Decades-old movie industry rules will be scrapped, feds say

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Decades-old rules aimed at preventing movie distribution oligopolies are about as valuable to the industry as celluloid, say federal officials who want to scrap them.

The US Department of Justice wants to ditch several legal settlements limiting the power big production studios can hold over movie theater companies — a move that has raised hackles among smaller cinema owners.

The so-called Paramount decrees “no longer serve the public interest” given the rise of streaming services and other sweeping changes that have hit the film industry, Assistant Attorney General Makan Delrahim said Monday, adding that the Justice Department is seeking to kill the rule.

“We cannot pretend that the business of film distribution and exhibition remains the same as it was 80 years ago,” Delrahim told an American Bar Association conference in Washington, DC.

The Paramount decrees stem from a 1948 Supreme Court ruling against eight major American film studios that had a stranglehold on the nation’s theaters. The agreements forced the companies — including Paramount, Twentieth Century Fox and Warner Brothers — to separate their distribution and theater businesses.

They also banned manipulative tactics such as “block booking,” the practice of lumping several films into a single theater license; and “circuit dealing,” in which one license covered all theaters in a particular circuit.

The scheme forced cinemas to buy and screen second-rate films along with features that were in high demand, according to the National Association of Theater Owners, the world’s largest trade group for movie exhibitors.

The feds will ask a federal court to terminate the decrees and phase out the block-booking and circuit-dealing prohibitions in two years, Delrahim said.

But independent movie houses and small theater chains fear block booking could make a dangerous comeback if the pacts are tossed.

Trashing the block-booking ban could make it harder for small exhibitors to show the movies their audiences want to see and further empower the big companies that dominate the market, theater groups say. The top four theater firms — Regal, AMC, Cinemark and Carmike Cinemas — have more than half the nation’s screens, according to a 2016 Redwood Capital report.

“To dissolve the Decrees at this moment in cinema history would declare open season on the most vulnerable players in the market and imperil access to the Big Screen for so many Americans in small towns and rural areas,” the Independent Cinema Alliance, a nonprofit representing more than 200 independent cinema firms, told the justice department last year.

But block booking and other practices the Paramount decrees prohibited will not necessarily become legal after the pacts are terminated, according to Delrahim. The feds will review any previously banned practices using a “rule of reason,” he said.

“If credible evidence shows a practice harms consumer welfare, antitrust enforcers remain ready to act,” Delrahim said.

The DOJ opened a review of the decrees last year and determined they have successfully put an end to the violations they were meant to address, according to Delrahim. The transformation the film industry has undergone since they were enacted “have made it unlikely that the remaining defendants can reinstate their cartel,” he said.

“Today, not only do our metropolitan areas have many multiplex cinemas showing films from different distributors, but much of our movie-watching is not in theaters at all,” Delrahim said. “Technological advancements, most recently subscription streaming services, have permitted more American consumers to watch movies anywhere they want at any time.”