The United States sued to restrain violations of §§ 1 and 2 of
the Sherman Act by a parent corporation, three of its officers and
directors and five of its subsidiaries, which owned or had a
financial interest in a large chain of motion picture theaters
located in six states. The District Court found that they had used
the combined buying power of the entire circuit to negotiate master
agreements with the major film distributors, which had the effect
of depriving competitors of first- and second-run films; obtained
from the distributors unreasonable "clearances," long-term
agreements for rentals of films and other concessions which gave
them unreasonable advantages over competitors; threatened to build
theaters or to open closed theaters in order to stop or prevent
competition; cut admission prices; obtained from competitors whom
they bought out agreements not to compete for long terms of years,
which sometimes extended to towns other than those in which the
purchased theaters operated, and thus conspired with each other and
with the eight major film distributors to violate §§ 1 and 2 of the
Sherman Act. The District Court enjoined these practices and
ordered defendants to divest themselves of certain theaters.
Page 334 U. S. 111
1. In negotiating for films, the combining of theaters in towns
in which the circuit had a monopoly with those in towns in which it
had competitors was a restraint of trade and a use of monopoly
power in violation of §§ 1 and 2 of the Sherman Act. United
States v. Griffith, ante
p. 334 U. S. 100
334 U. S.
2. The concerted action of the parent company, its subsidiaries,
and certain of the parent company's officers and directors in that
endeavor was a conspiracy which was not immunized by reason of the
fact that the members were closely affiliated, rather than
independent. P. 334 U. S.
3. The negotiations which appellants had with the distributors
and which resulted in the execution of master agreements between
the distributors and exhibitors brought the distributors into the
unlawful combination with the defendants. P. 334 U. S.
4. A conspiracy between the exhibitors and each of the named
distributors having been established by independent evidence,
inter-office letters and memoranda between officials of the
distributors were admissible in evidence against all conspirators
as declarations of some of the associates, so far as they were in
furtherance of the unlawful project. Pp. 334 U. S.
5. Detailed challenges to certain findings on which the District
Court based its holding that appellants had violated the Act are
examined, and the findings are sustained (pp. 334 U. S.
-124), except in the following respects:
(a) The finding that appellants obtained film rental concessions
not made available to independent operators is not intelligible,
and is set aside in order that it may be clarified on remand of the
cause. P. 334 U. S.
(b) A bare finding that appellants at times cut admission prices
without a showing that such action was, in purpose or effect,
employed as an instrument of monopoly power is not adequate to
support an injunction against price-cutting. Pp. 334 U. S.
(c) The findings as to "unreasonable clearances" are set aside
in order that the District Court may make further findings which
reflect an appraisal of the complex factors bearing on the question
of reasonableness. See United States v. Paramount Pictures,
p. 334 U. S. 131
334 U. S.
6. Detailed objections to those parts of the decree which
enjoined appellants from specified acts or practices are
considered, and the decree is sustained (pp. 334 U. S.
-126), except in the following respects:
(a) To the extent that provisions of the decree are directed to
practices reflected in findings set aside by this Court, they
Page 334 U. S. 112
must be reexamined by the District Court on remand of the cause.
P. 334 U. S.
(b) The general injunction against "monopolizing" first- and
second-run films is set aside, since the precise practices found to
have violated the Act should be specifically enjoined. Pp.
334 U. S.
7. The provisions of the decree which require appellants to
divest themselves of certain theaters are set aside so that the
District Court can make the findings necessary for an appropriate
decree. Pp. 334 U. S.
(a) In this type of case, an injunction against future
violations is not adequate to protect the public interest, and
divestiture or dissolution is an essential feature of the decree.
P. 334 U. S.
(b) Divestiture or dissolution must take account of the present
and future conditions of the particular industry, as well as past
violations. P. 334 U. S.
(c) It serves several functions: (1) it puts an end to the
combination or conspiracy when that is itself the violation; (2) it
deprives the defendants of the benefits of their conspiracy, and
(3) it is designed to break up or render impotent the monopoly
power which violates the Act. Pp. 334 U. S.
