHI of approximately 10,000,
representing an increase of 4,856. 38.	In the Upper Southwest Suburban Chicago area, the proposed transaction would
give the newly combined entity control of the only two mainstream theatres in that area, with 46
out of 46 total screens and a 100% share of 2009 box office revenues, which totaled
approximately $16.4 million. The transaction would yield a post-transaction HHI of
approximately 10,000, representing an increase of 4,875. 39.	In the Lower Southwest Suburban Chicago area, the proposed transaction would
give the newly combined entity control of two of the three mainstream theatres in that area, with
30 out of 46 total screens and a 53.0% share of 2009 box office revenues, which totaled
approximately $12.3 million. The transaction would yield a post-transaction HHI of
approximately 5,017, representing an increase of 1,221. Denver, Colorado area
40.	In the Upper Northwest Denver area, the proposed transaction would give the
newly combined entity control of the only two mainstream theatres in that area, with 26 out of 26
total screens and a 100% share of 2009 box office revenues, which totaled approximately $5.3
million. The transaction would yield a post-transaction HHI of approximately 10,000,
representing an increase of 4,356. 41.	In the Lower Northwest Denver area, the proposed transaction would give the
newly combined entity control of the only two mainstream theatres in that area, with 38 out of 38
total screens and a 100% share of 2009 box office revenues, which totaled approximately $13.3
representing an increase of 3,669. Indianapolis, Indiana area
42.	In the North Indianapolis area, the proposed transaction would give the newly
combined entity control of two of the three mainstream theatres in that area, with 26 out of 40
total screens and a 76.1% share of 2009 box office revenues, which totaled approximately $9.3
million. The transaction would yield a post-transaction HHI of approximately 6,357,
representing an increase of 2,689. 43.	In the South Indianapolis area, the proposed transaction would give the newly
combined entity control of the only two mainstream theatres in that area, with 30 out of 30 total
screens and a 100% share of 2009 box office revenues, which totaled approximately $10.1
million. The transaction would yield a post-transaction HHI of approximately 10,000, representing an increase of 4,838. 44.	The proposed transaction would likely lessen competition significantly in the
relevant markets. Today, if AMC or Kerasotes were to increase its prices at a theatre in one of
the relevant markets, and the other did not follow, the theatre that increased its prices might lose
business to the other. The proposed transaction would eliminate this pricing constraint and is
therefore likely to lead to higher prices for moviegoers, which could take the form of a higher
adult evening ticket price or reduced discounting, e.g., for matinees, children, seniors, and
45.	The proposed transaction would also eliminate competition between AMC and
Kerasotes over the quality of the viewing experience in each of the geographic markets at issue.
The combined entity would have reduced incentives to maintain, upgrade, and renovate its
theatres in the relevant markets, and to improve those theatres' amenities and services, thus
reducing the quality of the viewing experience for a moviegoer. 46.	The presence in some of the relevant geographic markets of other non-party
mainstream theatres would be insufficient to replace the competition lost due to the transaction
and thus render unprofitable post-transaction increases in ticket prices or decreases in quality by
the newly combined entity. VI. ENTRY
47.	Sufficient and timely entry that would deter or counteract the anticompetitive
effects alleged above is unlikely. Exhibitors are reluctant to locate new mainstream theatres near
existing theatres unless the population density, demographics, or the quality of existing theatres
makes new entry viable. Those conditions do not exist in any of the relevant geographic markets.
48.	The plaintiffs hereby reincorporate paragraphs 1 through 47.
49.	The effect of the proposed transaction would be to lessen competition substantially
in the relevant geographic markets in violation of Section 7 of the Clayton Act, 15 U.S.C. §18. 50.	The transaction would likely have the following effects, among others: (a) prices
for first-run, commercial movie tickets in mainstream theatres would likely increase to levels
above those that would prevail absent the transaction; and (b) the quality of mainstream theatres
and the mainstream theatre viewing experience in the relevant geographic areas would likely
decrease below levels that would prevail absent the transaction.	VIII. REQUESTED RELIEF
51.	The plaintiffs request: (a) adjudication that the proposed transaction would violate
Section 7 of the Clayton Act; (b) permanent injunctive relief to prevent the consummation of the
proposed transaction; (c) an award to each plaintiff of its costs in this action; and (d) such other
relief as is proper. FOR PLAINTIFF UNITED STATES OF
_______________/s/________________ CHRISTINE A. VARNEY	Assistant Attorney General
Deputy Assistant Attorney General	_______________/s/________________
PATRICIA A. BRINK	Deputy Director of Operations	_______________/s/________________
Assistant Chief	Litigation III
GREGG I. MALAWER (DC Bar No. 481685)
BENNETT J. MATELSON (DC Bar No.
454551)
CREIGHTON J. MACY
Telephone: (202) 616-5943
Fax: (202) 514-7308
E-mail: gregg.malawer@usdoj.gov
DATED: May 21, 2010
FOR PLAINTIFF STATE OF ILLINOIS:
Lisa Madigan, Attorney General _______________/s/________________
By: Robert Pratt
Chief, Antitrust Bureau Office of the Attorney General State of Illinois 100 West Randolph Street 13th Floor Chicago, Illinois 60601 Telephone: (312) 814-3722
Fax: (312) 814-4209
E-mail: RPratt@atg.state.il.us FOR PLAINTIFF STATE OF COLORADO:
John Suthers, Attorney General _______________/s/________________
By: Devin Laiho Assistant Attorney General
Office of the Colorado Attorney General 1525 Sherman St., Seventh Floor
Telephone: (303) 866-5079
E-mail: Devin.Laiho@state.co.us
FOR PLAINTIFF STATE OF INDIANA:
Greg Zoeller, Attorney General _______________/s/________________
By: Abigail Lawlis Kuzma
Office of the Indiana Attorney General Indiana Government Center South 302 W. Washington, 5th Floor Indianapolis, IN 46204
Telephone: (317) 234-6843 Fax: (317) 232-7979
E-mail: AKuzuma@atg.in.gov APPENDIX A DEFINITION OF HHI AND CALCULATIONS FOR MARKET
concentration. It is calculated by squaring the market share of each firm competing in the market
and then summing the resulting numbers. For example, for a market consisting of four firms with
shares of thirty, thirty, twenty and twenty percent, the HHI is 2,600 (302 + 302 + 202 + 202 =
2,600). The HHI takes into account the relative size and distribution of the firms in a market and
between those firms increases. Markets in which the HHI is between 1,000 and 1,800 points are considered
to be moderately concentrated, and those in which the HHI is in excess of 1,800
points are considered to be concentrated. Transactions that increase the HHI
by more than 100 points in concentrated markets presumptively raise antitrust
concerns under the Merger Guidelines. See Merger
Guidelines 1.51.