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(or operators of theaters) who were engaged in competition with the circuit theaters, with the design of making such competition impossible.

È. Illegal coercion by the companies which both produced pictures and operated theaters which show pictures, through the use of their inonopolistic buying power to freeze out independent theaters and chains.

G. Illegal contracts made in general by the companies which distribute films, through the use of illegal trade practices such as block booking, blind selling of films, and arbitrary licensing conditions.

Monopoly control: There is not time to relate to this committee all the facts asserted by the Government to justify its charges. I shall indicate, however, some of the high lights.

(a) Control of feature films: The Government's complaint stresses the importance of feature films in enabling the acquisition of monopolistic control. Because of their box-office appeal, such pictures furnish a formidable and generally irresistible weapon to those seeking monopoly control. The Big Eight stand in a position of unchallengeable supremacy in this regard. Of the 4,538 feature films produced by the movie industry from 1930 to 1939, the Big Eight produced 2,967 features, or 65 percent of all the feature films (see pp. 14, 18, 20, 23, 27, 29, 30, 32). Most of the Big Eight also released films produced by other companies. The Government pointed out that

105. Fox, Loew's, Paramount, R-K-0, and Warner have collectively received during the past 5 years approximately 70 percent of the total film rentals received by all distributors of motion pictures from exhibition in the United States, and Columbia, United Artists, and Universal received about 25 percent of such total film rentals. Fox, Loew's, Paramount, R-K-0, and Warner have during each of said years collectively released about 80 percent of all firstclass features, and Columbia, United Artists, and Universal have during each of said years released about 15 percent of all first-class features. There was a total of 95 percent for the Big Fight. The first-class features represent those which have generally cost the most money to produce, have received the most intensive exploitation by distributors, have been successful in attracting patrons to theaters, and have yielded the largest gross box-office returns to exhibitors.

No other distributor has released more than 1 percent of such features during any of said years and in no year hive all other distributors combined released more than 5 percent of such features (pp. 39–40).

(b) Control of theaters: The Government's complaint also points out the importance of control of first-run theaters in metropolitan areas in any monopoly scheme, since control of such theaters enables their owner to virtually dictate the operations of most other theaters in any such area. Five of the Big Eight operate large numbers of first-run theaters (Paramount, Loew's, R-K-O, Warner's and Fox) in metropolitan cities and in addition operate large numbers of other theaters. They are as follows (pp. 15, 17, 21-22, 24, 26).

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181

Total.

2, 441

"More than 80 percent of all the metropolitan first-run theaters are affiliated theaters"; that is, controlled by some or all of the defendant companies (p. 56). The Government further points out that (p. 57)—

In only 4 of the 92 cities of the United States with populations of 100,000 and over are there no affiliated theaters. In 73 of the remaining 88, the producerexhibitors operate enough first-run theaters in each to receive a substantial majority of the total theater admissions paid in each of these cities. The 5 producerexhibitors (Paramount, Loew's, Fox, R-K-O, Warner's) also own or operate 1 or more theaters in 200 of the 283 cities of population between 25,000 and 100,000.

(c) Newsreels and shorts: Seven of the Big Eight also produce newsreels and shorts. Here are the figures for their production, either direct or through subsidiaries (see pp. 14, 19, 20, 23, 27, 29, 30):

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A. Conspiracies to unreasonably restrain and monopolize the production, distribu

tion, and exhibition of motion pictures participated in by all of the distributor defendants

142. All of the distributor defendants, each well knowing all the matters and things hereinbefore alleged, for many years last past, have combined and conspired with each other to unreasonably restrain, and pursuant to said combinations and conspiracies have in fact unreasonably restrained, trade and commerce in the production, distribution, and exhibition of motiin pictures in the United State, and have attempted to and have succeeded in monopolizing such trade and commerce in violation of sections 1 and 2 of the act of Congress approved July 2, 1890, entitled "An Act to Protect Trade and Commerce Against Unlawful Restraints and Monopolies,” commonly known and hereinafter referred to as the "Sherman Act,” in the following manner :

143. By concertedly aiding and assisting in the loaning and exchanging of production personnel under contract to each major producer, and costly production equipment owned by each major producer, to and with other major producers on uniform, noncompetitive terms.

144. By concertedly aiding and assisting the major producers to exclude independent producers from access to production personnel under contract to each major producer, and costly production equipment owned by each major producer, on the same terms on which they are made available to major producers.

145. By concertedly fixing license terms in contracts made before the licensees have had a fair opportunity to estimate the value and character of the films licensed and before such films have been completed or trade shown.

146. By concertedly fixing the run, clearance, and minimum admission price terms on which an exhibitor may play features in license agreements covering periods of a year or more.