(d) In applying this remedy, it is essential for the District
Court to determine what were the fruits of the unlawful conspiracy,
and to consider what is the best way of requiring appellants to
surrender them. P. 334 U. S.
(e) Even after appellants are deprived of the fruits of their
conspiracy, it will be necessary for the District Court to consider
whether appellants' theater circuit will still constitute a
monopoly power of the kind which the Act condemns, in spite of the
restrictive provisions of the decree. Pp. 334 U. S.
8. The provisions of the decree providing for the dissolution of
the pooling agreements, the prohibition against buying or booking
films for theaters in which appellants have no financial interest,
and the restriction on future acquisitions of theaters, are
approved. Pp. 334 U. S.
affirmed in part and reversed in part.
In a suit by the United States to restrain violations of §§ 1
and 2 of the Sherman Act by a large chain of motion picture
exhibitors, the District Court entered a decree enjoining certain
practices and requiring the chain to
Page 334 U. S. 113
divest itself of certain theaters. 63 F.
. On appeal to this Court, affirmed in part,
reversed in part, and remanded,
p. 334 U. S.
MR. JUSTICE DOUGLAS delivered the opinion of the Court.
This is a companion case to United States v. Griffith,
p. 334 U. S. 100
is here by way of appeal from the District Court. The appellants,
who were defendants below, are a parent company, three of its
officers and directors, and five of its wholly owned subsidiaries
-- to whom we refer collectively as Schine. As of May 19, 1942,
Schine owned or had a financial interest in a chain of
approximately 148 motion picture theaters [Footnote 1
] located in 76 towns in 6 states, [Footnote 2
] the greater portion being
78 theaters in 41 towns in New York and 36 theaters in 17 towns in
Ohio. Of the 76 towns, 60 were closed towns, i.e.,
where Schine had the only theater or
Page 334 U. S. 114
all the theaters in town. [Footnote 3
] This chain was acquired beginning in 1920, and
is the largest independent theater circuit in the country. Since
1931, Schine acquired 118 theaters. Since 1928, the closed towns
increased by 56. In 1941, there were only three towns in which
Schine's competitors were playing major film products.
The United States sued to prevent and restrain appellants from
violating §§ 1 and 2 of the Sherman Act. 26 Stat. 209, 50 Stat.
693, 15 U.S.C. §§ 1, 2. The complaint charged that the Schine
interests, by pooling their entire circuit buying power in the
negotiation of films from the distributors so as to combine its
closed and open towns, got advantages for itself and imposed
restrictions on its competitors which otherwise would not have been
possible. It charged that the distributors granted certain favors
to Schine which were withheld from Schine's competitors,
giving Schine the first run, refusing at times
second runs to Schine's competitors, charging Schine with lower
rentals than it charged others, licensing to Schine films in excess
of Schine's reasonable requirements.
The complaint also charged that Schine had forced or attempted
to force competitors out of business, and where competitors would
not sell out to Schine had threatened to build or had built an
opposition theater, had threatened to deprive or had deprived
competitors of a desirable film or run, had cut admission prices,
and had engaged in other unfair practices. In these and other ways,
it was charged that Schine had used its circuit buying power to
maintain its monopoly and to
Page 334 U. S. 115
restrain trade. The conspiracy charged was between the Schine
defendants themselves and between them and the distributors.
