Feds probe studio-distrib relationships
Exhibs under microscope
The Justice Dept.'s antitrust division has sent a sweeping "civil investigative demand" to at least seven major studios, asking for information about their dealings with theater chains.
Disney, Paramount, 20th Century Fox, Sony, Warner Bros., MGM and Universal are among those believed to have received the missive Thursday. It was not known whether the demand was sent to exhibitors as well.
In the 10-page letter, Justice Dept. attorneys requests information and supporting documents about specific sales and booking policies going back to January 1996.
It's not known what prompted the preliminary probe, which caught many studio and theater execs by surprise. Except in cases of theater circuit mergers, the Justice Dept. has over the past decade rarely intervened in the world of theatrical distribution and exhibition.
Among the practices questioned in the letter were clearances (in which a theater owner asks distributors to grant it exclusivity within a given zone on any pictures it plays) and block booking (in which a distributor agrees to sell a film to one theater in exchange for booking the film in another theater in the same circuit, or booking a less desirable film).
The Justice Dept. is also inquiring about close relationships between exhibitors and distributors which give certain suppliers priority status.
In the early 1980s, the government put a stop to the practice of "splitting," whereby competing theaters in a given market would agree to divvy up the available films.
The investigative demand came from the office of Bernard Hollander, a Justice Dept. senior trial lawyer who has handled a number of antitrust investigations into distributor-exhibitor dealings, including the splitting case.
"Ever since the splits ended, it's been relatively calm out there," observed one exec. "Justice's function is to protect the public interest. With 34,000 screens and more films being released than ever, it's hard to see how the public isn't being served."
In the early days of the studio system, the majors owned theaters as well as production facilities. As early as 1948, the Justice Dept., arguing that the practice was monopolistic, began forcing the studios to divest their theater holdings in what is now known as the Consent Decrees. In 1988, the Justice Dept. charged 20th Century Fox with block booking, which was prohibited under the Consent Decrees. Fox was fined $500,000. By the early 1990s, the government-imposed restrictions on studios owning theaters were lifted.
Justice Dept. officials could not be reached for comment.