147. By concertedly conditioning the licensing of one film or group of films upon the licensing of another film or group of films.

148. By concertedly conditioning the licensing of films in one theater or group of theaters other than common ownership or control or a common film-buying agent.

149. By concertedly discriminating with respect to the license terms granted to theaters in large circuits because such theaters are a part of a circuit

149h. Forcing of short subjects, newsreels, trailers, serials, reissues, westerns, and foreigns.

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In many instances each defendant distributor has refused to license its feature pictures to independent exhibitors unless they also agree to license and pay for the short subjects, newsreels, trailers, serials, reissues, westerns, and foreigns released by that defendant, even though the independent exhibitor does not wish to license such additional films and has no need for them. This practice is usually not enforced against such circuit theaters.

APPENDIX B

B. Conspiracies to unreasonably restrain and monopolize the exhibition of motion

pictures participated in by the producer-exhibitor defendants 150. All of the producer-exhibitor defendants, each well knowing all of the matters and things hereinbefore alleged, for many years last past, have combined and conspired with each other to unreasonably restrain and monopolize and pursuant to said combinations and conspiracies have in fact unreasonably restrained and monopolized, trade and commerce in the exhibition of motion pictures in the United States, in violation of sections 1 and 2 of the Sherman Act, in the following manner:

151. By concertedly conditioning the licensing of films distributed by one producer-exhibitor defendant in theaters operated by another such defendant upon the licensing of films distributed by the latter defendant in the theaters operated by the former defendant.

152. By concertedly excluding independently produced films from affiliated theaters.

153. By concertedly excluding unaffiliated exhibitors from the operation of competing first-run theaters in cities and towns where affiliated theaters are located.

154. By concertedly excluding unaffiliated exhibitors from operating competing theaters on the same run as the subsequent-run affiliated theaters in the cities and towns where such affiliated theaters are located.

155. By concertedly using the first and early run affiliated theaters to control the film supply, run, clearance, and admission prices of operators of competing unaffiliated theaters in the cities and towns in which affiliated theaters are located.

156. By concertedly coercing and intimidating unaffiliated exhibitors located in towns where there are no affiliated theaters to license their films upon arbitrary terms by expressed or implied threats to build or acquire a competing theater and use it to destroy the business of the unaffiliated exhibitor.

159. By agreeing to divide the available films among affiliated theaters owned or controlled by two or more producer-exhibitor defendants located in the same. competitive area, without competitive negotiations, in situations where such theaters would otherwise compete with each other for such films.

162. By concertedly effecting a division of the territory of the entire United States between them for theater operating purposes.

163. By concertedly acquiring and maintaining a monopoly of the business of exhibiting motion pictures in approximately 80 percent of the cities of the United States with populations of more than 100,000.

165. By concertedly acquiring and maintaining a monopoly of the business of exhibiting motion pictures in each of the following cities of the United States with populations of more than 100,000 for theaters affiliated with the producerexhibitor defendants respectly named thereafter (listing 73 cities, ranking in population from the largest city in the United States to the 92d largest).

164. By concertedly acquiring and maintaining a monopoly of the business of exhibiting motion pictures in all of the cities of the United States with populations of more than 1,000,000.

APPENDIX C

O. Conspiracies to unreasonably restrain and monopolize the production of

motion pictures participated in by the producer defendants 166. All of the producer defendants, each well knowing all of the matters and things hereinbefore alleged, for many years last past, have combined and conspired with each other to unreasonably restrain and monopolize, and pursuant to said combinations and conspiracies have in fact unreasonably restrained trade and commerce in the production of motion pictures in the United States, and have attempted to and have succeeded in monopolizing

such trade and commerce in violation of sections 1 and 2 of the Sherman Act, in the following manner :

167. By concertedly placing under contract most of the valuable stars, featured players, directors, technicians, and others who have gained fame, prestige, renown, artistic, technical, or other great value in the production branch of the industry.

168. By concertedly loaning and exchanging production personnel under contract to each major producer, and costly production equipment owned by each major producer, to and with other major producers on uniform, noncompetitive terms.

169. By concertedly excluding independent producers from access to production personnel under contract to each major producer, and costly production equipment owned by each major producer, on the same terms on which they are made available to major producers.

APPENDIX D

D. Combinations of which each producer-exhibitor defendant is a member which

are illegal per se 170. Each of the combinations of parent and subsidiary corporations which respectively form Fox, Loew's, Paramount, R-K-0, and Warner constitutes a separte combination and monopoly in restrain of trade, which in and of itself has violated sections 1 and 2 of the Sherman Act in the following manner:

171. By preventing independent producers from competing with such a combination in the production of films.

172. By preventing independent distributors from competing with such a combination in the distribution of films.

173. By preventing unaffiliated exhibitors from competing with such a combination in the operation of theaters in cities and towns where theaters operated by it are located.

