Interstate Circuit, Inc. v. United States
306 U.S. 208 (1939)

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U.S. Supreme Court

Interstate Circuit, Inc. v. United States, 306 U.S. 208 (1939)

Interstate Circuit, Inc. v. United States

No. 269

Argued January 11, 1939

Decided February 13, 1939*

306 U.S. 208




1. Where distributors of motion picture films, owning or controlling the copyrights and engaged, interstate, in the business of supplying the films to theaters for exhibition under license contracts, join in making and carrying out an agreement with the owners of the theaters in certain cities to whom their licenses for first-run exhibitions of "feature" pictures in those cities are confined, whereby the distributors, in granting licenses to other theaters in the same places for subsequent runs of such films require of them that they observe a minimum price of admission and abstain from presenting a picture so licensed with any other feature picture at the same show -- the purpose and effect of these restrictions being to maintain the higher prices of the first-run theaters and protect them from the competition of the others -- such agreement is an unreasonable restraint of interstate commerce, and contrary to the Federal Anti-Trust Act. Pp. 306 U. S. 221, 306 U. S. 232.

2. The evidence in this case supported the inference that the distributors of the films acted in concert in making their several agreements with the first-run exhibitors and in imposing the restrictions so stipulated on the subsequent-run exhibitors. P. 306 U. S. 221.

3. Upon the production of such proof, the burden rested upon those implicated to explain away or contradict it. P. 306 U. S. 225.

4. The production of weak evidence when strong is available leads to the conclusion that the strong would have been adverse. Silence then becomes evidence of the most convincing character. P. 306 U. S. 226.

5. Acceptance by competitors, knowing that concerted action is contemplated, of an invitation to participate in a plan the necessary consequence of which, if carried out, is restraint of interstate commerce is sufficient to establish an unlawful conspiracy under the Sherman Act. P. 306 U. S. 227.

Page 306 U. S. 209

6. A contract between the copyright owner of motion picture films and the owner of motion picture theaters restraining the competitive distribution of the films in the open market in order to protect the theater owner from competition of other theaters is not protected by the opyright Act. P. 306 U. S. 227.

7. The owner of those motion picture theaters in several cities in which the first runs of copyrighted "feature" pictures were exhibted, taking advantage of its monopoly, secured from each of several copyright owners who distributed such films in interstate commerce an agreement binding the distributor when licensing subsequent runs of his films at other theaters in those cities to require the licensee to observe a certain minimum admission price and to abstain from exhibiting the picture in a double bill with any other "feature" film. The purpose of the arrangement was to protect the owner of the first-run theaters from competition of subsequent-run theaters, and its effect was to impose undue restraints upon competing theater businesses habitually exhibiting the competitive pictures of different copyright owners, and to enable the favored theater oner to dominate the business of his competitors.

Held: that the contracts were not protected by the Copyright Act, and that, aside from any agreement between the distributors themselves, they were contrary to the Anti-Trust Act. P. 306 U. S. 230.

20 F.Supp. 868 affirmed.

Appeals from a decree of the District Court awarding an injunction in a suit brought by the Government under the Sherman Anti-Trust Act.

Page 306 U. S. 213

MR. JUSTICE STONE delivered the opinion of the Court.

This case is here on appeal under § 2 of the Act of February 11, 1903, 32 Stat. 823, 15 U.S.C. § 29, and § 238 of the Judicial Code, as amended by the Act of February 13, 1925, 43 Stat. 936, 938, 28 U.S.C. § 345, from a final decree of the District Court for northern Texas restraining appellants from continuing in a combination and conspiracy condemned by the court as a violation of § 1 of the Sherman Anti-Trust Act, 26 Stat. 209, 15 U.S.C. § 1, and from enforcing or renewing certain contracts found by the court to have been entered into in pursuance of the conspiracy. 20 F.Supp. 868. Upon a previous appeal, this Court set aside the decree and remanded the cause to the District Court for further proceedings because of its failure to state findings of fact and conclusions of law as required by Equity Rule 70 1/2. 304 U. S. 304 U.S. 55. The case is

Page 306 U. S. 214

now before us on findings of the District Court specifically stating that appellants did, in fact, agree with each other to enter into and carry out the contracts which the court found to result in unreasonable, and therefore unlawful, restraints of interstate commerce.

Appellants comprise the two groups of defendants in the District Court. The members of one group of eight corporations which are distributors of motion picture films, and the Texas agents of two of them, are appellants in No. 270. The other group, corporations and individuals engaged in exhibiting motion pictures in Texas, and some of them in New Mexico, appeals in No. 269. The distributor appellants are engaged in the business of distributing in interstate commerce motion picture films, copyrights on which they own or control, for exhibition in theaters throughout the United States. They distribute about 75 percent of all first-class feature films exhibited in the United States. They solicit from motion picture theater owners and managers in Texas and other states applications for licenses to exhibit films, and forward the applications, when received from such exhibitors, to their respective New York offices, where they are accepted or rejected. If the applications are accepted, the distributors ship the films from points outside the states of exhibition to their exchanges within those states, from which, pursuant to the license agreements, the films are delivered to the local theaters for exhibition. After exhibition, the films are reshipped to the distributors at points outside the state.

The exhibitor group of appellants consists of Interstate Circuit, Inc., and Texas Consolidated Theaters, Inc., and Hoblitzelle and O'Donnell, who are, respectively, president and general manager of both, and in active charge of their business operations. The two corporations are affiliated with each other and with Paramount Pictures Distributing Co., Inc., one of the distributor appellants.

Page 306 U. S. 215

Interstate operates forty-three first-run and second-run motion picture theaters, located in six Texas cities. [Footnote 1] It has a complete monopoly of first-run theaters in these cities, except for one in Houston operated by one distributor's Texas agent. In most of these theaters, the admission price for adults for the better seats at night is 40 cents or more. Interstate also operates several subsequent-run theaters in each of these cities, twenty-two in all, but, in all but Galveston, there are other subsequent-run theaters which compete with both its first- and subsequent-run theaters in those cities.

Texas Consolidated operates sixty-six theaters, some first- and some subsequent-run houses, in various cities and towns in the Rio Grande Valley and elsewhere in Texas and in New Mexico. In some of these cities, there are no competing theaters, and in six leading cities, there are no competing first-run theaters. It has no theaters in the six Texas cities in which Interstate operates. That Interstate and Texas Consolidated dominate the motion picture business in the cities where their theaters are located is indicated by the fact that, at the time of the contracts in question, Interstate and Consolidated each contributed more than 74 percent. of all the license fees paid by the motion picture theaters in their respective territories to the distributor appellants. [Footnote 2]

On July 11, 1934, following a previous communication on the subject to the eight branch managers of the distributor

Page 306 U. S. 216

appellants, O'Donnell, the manager of Interstate and Consolidated, sent to each of them a letter [Footnote 3] on the letterhead of Interstate, each letter naming all of them as addressees, in which he asked compliance with two demands as a condition of Interstate's continued exhibition of the distributors' films in its "A" or first-run theatres

Page 306 U. S. 217

at a night admission of 40 cents or more. [Footnote 4] One demand was that the distributors

"agree that, in selling their product to subsequent runs, that this 'A' product will never be exhibited at any time or in any theater at a smaller admission price than 25

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