The District Court found that the appellants had conspired with
each other and with the eight major film distributors [Footnote 4
] to violate § 1 and § 2 of
the Sherman Act. Its findings may be summarized as follows:
The entire circuit buying power was utilized to negotiate films
for all the theaters from the distributors, the negotiations ending
in master agreements between a distributor and the exhibitor. This
large buying power [Footnote 5
gave Schine the "opportunity to exert pressure on the distributors
to obtain preferences." Moreover, Schine, by combining its closed
and open towns in its negotiations for films, was able "to dictate
terms to the distributors." Schine bought films for some theaters
in which it had no financial interest (but as respects most of
which it had an option to purchase). It also performed the service
(under so-called pooling agreements) for groups of theaters in
which it and others were interested. Through the use of such buying
power, Schine arbitrarily deprived competitors of first and
second-run pictures, was able in many towns to secure unreasonable
clearances [Footnote 6
after year of from 90 to 180 days, obtained long-term agreements
for rental of film (franchises) which gave it preferences not given
independent operators, [Footnote
] and received
Page 334 U. S. 116
more advantageous concessions from the distributors respecting
admission prices than competitors were able to get. Schine made
threats to build or to open closed theaters in order to force sales
of theaters in various towns or to prevent entry by an independent
operator. Schine cut admission prices. Schine obtained from
competitors whom it bought out agreements not to compete for long
terms of years, which agreements at times extended to other towns
as well. Schine obtained film rental concessions not made available
to independents. The District Court entered a decree enjoining
these practices and requiring a divestiture by Schine of various of
its theaters. 63 F.
For the reasons stated in United States v.
p. 334 U. S. 100
combining of the open and closed towns for the negotiation of films
for the circuit was a restraint of trade and the use of monopoly
power in violation of § 1 and § 2 of the Act. The concerted action
of the parent company, its subsidiaries, and the named officers and
directors in that endeavor was a conspiracy which was not immunized
by reason of the fact that the members were closely affiliated,
rather than independent. See United States v. Yellow Cab
Co., 332 U. S. 218
332 U. S. 227
United States v. Crescent Amusement Co., 323 U.
. The negotiations which Schine had with the
distributors resulted in the execution of master agreements between
the distributors and exhibitors. This brought the distributors into
unlawful combinations with the Schine defendants. See United
States v. Paramount Pictures, Inc., post,
p. 334 U. S. 131
course of business makes plain that the commerce affected was
interstate. United States v. Crescent Amusement Co. supra,
pp. 332 U. S. 180
332 U. S.
Appellants object to admission in evidence of
numerous inter-office communications between officials of the
distributors with whom Schine dealt. The District Court placed
considerable reliance on them in making
Page 334 U. S. 117
its findings. We will advert later to the use of these documents
to prove the unreasonableness of clearances. It is sufficient at
this point to say that, since a conspiracy between Schine and each
of the named distributors was established by independent evidence,
these inter-office letters and memoranda were admissible against
all conspirators as declarations of some of the associates so far
as they were in furtherance of the unlawful project. Hitchman
Coal & Coke Co. v. Mitchell, 245 U.
, 245 U. S. 249
United States v. Crescent Amusement Co., supra,
323 U. S. 184
United States v. United States Gypsum Co., 333 U.
Appellants make detailed challenges to many of
the other findings of the District Court on which it based its
holdings that appellants violated the Act.
(1) They vigorously attack the findings that Schine arbitrarily
deprived independents of first-and second-run pictures. Their chief
contention is that there is no support for the finding of arbitrary
action on the part of Schine, that Schine did not buy pictures
beyond its needs in order to keep them away from its competitors,
that any successful purchaser of a first- or second-run picture has
an exclusive privilege that necessarily deprives competitors of the
film for the period of the run, and that any advantage which Schine
obtained in this regard was the result of the operation of forces
As we read the evidence underlying this finding, it was the use
of Schine's monopoly power -- represented by combining the buying
power of the open and closed towns -- which enabled it to obtain
that which its competitors could not obtain. Deprivation of
competitors of first- and second-run pictures in that way was
indeed arbitrary in the sense that it was the product of monopoly
power, not of competitive forces. That is the construction we give
the finding of the District Court, and, as so construed, it is
supported by substantial evidence. There may be exceptions in the
case of some subsidiary
Page 334 U. S. 118
findings. But we do not stop to relate them. For, even if we lay
them aside as clearly erroneous for lack of support in the
evidence, the conclusion is irresistible that Schine so used its
monopoly power to gain advantages and preferences which, on a
purely competitive basis, it could not have achieved.
(2) Defense of the long-term film rental agreements -- the
franchises -- is made on the ground that they were accepted methods
of doing business in the industry, [Footnote 8
] that they were favored by distributors as
devices to stabilize their end of the business and to save expense,
and that they were not chosen by Schine as instruments to suppress
competition. But it seems to us apparent that their use served to
intensify the impact of Schine's monopoly power on its competitors.