174. By acquiring and maintaining a monopoly of the business of exhibiting motion pictures in areas serving a substantial percentage of the total population of the United States.

175. By coercing and intimidating unaffiliated exhibitors located in towns where such a combination operates no theaters to license its films upon arbi. trary terms by expressed or implied threats to build or acquire a competing theater and use it to destroy the business of such unaffiliated exhibitors.

176. By coercing and intimidating unaffiliated exhibitors located in towns where such a combination operates theaters or where it desires to operate theaters, into relinquishing control of their theaters or a share of the profits thereof, to it, by expressed or implied threats to deprive them of access to its films or to so limit the terms and conditions on which they license such films that they may no longer be profitably exhibited by them.

177. By conditioning the licensing of films distributed by such a combination in theaters operated by another such combination, upon the licensing of films distributed by the latter combination in theaters operated by the former combination.

APPENDIX E

E. Illegal contracts between each distributor defendant and circuit theaters

178. Each defendant distributor, well knowing all the matters and things hereinbefore alleged, for many years last past, has contracted with various theater circuits throughout the United States, including the affiliated circuits hereinbefore mentioned, to restrain and pursuant to such contract, has in fact unreasonably restrained trade and commerce in the distribution and exhibitio of motion pictures among the several States of the United States, in violation of section 1 of the Sherman Act, by entering into licensing agreements with said circuits of theaters which contain provisions calculated to impose on independent exhibitors in competition with such circuit theaters, one or more of the discriminatory restrictions referred to in the lettered subparagraphs of paragraph 149, regardless of whether such license contracts were made pursuant to any prior concerted action, combination, or conspiracy between two or more defendants.

APPENDIX F

F. Illegal coercion by each producer-exhibitor defendant 179. Each producer-exhibitor defendant, well knowing all the matters and things hereinbefore alleged, for many years last past, has violated section 2 of the Sherman Act by using the monopolistic buying power of its circuit of theaters to compel each of the defendant distributors and other distributors of films to enter into licensing agreements with its circuit on terms which prevent unaffiliated theaters from in fact competing with its circuit theaters, either with respect to the terms on which said unaffiliated theaters license films or the terms on which they exhibit films to the public, regardless of whether such license contracts were made pursuant to any prior concerted action, combination, or conspiracy between two or more defendants.

APPENDIX G

G. Illegal contracts made by each distributor defendant with exhibitors

generally

180. Each distributor defendant, well knowing all the matters and things hereinbefore alleged, for many years last past has made divers contracts with exhibitors generally throughout the United States to unreasonably restrain and, pursuant to such license contracts, has in fact unreasonably restrained trade and commerce in the distribution, production, and exhibition of motion pictures in the United States in violation of section 1 of the Sherman Act, in the following manner, regardless of whether such license contracts were made pursuant to any concerted action, combination, or conspiracy between two or more defendants (listing 7 practices complained of).

May I say in connection with the introduction of the amendment to the pending resolution that it was not my thought, and I rather guess it was not particularly the thought of Senator Clark who joined in its introduction, to occasion an extended study by this committee of charges of monopoly. The truth is that many such studies or a number of such studies have been made in recent years. I would not want to wish upon this committee necessarily the task of going back into and over that ground again and again and again. The purpose that I was striving to serve with reference to the amendment to the resolution was that of closing the door to whatever prospect there was of an objection being raised in reference to the existence of a monopoly.

I could not hope before you this morning to demonstrate the control of a few men over a majority of the seating capacity of the theaters of the United States without referring to the existence of a monopoly, and I did not want to chance being questioned or estopped from making a point as important as is that one of the moving-picture producers' control of the places of exhibition for the films in our country.

Senator CLARK of Idaho. I think, Senator, that even without your latest amendment, the monopolistic feature of this industry, if it exists and if it is shown to exist, would be pertinent as showing the peculiar viciousness of the propaganda. May I just elaborate on that. In a measure, everything that we read or hear on the war is propaganda. That is true. If Lindbergh speaks, that is propaganda for one side. If Senator Wheeler or yourself speak that might, in the broad sense of the term, be propaganda for the other side.

Senator MCFARLAND. You would not admit that, would you? [Laughter and applause.]

Senator CLARK of Idaho. The point that I take it you are making is that people either listen to you or listen to Colonel Lindbergh and Senator Wheeler on one side, or, we will say, the Fight for Freedom

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