Opinion ID: 404168
Heading Depth: 1
Heading Rank: 2

Heading: the validity of the trade screening requirement

Text: 8 In United States v. Paramount Pictures, 334 U.S. 131, 68 S.Ct. 915, 92 L.Ed. 1260 (1948), the seminal antitrust case which restructured the film industry, see M. Conant, Antitrust in the Motion Picture Industry (1960), the Supreme Court defined blind bidding as the practice whereby a distributor licenses a feature before the exhibitor is afforded an opportunity to view it. 334 U.S. 157, n. 11, 68 S.Ct. at 929, n. 11. The Court approved a district court antitrust decree designed to remedy the problems-mainly misrepresentation and deceptive trade practices-created by that practice. Id. The Court quoted language from the decree setting out some of the reasons exhibitors need accurate information about films before licensing negotiations take place. It appears from the Supreme Court opinion and from the record in this case that potential abuses arising from blind bidding have been a legitimate concern of exhibitors for many years and a bone of contention within the industry. Judge Duncan found that the exhibitors' need for accurate information about films before they buy is real and that trade screening is the best remedy. 496 F.Supp. at 421. Judge Duncan stated that by permitting Ohio exhibitors to view the film before bidding, it permits the exhibitors to use their own business judgment in determining whether and on what terms, to bid for a motion picture license. It effectively removes the unfairness inherent in the blind bidding process exhibitors described as 'buying a pig in a poke.'  496 F.Supp. at 431. 9 State statutes repealing the doctrine of caveat emptor in its various forms in order to restrain possible deceptive trade practice in various industries are common. Statutes which require that buyers and sellers provide each other with accurate information about their products and services in order to counteract deceptive and misleading practices are based on legitimate state interests. The trade screening requirement here is a variation on that statutory theme. The fact that one purpose of trade screening may be, as Judge Duncan found, to redress an imbalance in bargaining power in favor of in-state exhibitors-a state interest we find highly suspect under the commerce clause (as explained in section IV below)-does not render invalid the state's legitimate interest in restraining deceptive trade practices by encouraging the flow of accurate information prior to contracting. 10 The District Court found as fact that the delays in film release caused by the trade screening requirement, although possible, appear to be infrequent and relatively minor in nature. We do not view this finding as clearly erroneous. Trade screening has been used in the industry for many years; and, as Judge Duncan found, it is content-neutral under the first amendment. We agree with the District Judge that in light of the problems of deception that it tends to remedy-using the words of the Supreme Court in Paramount, 334 U.S. at 157, n.11, 68 S.Ct. at 929, n. 11-it does not impose undue burdens on producers and distributors under that amendment, see Konigsberg v. State Bar of California, 366 U.S. 36 at 50-51, 81 S.Ct. 997, at 1006-1007, 6 L.Ed.2d 105 (1961); United States v. O'Brien, 391 U.S. 367, 377, 88 S.Ct. 1673, 1679, 20 L.Ed.2d 672 (1968); or the commerce clause, see Pike v. Bruce Church, Inc., 397 U.S. 137, 142, 90 S.Ct. 844, 847, 25 L.Ed.2d 174 (1970); Exxon Corp. v. Governor of Md., 437 U.S. 117, 126-28, 98 S.Ct. 2207, 2214-2215, 57 L.Ed.2d 91 (1978). Like the statute upheld in Exxon prohibiting certain types of vertical integration in the gasoline business, the trade screening requirement is facially neutral and does not distinguish between in-state and out-of-state distributors. It is true, however, as in Exxon, that its impact falls on out-of-state business because there are no in-state producers and distributors. This fact does not invalidate the statute, as the Court held in Exxon, but it may call for a more penetrating review of the burdens imposed on commerce and the state interest served. As previously noted, Ohio has an easily explained, traditional state interest supporting the trade screening requirement; and, like the District Court, we do not find a less restrictive alternative that would serve that purpose. 11 Nor does the trade screening requirement violate restrictions implicitly placed upon state regulatory authority by the antitrust and copyright laws. The prohibition of blind bidding insures more informed and rational decision making in the marketplace. The anti-competitive effects that may be incidental to trade screening-that exhibitors willing to blind bid are now forbidden to do so-are not the types of restraints the antitrust laws were designed to prohibit. For, as the Supreme Court noted in Exxon, if an adverse effect on competition were, in and of itself, enough to render a state statute invalid, the State's power to engage in economic regulation would effectively be destroyed. 437 U.S. at 133, 98 S.Ct. at 2217. 12 Even if the prohibition of blind bidding were shown to require behavior inconsistent with the Sherman Act, Ohio's statute regulating motion picture licensing would fall within the state action exemption to the antitrust laws. Parker v. Brown, 317 U.S. 341, 63 S.Ct. 307, 87 L.Ed. 315 (1943); New Motor Vehicle Bd. of Cal. v. Orrin W. Fox Co., 439 U.S. 96, 109, 99 S.Ct. 403, 411, 58 L.Ed.2d 361 (1978). There is no question that the trade screening requirement is clearly articulated and affirmatively expressed (by the state legislature) designed to displace unfettered business freedom in methods of licensing motion pictures. See New Motor Vehicle Bd. of Cal. v. Orrin W. Fox Co., 439 U.S. at 109, 99 S.Ct. at 411. Furthermore, the trade screening requirement is entirely self executing. This feature of the statute delegates no authority to either private parties or non-state agencies to control price, supply, demand, or market entry. Thus the active state supervision requirement discussed in California Retail Liquor Dealers Association v. Midcal Aluminum, Inc., et al., 445 U.S. 97, 100 S.Ct. 937, 63 L.Ed.2d 233 (1980), need not be present. The state need not itself conduct the screening in order for the exemption to apply. This is not a case in which the state simply authorizes price-setting and enforces the prices set by private parties, as in Midcal, 100 S.Ct. at 943, or in which anticompetitive conduct is 'promoted' by state action, id., but is rather a case in which conduct is compelled by direction of the State action as a sovereign, id. In such cases the self-executing statute itself plus judicial enforcement satisfies the supervision requirement. 3 13 Finally, turning to the copyright preemption challenge, 4 we do not find authority for the argument that state trade regulation which affects distribution procedures and, indirectly, monetary returns from copyrighted property is invalidated implicitly or explicitly by the terms of the Copyright Act, 17 U.S.C. § 101 et seq. or the copyright clause. After thorough analysis, Judge Duncan rejected each of these claims, 496 F.Supp. at 441-48. We agree with his decision and his analysis. 14