For, when Schine's buying power was used to acquire films produced
by a distributor for two or three years, rather than for one year
alone, it plainly strengthened, through the exercise of monopoly
power, such dominant position as Schine had over each of its
Appellants also challenge the finding that Schine obtained
preferences through the franchises, in addition to long-term
supplies of pictures, which were not granted independent operators.
One of these preferences was found to be the unfair and inequitable
clearance provisions; another, special film rental concessions. We
will consider these later. The other aspects of the findings we do
not stop to analyze. For the franchise agreements, as employed by
Schine, are unreasonable restraints of trade for the reasons
stated, and they must be permanently enjoined,
Page 334 U. S. 119
even though we assume their collateral aspects are not
accurately described by the District Court, and so may not be
(3) Appellants challenge the finding that Schine made threats to
build theaters or to open closed ones in order to force sales of
theaters in various towns or to prevent entry by an independent
operator. There are inaccuracies in some of the subsidiary
findings. There are episodes which are susceptible of two
interpretations, one wholly innocent and the other unlawful. There
are still other episodes which have the unmistakable earmarks of
the use of monopoly power with intent to expand an empire and to
restrain competition. On the whole, we think the District Court was
justified in drawing the inference of unlawful purpose from the
ambiguous episodes, and that those, coupled with the others, are
adequate to support these findings of the District Court.
(4) We reach the same result as respects the agreements not to
compete which Schine exacted from competitors whom it bought out.
It is not enough that the agreements may be valid under local law.
Even an otherwise lawful device may be used as a weapon in
restraint of trade or in an effort to monopolize a part of trade or
commerce. Agreements not to compete have at times been used for
that unlawful purpose. See United States v. American Tobacco
Co., 221 U. S. 106
221 U. S. 174
United States v. Crescent Amusement Co., supra,
323 U. S. 181
If we had here only agreements not to complete, the inferences
drawn by the District Court might not be warranted. But, in the
setting of this record, and against the background of Schine's
other monopolistic practices, it seems to us that the District
Court might infer that the requisite purpose was present and that
these agreements were additional weapons in Schine's arsenal of
power through the use of which its monopoly was sought to be
Page 334 U. S. 120
(5) The finding that Schine obtained film rental concessions not
made available to independent operators is not intelligible to us.
For the District Court went on to state that "[t]hese provisions
were also in contracts with independents." How those concessions
constitute a restraint of trade is therefore not apparent. We set
aside this finding so that it may be clarified on remand of the
(6) There is challenge to the findings that Schine's rental
agreements contained minimum admission prices, or minimum admission
prices lower than those to be charged by the independent operators
for subsequent runs, or relieved Schine of requirements for minimum
admission prices though imposing them on its competitors. There is
evidence to support the findings that minimum prices were fixed. It
is well settled that the fixing of minimum prices like other types
of price-fixing, is unlawful per se. United States v.
Socony-Vacuum Oil Co., 310 U. S. 150
findings that Schine was either granted minimum admission prices
more favorable than those required of its competitors or that
Schine, unlike its competitors, was relieved of all requirements
for minimum prices, are also supported by evidence. It is said that
these provisions of the agreements were not adhered to. But since
they did exist, it is not for us to speculate as to what force or
sanction they may have had.
(7) There is also challenge to the finding that Schine cut
admission prices. This seems uncontroverted. But price-cutting,
without more, is not a violation of the Sherman Act. It is, indeed,
a competitive practice which this record shows to have been common
in the industry. It may be used in violation of the Act. Thus, it
may be the instrument of monopoly power to eliminate competitors or
to bring them to their knees. But since it is not unlawful per
facts and circumstances must be adduced to show that it
was in purpose or effect employed as an
Page 334 U. S. 121
instrument of monopoly power. Here, there is nothing except a
bare finding that, at times, Schine cut admission prices. That
finding is not sufficiently discriminating to withstand analysis,
and is not adequate to support an injunction against
(8) The finding as to unreasonable clearances presents rather
large issues. We have elaborated the point in United States v.
