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Justice Department to abolish movie distribution rules dating to 1949

The Justice Department said it plans to overturn antitrust-related movie distribution rules from the early days of Hollywood, citing an entertainment landscape that has been radically reshaped by technology.

“We cannot pretend that the business of film distribution and exhibition remains the same,” Makan Delrahim, the antitrust chief at the Justice Department, said Monday at an American Bar Association conference in Washington. “Changes over the course of more than half a century also have made it unlikely that the remaining defendants can reinstate their cartel.”

The film distribution rules, known as the Paramount consent decrees, were enacted in 1949, a year after the U.S. Supreme Court ruled that Hollywood’s eight largest studios could not own theaters, and thus control the film business. The regulations made it illegal for studios to unreasonably limit the number of theaters in one geographical area that could play a movie. They also banned “block booking,” a bundling practice where studios forced theaters to play their bad movies along with their good ones or not play any.

But that was when “metropolitan areas generally had a single movie theater with one screen that showed a single movie at a time,” Delrahim 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.” In essence, he was saying that the regulations are obsolete because of technological advancements, most recently streaming.

After years of consolidation, three companies, AMC Entertainment, Regal Entertainment and Cinemark Holdings, control roughly half of the 40,000 screens in the United States. They are unlikely to be affected by the Justice Department’s decision. At greater risk are independent theaters (single-screen downtown cinemas, drive-ins), which are already dwindling in number; the National Association of Theater Owners said in comments submitted to the Justice Department that abolishing the consent decrees could result in a return to block booking, which many smaller theater owners could not survive.

“If distributors can engage in block booking, exhibitors may be forced to pack their screens with global tentpoles at the expense of targeted programming,” the association said in its submitted comments, referring to blockbuster films that now dominate the box office. “Consumers will face increasingly limited choices at the box office, and, without the possibility of a theatrical run, many films will no longer be made, limiting the availability of choices through home entertainment platforms as well.”

The Justice Department will ask a federal court to overturn the rules in the coming days. Delrahim said the department would request a two-year sunset period. Delrahim’s team started to review the Paramount consent decrees last year as part of a look at nearly 1,300 old antitrust judgments.

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