Warners

DIVORCEMENT FOR 20th-FOX,
LOEWS AND WARNER BROTHERS
Three-Year Limit Is Set
To Carry Out Plan
For Divestiture
NEW YORK—The statutory court wrote
the final chapter on divorcement this week.
The three-judge court ordered 20th Century-Fox.
Loew's. Inc.. and Warner Bros,
to separate their production-distribution
busine.;s from exhibition, to submit a plan
for divestiture within six months and to
complete the job of divorcement within
three years.
A THREE-YEAR DEADLINE
If the three remaining theatre-holding defendants
in the antitrust case and the Department
of Justice adhere to the court's
timetable, divorcement will be an accomplished
fact by Feb. 8, 1953—when the threeyear
deadline is reached.
Judge Augustus N. Hand of the Circuit
Court of Appeals and Judges Henry W. Goddard
and Alfred C. Coxe of United States
district court handed down their 61 -page
findings of fact and conclusions of law and
decrees for the three remaining Big Five
defendants and Columbia. United Artists and
Universal—the Little Three—late Wednesday
afternoon (8i. There were separate decrees
for the theatre-owning defendants and
the Little Three, with the document for the
Little Three consisting only of restraints in
trade practices. These restraints, however,
were identical with those invoked for 20th-
Fox. Loew's and Warners.
Tlie divorcement orders were not unexpected,
in view of the consent decrees already
negotiated by the government with
Paramount and RKO Radio, nor were the
trade restraints altered to any appreciable
degree from previous declarations of the court
on trade regulations. But there were several
surprises.
There was an absolute "no" to the maintenance
of a system of clearances. Neither
distributors nor exhibitors can become involved
in any sort of a set plan for runs.
The court did say that clearance "reasonable
as to time and area is essential in the
distribution and exhibition of pictures" and
that the practice is of "proved utility" in
the motion picture business. But clearance
cannot be established along any established
.system which distributors may agree to
maintain between themselves or with exhibitors.
DISCUSSED AT MINNEAPOLIS
This would halt such a plan as was discussed
at the annual National Allied meeting
in Minneapolis last fall in which it was
proposed that Allied members sit down with
distributor representatives to settle some of
the controversial clearance situations around
the country. This, under the decree, would
involve an arrangement to maintain a system.
The court held that the system of clearance
which had been set up by the majors
gave them "practical control" over the status
of in-,- ..ivPTi theatre in the country, even
COURT ORDERS ON DIVORCEMENT:
1. Within six months, 'iOth Century-
Fox, Warner Bros, and Loew's, Inc., shall
submit a plan for ultimate separation of
their distribution and production business
from their exhibition business, with
final divorcement to become effective on
Feb. 8, 1953—three years from the day
the decree was entered.
2. Within one year, the defendants and
the Department of Justice shall submit
a list of theatres which must be divested
to satisfy requirements of the Supreme
Court.
3. No distributing company resulting
from the divorcement may engage in exhibition
of pictures and no exhibition
company created through divorcement
may engage in film distribution except
on permission granted by the court, upon
a showing that "such engagement shall
not restrain competition in the distribution
or exhibition of motion pictures."
This apparently is designed to enable the
new distribution companies to acquire
TRADE PRACTICE
The decrees for 20th Century-Fox, Warner
Bros , Loew's Inc., Columbia, United Artists
and Universal restrain these companies:
1. From granting any licenses in which
minimum prices for admissions are fixed,
either in writing, through a committee,
by arbitration or in any other manner.
1. From agreeing with each other or
with any exhibitors or distributors to
maintain a system of clearances.
3. From granting any clearance between
theatres not in substantial competition.
4. From granting or enforcing clearance
against theatres in substantial competition
with the theatre receiving the
licenses in excess of what is reasonably
necessary to protect the run.
though it probably would be impossible to
prove there was discrimination in negotiation
for clearance and runs on a theatre by theatre
basis. But, added the court, the system
which had been set up made competition
against the defendants practically impossible.
The surprise in the decree handed down
for the Little Three was the court's restraint
on the granting of franchises, Columbia,
UA and Universal had argued for this right,
and Edward Raftery, UA's counsel, held that
franchises were the small independent's insurance
that he would get a steady supply
of product from a distributor. The court
was not inclined to accept this viewpoint
showcases they contend is essential to a
successful operation.
4. No exhibitor company resulting from
divorcement may acquire directly or indirectly
any interest in any theatre
divested by another defendant.
5. The defendants are restricted from
acquiring any new theatres unless it is
shown first to the court that the acquisition
will not restrain competition in exhibition,
or the new theatre replaces one
lost through physical destruction, expiration
or cancellation of a lease under
which such a theatre is held, or disposition
other than dispositions made in compliance
with the decree.
6. For the purpose of securing compliance
with the decree, the Department
of Justice is permitted reasonable access
to records of the defendants and to interview
personnel as well as to request written
reports as may be necessary for compliance.
RESTRAINTS:
5. From granting franchises, except
for the purpose of enabling an independent
exhibitor to operate a theatre in
competition with a theatre affiliated with
a defendant or with theatres in new
circuits which may be formed as a result
of divorcement.
6. From entering into formula deals
or master agreements with circuits, calling
for blanket picture deals.
7. From entering into any license in
which the right to exhibit one feature
is conditioned upon the exhibitor's taking
one or more other features.
8. From licensing features in any other
manner than by offering them theatre
by theatre and without discrimination
in favor of affiliated circuits, circuit
theatres or others.
and it held that franchises could only be
made to enable an independent exhibitor
to operate a theatre in competition with a
theatre affiliated with a defendant or with
theatres in new circuits which may be formed
as a result of divorcement.
However, the Little Three may find some
satisfaction in the decree handed down for
20th-Fox, Warners and Loew's through the
provision which gives the new distribution
companies the right to acquire theatres,
where it is proven the acquisitions will not
restrain competition in exhibition. In some
quarters this was taken as an invitation to
the Little Three to acquire showcases for
f! BOXOFFICE :: February 11, 1950