Paramount Pictures, Inc., post,
p. 334 U. S. 131
need not repeat what is said there. Clearance is an agreement by
distributor not to exhibit a film nor to license others to do so
within a given area and for a stated period after the last date of
the showing of the film by the licensee with whom the agreement is
made. [Footnote 9
] It is, in
other words, an agreement by a distributor to license films only
for specified successive dates. It is, in part, designed to protect
the value of the license which is granted. While it thus protects
the income of the first exhibitor, there is no contention that
clearance agreements are per se
unlawful restraints on
competition by reason of the effect they may have on admission
prices or otherwise. All the District Court purported to condemn,
and all the appellee maintains is unlawful, are "unreasonable
clearances." If reasonableness is the test, the factors which bear
on it would appear to be numerous. [Footnote 10
] The findings and opinion of the District
Court, however, do not greatly
Page 334 U. S. 122
illuminate the problem. What standards or criteria of
unreasonableness were applied does not clearly appear. There are,
however, in some of the subsidiary findings in this case, a few
clues as to the basis used by the District Court in classifying
clearances as unreasonable. Thus, it said that Schine got some
clearances "over towns in which Schine did not operate." But that
is irrelevant to the problem of reasonableness of clearances,
since, by definition, clearances run to both theaters and towns not
owned by him who has the clearance.
The District Court also found that clearances "were given over
towns over which there had been no previous clearance." But that,
without more, would not make a clearance "unreasonable." The
District Court found that Schine got clearances over "some towns
distant from 10 to upwards of 20 miles," and that clearances were
also obtained over "outside towns of comparably small
Page 334 U. S. 123
distant so far that no clearance is justified." If the basis for
these findings is that the towns were in different competitive
areas, it would come closest to revealing the standard used by the
District Court in determining whether the clearances were or were
not reasonable, unless possibly it be the finding that, in a few
instances, Schine got clearances over towns where there were no
The District Court cites instances of clearances which, in its
view, were illegal because unreasonable as to time. But some of
these turn out to be situations where clearances were granted over
towns where Schine had the only theater in town. So perhaps the
District Court used as a basis for some of its findings of
unreasonable clearances the absence of any competition between the
theaters in question. But, as to that, we can only guess in each
case, and then wonder whether our guess was correct, because
appellee suggests that one vice of Schine's clearances was that
they ran not to specified theaters, but to specified towns. We are,
however, left somewhat in the dark whether the District Court
followed that theory or made the reasonableness of clearances turn
on whether or not the theaters affected were in different
Appellee also suggests that proof of the unreasonableness of
Schine's clearances is that their periods were almost uniformly the
same, even though there were wide variations in the condition and
size of theaters and of the type of pictures played in the various
theaters. But we are given no clue in the findings whether that was
the view of the District Court. On its face, it seems more like an
attempt of the appellee to show what findings could have been made
on the basis of the record had some discrimination been made in
appraising the evidence.
Appellee seems to argue that standards of reasonableness can be
dispensed with by reason of statements in the
Page 334 U. S. 124
inter-office memoranda of the distributors that many of Schine's
clearances were "unreasonable." On the matter of clearances,
however, the interests of distributors and exhibitors are not
necessarily identical. For the self-interest of exhibitors which
would call for long clearances would militate against the best
interests of distributors. [Footnote 11
] So it is not clear that these declarations
can properly be said to fall within the scope of the unlawful
project which the two groups were sponsoring. Cf. Pinkerton v.
United States, 328 U. S. 640
328 U. S.
-648. But, however that may be, these statements do
not advance us very far with the problem, because they too fail to
give specific content to the concept of unreasonable as applied to
As a last resort, appellee seeks to sustain these findings on
the ground that Schine got at least some of its clearances by
refusing to make any deal for the circuit unless its terms were
met. But any clearance so obtained, though otherwise reasonable,
would be unlawful, for it would be the product of the exercise of
monopoly power. It is evident, however, that that was not the
theory adopted by the District Court, for it did not look to see
what clearances had been obtained in that manner.
