Source: http://en.wikisource.org/wiki/United_States_v._Paramount_Pictures,_Inc./Opinion_of_the_Court
Timestamp: 2013-12-07 15:17:16
Document Index: 229523490

Matched Legal Cases: ['§ 1', '§ 2', '§ 1', '§ 1', '§ 1', '§ 2', '§ 1', '§ 1']

United States v. Paramount Pictures, Inc./Opinion of the Court - Wikisource, the free online library
United States v. Paramount Pictures, Inc./Opinion of the Court
< United States v. Paramount Pictures, Inc.
United States v. Paramount Pictures, Inc. by William O. DouglasOpinion of the Court
903297United States v. Paramount Pictures, Inc. — Opinion of the CourtWilliam O. Douglas
Concurrence/DissentFrankfurter Wikipedia article
United States Supreme Court334 U.S. 131UNITED STATES v. PARAMOUNT PICTURES, INC. Argued: Feb. 9, 10, 11, 1948. --- Decided: May 3, 1948
These cases are here on appeal [1] from a judgment of a three-judge District Court [2] holding that the defendants had violated § 1 and § 2 of the Sherman Act, 26 Stat. 209, as amended, 50 Stat. 693, 15 U.S.C. §§ 1, 2, 15 U.S.C.A. §§ 1, 2, and granting an injunction and other relief. D.C., 66 F.Supp. 323; Id., D.C., 70 F.Supp. 53.
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 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 nonopolize, 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. [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 defendans . 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 and with independent theatre owners covering the operation of certain theatres. [4] By these later contracts minimum admission prices were often fixed for dozens of theatres 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.
The District Court found that two price-fixing conspiracies existed-a horizontal one between all the defendants, a vertical one between each distributor-defendant and its licensees. The latter was based on express agreements and was plainly established. The former was inferred from the pattern of price-fixing disclosed in the record. We think there was adequate foundation for it too. It is not necessary to find an express agreement in order to find a conspiracy. It is enough that a concert of action is contemplated and that the defendants conformed to the arrangement. Interstate Circuit v. United States, 306 U.S. 208, 226, 227, 59 S.Ct. 467, 474, 83 L.Ed. 610; United States v. Masonite Corp., 316 U.S. 265, 275, 62 S.Ct. 1070, 1076, 86 L.Ed. 1461. That was shown here.
On this phase of the case the main attack is on the decree which enjoins the defendants and their affiliates from granting any license, except to their own theatres, in which minimum prices for admission to a theatre are fixed in any manner or by any means. The argument runs as follows: United States v. General Electric Co., 272 U.S. 476, 47 S.Ct. 192, 71 L.Ed. 362, 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, 17 U.S.C.A. § 1, like the patent statutes, grants the owner exclusive rights. [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.
Clearances are designed to protect a particular run of a film against a subsequent run. [6] The District Court 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 theatres; in terms of a given period of clearance over specifically named theatres; in terms of so many days' clearance over specified areas or towns; or in terms of clearances as fixed by other distributors.
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. pages 343-346, that many clearances had no relation to the competitive factors which alone could justify them. [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 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.
Objection is made to a further provision of this part of the decree stating that 'Whenever any clearance provision is attacked as not legal under the provisions of this decree, the burden shall be upon the distributor to sustain the legality thereof.' We think that provision was justified. Clearances have been used along with price fixing to suppress competition with the theatres 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, 724, 64 S.Ct. 805, 814, 88 L.Ed. 1024. 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, 188, 65 S.Ct. 254, 261, 89 L.Ed. 160. (3) Pooling Agreements; Joint Ownership.
The District Court found the exhibitor-defendants had agreements with each other and their affiliates by which theatres of two or more of them, normally competitive, 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. Some of these agreements provided that the parties might not acquire other competitive theatres without first offering them for inclusion in the pool. The court concluded that the result of these agreements was to eliminate competition pro tanto both in exhibition and in distribution of features, [8] since the parties would naturally direct the films to the theatres in whose earnings they were interested.
There was another type of business arrangement that the District Court found to have the same effect as the pooling agreements just mentioned. Many theatres are owned jointly by two or more exhibitor-defendants or by an exhibitord efendant and an independent. [9] The result is, according to the District Court, that the theatres 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 'putative competition between itself and the other joint owner, who otherwise would be in a position to operate theatres independently.' The District Court found these joint ownerships of theatres to be unreasonable restraints of trade within the meaning of the Sherman Act.
The District Court also ordered disaffiliation in those instances where theatres were jointly owned by an exhibitor-defendant and an independent, and where the interest of the exhibitor-defendant was 'greater than 5% unless such interest shall be 95% or more,' an independent being defined for this part of the decree as 'any former, present or putative motion picture theatre operator which is not owned or controlled by the defendant holding the interest in question.' The exhibitor-defendants are authorized to acquire existing interests of the independents in these theatres if they establish, and if the District Court first finds that the acquisition 'will not unduly restrain competition in the exhibition of feature motion pict