This week, a federal judge gave a thumbs up to a Department of Justice effort to terminate what’s become known as the Paramount Consent Decrees — a set of antitrust rules and regulations that have been in place since the 1940s. The decrees essentially barred major movie studios at the time from also owning movie theaters, alongside regulations on several other anti-competitive business practices.
In a 17-page decision this week, U.S. District Judge Analisa Torres said changes in the industry, including new antitrust laws and regulations, have made the Paramount Consent Decrees unnecessary.
“[S]eventy years of technological innovation, new competitors and business models, and shifting consumer demand have fundamentally changed the industry,” Torres wrote.
Torres also pointed out that several of the major movie studios bound the decrees, like RKO, no longer exist, and those still bound by the rules are up against companies for which the decrees don’t apply.
“None of the internet streaming companies — Netflix, Amazon, Apple and others — that produce and distribute movies are subject to the Decrees. Thus, the remaining Defendants are subject to legal constraints that do not apply to their competitors,” Torres added.
Independent theaters raised concerns about terminating the decrees, warning such a move could open the door to the return of anti-competitive business practices that brought on the decrees in the first place.
Among those practices are block booking and circuit dealing. Block booking refers to the practice of bundling multiple films under one theater license, meaning that theaters could only carry a given movie if they agreed to carry other movies bundled within the same package. Meanwhile, circuit dealing describes the act of licensing a film to all theaters within a given circuit instead of via a theater-by-theater basis.
The plan to terminate the decree will include a two-year “sunset” period where restrictions on both block booking and circuit dealing will remain in place while the industry works to adjust to their new realities.
As for concerns of major studios swooping in to control movie theater chains, Torres wrote that the there’s a low “likelihood of a potential future violation,” adding that there’s been little evidence of major players trying to acquire national chains or engage in the types of activities the decrees covered. Newer companies have shown interest in acquiring movie theater locations, like Netflix’s deals for New York City’s Paris Theatre or Hollywood’s Egyptian Theatre, but those efforts appear to be more focused on special one-off events and premieres and less about establishing a nationwide theater footprint.
“If there is a future violation, however, that party would be subject to the liability under the full extent of federal and state antitrust laws, as they are today,” Torres wrote.
In all, it’s possible the full ramifications of this decision won’t be felt for some time to come, especially with a two-year sunset period in place for block booking and circuit dealing. We’ll continue to keep an eye on developments, including potential fallout from this decision.
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