The short of the matter is that, since we do not know for
certain what the findings of the District Court on clearances mean,
they must be set aside. In doing so we, of course, do not intimate
here, any more than we do in case of the other findings we have set
aside in the case, that the record would not sustain findings
adverse to Schine. We only hold that, before we can pass on the
questions tendered, findings on clearances must be made which
reflect an appraisal of the complex of factors bearing on this
question of reasonableness. That is a function of the District
Page 334 U. S. 125
The decree entered by the District Court
enjoins appellants from specified acts or practices. [Footnote 12
] To the extent that
these provisions are directed to practices reflected in findings
which we set aside, they must be reexamined by the District Court
on remand of the case.
Appellants object to the generality of the injunction against
"monopolizing" first- and second-run films. [Footnote 13
Page 334 U. S. 126
statutory requirement is that these injunctions
"shall be specific in terms, and shall describe in reasonable
detail, and not by reference to the bill of complaint or other
document, the act or acts sought to be restrained."
38 Stat. 738, 28 U.S.C. § 383. And see
Federal Rules of
Civil Procedure, rule 65(d). We need not determine whether the
provision in question if read, as it must be, in light of the other
paragraphs of the decree (Swift & Co. v. United
States, 276 U. S. 311
276 U. S. 328
would pass muster. For we think the public interest requires that a
more specific decree be entered on this phase of the case. The
precise practices found to have violated the act should be
We have considered the objections to the other parts of the
injunction (apart from provisions as to divestiture which we
discuss later) and find them without merit.
The District Court included in its decree a
divestiture provision adjudging that appellant companies be
"dissolved, realigned, or reorganized in their ownership and
control so that fair competition between them and other theaters
may be restored and thereafter maintained."
The parties subsequently submitted various plans and after
hearings the one submitted by the Department of Justice was
approved with modifications. The plan does not provide for the
dissolution of the Schine circuit through the separation of the
several affiliated corporations as was done in United States v.
Crescent Amusement Co., supra,
pp. 323 U. S.
-189. It keeps the circuit intact in that sense, but
requires Schine to sell certain theaters. The plan requires Schine
to sell its interest in all but one theater of its selection in
each of 33 towns, all but two in each of four larger towns, and two
of four theaters in Rochester, New York. [Footnote 14
] Schine is to be divested of
Page 334 U. S. 127
more than 50 of its theaters. The towns affected are over 40 out
of the 70-odd in which Schine is operating. [Footnote 15
] The one-theater towns of Schine are
The decree also dissolves the pooling agreements. A trustee is
appointed to make the sales which are ordered. Schine is prohibited
from acquiring any financial interest in additional theaters
"except after an affirmative showing that such acquisition will not
unreasonably restrain competition." Schine is ordered not to buy or
book films for any theater other than those in which it owns a
financial interest. The District Court concluded that this program
of divestiture was necessary in order to restore "free enterprise
and open competition amongst all branches of the motion picture
As we have noted, the District Court did not follow the
procedure of United States v. Crescent Amusement Co.,
and order the dissolution of the combination of the
affiliated corporations. Schine presented such a plan, and it was
rejected. That plan contemplated the division of the Schine
theaters among three separate corporations, with members of the
Schine family owning each corporation. The District Court rejected
that plan because it did not furnish such separation of ownership
as would assure discontinuance of the practices which had
constituted violations of the Act. The District Court did not
pursue further the prospect of dismemberment of the Schine circuit
through separation of the theaters into geographical groupings
under separate and unaffiliated ownerships. Nor do the findings
reflect an inquiry to determine what theaters had been acquired by
Schine through methods which violate the Act. So far as the
findings reveal, the theaters which are ordered divested may be
properties which in whole or in part were lawfully acquired,
Page 334 U. S. 128
and theaters which Schine is permitted to retain may, so far as
the findings reveal, be ones which it obtained as the result of
tactics violating the Act.
In this type of case, we start from the premise that an
injunction against future violations is not adequate to protect the
public interest. If all that was done was to forbid a repetition of
the illegal conduct, those who had unlawfully built their empires
could preserve them intact. They could retain the full dividends of
their monopolistic practices and profit from the unlawful
restraints of trade which they had inflicted on competitors. Such a
course would make enforcement of the Act a futile thing unless,
perchance, the United States moved in at the incipient stages of
the unlawful project. For these reasons, divestiture or dissolution
is an essential feature of these decrees. See United States v.
Crescent Amusement Co., supra,
p. 323 U. S. 189
and cases cited.
To require divestiture of theaters unlawfully acquired is not to
add to the penalties that Congress has provided in the antitrust
laws. Like restitution, it merely deprives a defendant of the gains
from his wrongful conduct. It is an equitable remedy designed in
the public interest to undo what could have been prevented had the
defendants not outdistanced the government in their unlawful
project. Nor is United States v. National Lead Co.,
332 U. S. 319
332 U. S.
-353, opposed to this view. For in that case there
was no showing that the plants sought to be divested were either
unlawfully acquired or used in a manner violative of the antitrust
Divestiture or dissolution must take account of the present and
future conditions in the particular industry as well as past
violations. It serves several functions: (1) It puts an end to the
combination or conspiracy when that is itself the violation. (2) It
deprives the antitrust defendants of the benefits of their
Page 334 U. S. 129
(3) It is designed to break up or render impotent the monopoly
power which violates the Act. See United States v. Crescent
Amusement Co., supra,
pp. 323 U. S.
-190; United States v. Griffith, ante,
334 U. S. 100
The last two phases of this problem are the ones presented in
this case. But the District Court purported to deal with only one
of them. It did not determine what dividends Schine had obtained
from the conspiracy. In United States v. Crescent Amusement
pp. 323 U. S. 181
323 U. S. 189
some of the affiliated corporations through which that empire was
built were products of the conspiracy. Hence, that fact without
more justified the direction in the decree to unscramble them.
There are no findings which would warrant such a course in this
case. But an even more direct method of causing appellants to
surrender the gains from their conspiracy is to require them to
dispose of theaters obtained by practices which violate the
antitrust acts. We do not know what findings on that score would be
supported by the record, for the District Court did not address
itself to the problem. The upshot of the matter is that the
findings do not reveal what the rewards of the conspiracy were, and
consequently the court did not consider what would be the
preferable way of causing appellants to surrender them. The case
must therefore be remanded so that the District Court may make
appropriate findings on this phase of the case.
While such an inquiry is the starting point for determining to
what extent divestiture should be ordered, the matter does not end
there. For it may be that, even after appellants are deprived of
the fruits of their conspiracy, the Schine circuit might still
constitute a monopoly power of the kind which the Act condemns
(see American Tobacco Co. v. United States, 328 U.
, 328 U. S. 809
328 U. S.
), in spite of the restrictive provisions of the
Page 334 U. S. 130
Monopoly power is not condemned by the Act only when it was
unlawfully obtained. The mere existence of the power to monopolize,
together with the purpose or intent to do so, constitutes an evil
at which the Act is aimed. United States v. Griffith,
p. 334 U. S. 100
United States v. Aluminum Co. of America,
148 F.2d 416,
432. But whether that condition will obtain in this case must await
the findings on the other phase of the case.
We accordingly set aside the divestiture provisions of the
decree so that the District Court can make the findings necessary
for an appropriate decree. We approve the dissolution of the
pooling agreements, the prohibition against buying or booking films
for theaters in which Schine has no financial interest, and the
restriction on future acquisitions of theaters. See United
States v. Crescent Amusement Co., supra,
pp. 323 U. S.
-187. We do not reach the question of the appointment
of a trustee to sell theaters as that merely implements the
divestiture provisions which must be reconsidered by the District
The judgment of the District Court is affirmed in part and
reversed in part, and the cause is remanded to it for proceedings
in conformity with this opinion.
MR. JUSTICE FRANKFURTER concurs in the result.
MR. JUSTICE MURPHY and MR. JUSTICE JACKSON took no part in the
consideration or decision of the case.
These figures do not include 18 which were closed and had been
or were being converted to other uses.
New York (78), Ohio (36), Kentucky (18), Maryland (12), Delaware
Schine had the only theater in each of 21 towns, both theaters
in 21 towns that had two each, all theaters in 16 towns that had
three each, and all theaters in one town that had six theaters and
in another that had four theaters.
Of these theaters, approximately 87 percent are located in
cities or villages with populations under 25,000 and 60 percent in
cities or villages with populations under 10,000.
Fox, Loew, Paramount, RKO, Warner, Columbia, Universal, and
In the 1939-1940 season, Schine paid $1,647,000 to six
distributors in film rental.
By clearance is meant the period of time agreed upon which must
elapse between runs of the same feature within a particular area or
in specified theaters.
The District Court used "independents" or "independent
operators" to mean competitors other than the
exhibitor-distributors. Schine, of course, is an independent
circuit as that term is used in the industry.
A consent order was entered in the present case on May 19, 1942,
which provided, inter alia,
that appellants would not
enter into any agreement licensing films released by any
distributor during a period of more than one year and that all
agreements in existence having a longer term should be void as to
all films released after the thirtieth day following the date of
the consent order.
See note 6
Bertrand, Evans & Blanchard, The Motion Picture
Industry -- A Pattern of Control 40-41 (TNEC Monograph No. 43,
"The establishment of clearance schedules is an intricate
procedure. It involves a complex bargaining process and the balance
of a variety of opposing economic interests. It may be stated
initially that the primary objective of the distributor is, of
course, to maximize his total revenue from each picture. This aim
gives him a very direct interest in clearance periods. The higher
rental fees paid by the prior-run exhibitor are directly
conditioned on the extent of the protection which he is granted,
and, in general, the longer the clearance period before subsequent
showing, the higher the rental fee the prior-run exhibitor will
"On the other hand, the distributor's revenue from
subsequent-run exhibition is also important to him; this income may
mean the difference between black or red ink on his ledgers. But
the longer the clearance period, the smaller will be these returns
-- not only because more customers will have attended the prior
showing, rather than wait for subsequent exhibition, but also
because the effects of the advertising and exploitation efforts
made when the picture was released will have been vitiated over
this time. In general, the greater the total box-office return
earned by a film in all showings, the greater will be the
"* * * *"
"The relation between run, clearance and zoning, admission
price, seating capacity, and rental fees is indeed a complex one.
The range covered by these factors is indicated by this fact: a
license fee amounting to many thousands of dollars may be paid for
the first showing of a film in a large metropolitan theater, and,
within a year, the same film may be exhibited in some small theater
in the same city for a fee of less than $20."
See note 10
This part of the decree provides:
"Each of the defendants is hereby enjoined and restrained:"
"1. From monopolizing the supply of major first run films in any
situation where there is a competing theater suitable for first run
exhibition thereof and from monopolizing the supply of second run
film in any situation where there is a suitable theater for second
run exhibition thereof."
"2. From demanding or receiving clearance over theaters operated
by others which unreasonably restricts their ability to compete
with a theater owned or operated by a defendant corporation
controlled by it and from attempting to control the admission
prices charged by others by agreement with distributors, demands
made upon distributors, or by any means whatsoever."
"3. From conditioning the licensing of films in any competitive
situation outside of Buffalo, New York, upon the licensing of films
in any other situation and from entering into any film
"* * * *"
"5. From enforcing any existing agreements heretofore entered
into (1) not to compete or (2) to restrict the use of any real
estate to nontheatrical purposes."
"6. From using any threats or deception as a means whereby a
competitor is induced to sell."
"7. From continuing any contract, conspiracy or combination with
each other or with any other person which has the purpose or effect
of maintaining the exhibition or theater monopolies of the
defendants or of preventing any other theater or exhibitor from
competing with the defendants or any of them, and from entering
into any similar contract, conspiracy, or combination for the
purpose or with the effect of restraining or monopolizing trade and
commerce between the States."
See note 12
It also requires Schine to sell specific theaters remaining
unsold under the consent decree of May 19, 1942.
Schine had withdrawn from five towns pursuant to the consent
order of May 19, 1942.