Paramount Film Distributing Corp. But the plaintiffs have won a share of the cases by successfully proving collusion among distributors and competing exhibitors to deprive them of remunerative first-run films. Beech Cinema v. Twentieth Century Fox Film 2d Cir. Charles Rubenstein, Inc. Paradise T.
Village Theatre, Inc. Theatres v. Paramount Pictures 2d Cir. Very few decisions have alluded to the specific practices of circuit dealing and franchising disapproved in Paramount Pictures.
But see Paramount [ Cal. Applebaum 5th Cir. In two recent cases, however, the issue of circuit dealing has arisen in connection with alleged conspiracies to cut off the plaintiff from desired first-run films.
Schmidt v. Columbia Pictures Industries Inc. Twentieth Century Fox Film, supra, F. In this context, circuit dealing may be viewed not as a per se violation of the Sherman Act as suggested by the language of Paramount Pictures , but as a tactical device that has been used -- and may be used again -- in illegal conspiracies to exclude motion picture exhibitors from trade relations needed to compete.
Franchising stands on the same ground. But while the practices may merit scrutiny, the issue of a Sherman Act violation will turn on the general antitrust law concerning boycotts. In a long line of decisions the Supreme Court has held categorically that agreements to exclude competitors from valued trade relations are unreasonable restraints of trade. Lowry U. Trade Comm'n. New York Stock Exchange U.
Since Northern Pac. See also United States v.
General Motors U. Palsson, supra, 16 Cal. Broadway-Hale Stores U.
The alleged boycott also consisted of agreements between a single competing dealer and its suppliers. The plaintiff, Klor's, operated a retail store specializing in household appliances in San Francisco located next door to a major department store owned by Broadway-Hale Stores. In its complaint, Klor's alleged that Broadway-Hale and 10 suppliers conspired among themselves either not to sell it household appliances or to sell them at commercially unacceptable terms.
The district court granted summary judgment for [ Cal.
It relied on affidavits showing that there was an active local market in household appliances, involving hundreds of other retailers who sold many competing brands of appliances. Reversing the judgment, the Supreme Court held that the plaintiff had alleged a group boycott that belonged to the "classes of restraints which from their 'nature or character' were unduly restrictive.
Broadway-Hale Stores, supra, U. The plaintiff therefore did need not to allege market-wide injury to competition. There, the complaint alleged a conspiracy among the suppliers of the competing retailer. Here, the complaint contains no allegation of a combination among the distributor defendants; rather it alleges three separate agreements between the competing exhibitor and three major film distributors. If the plaintiff had alleged collusion among the offending film distributors, the case would come within the holding of Klor's.
In the absence of this allegation, we must consider whether the three alleged agreements between the competing exhibitor and the distributor defendants may individually constitute a boycott. In his frequently cited text, Sullivan comments that "the concept of a boycott does not necessarily involve the concert of several traders. The case law indeed includes a few examples of such a two-party boycott involving a single competing dealer and a single supplier. See Murphy Tugboat Co. Crowley 9th Cir. Rollins Telecasting, Inc. Under these facts, the court found a violation of section 1 of the Sherman Act.
Again, in Cherokee Laboratories, Inc. Rotary Drilling Services, Inc. Plaintiff's principal business dealt with a highly specialized commodity in a very limited market -- additives for drilling muds. After selling a specialized additive to plaintiff for many years, Monsanto gave exclusive distributorship rights to a competing dealer who then raised the price to the plaintiff. Stressing the apparent lack of an [ Cal. But as Cherokee Laboratories suggests, an alleged two-party boycott is likely to be equivalent to an exclusive distributorship -- a business arrangement not often subject to antitrust challenges.
See Kolling v. Hudson Sales Corp. Merle Norman Cosmetics Cal. In Klor's, the court made clear that it did not intend to cast doubt on the legality of such agreements: "This is not a case of a single trader refusing to deal with another, nor even of a manufacturer and a dealer agreeing to an exclusive distributorship. Alleged in this complaint is a wide combination consisting of manufacturers, distributors and a retailer.
Santa Clara Valley Bowling etc. In Continental T. GTE Sylvania Inc. All exclusive distributorship agreements involve an intent to deprive competitors of access to a supplier; this is the raison d'etre of the agreement -- the incentive offered to the dealer to make investment and promotional expenses. Cases such as Six Twenty-Nine Productions and Cherokee Laboratories, in which an exclusive dealing agreement constitutes a boycott, are probably rare and confined to unusual market conditions.
Still, the possibility cannot be excluded a priori. Appellant heavily relies on a recent Second Circuit decision that appears to apply such a two-party boycott theory to the motion picture industry. In Beech Cinema v.
DOC facilities have recently come under scrutiny from the Department of Justice for the inhumane treatment of inmates in solitary confinement. Ross-Simmons Hardwood Lumber Co. Represented, counseled, coached, and encouraged a grass roots citizens group, through more than 20 contentious public hearings and meetings, in its successful efforts to thwart the rezoning and sale by a prominent and politically powerful non-profit of one of the last old growth forests in suburban Philadelphia. The difficulty arises out of the fact that the different sets of considerations point in different directions. Individuals with Disabilities Education Act Winkelman v. The per se rule, treating categories of restraints as necessarily illegal, eliminates the need to study the reasonableness of an individual restraint in light of the real market forces at work, Business Electronics Corp.
Beginning about January , Fox ceased to license films to the plaintiffs but continued actively to deal with General Cinema. Plaintiffs secured a favorable jury verdict on the theory that General Cinema had conspired with Fox "to cut off" their access to Fox films. The court found evidence "that Fox had a history of favoring 'circuits' Largely on the strength of this evidence, the court held that there was sufficient evidence "of a conspiracy between General Cinema and Fox to cut off plaintiffs. The opinion's repeated use of the phrase "to cut off plaintiffs" suggests that Beech Cinema should be accepted for the proposition that a plan to deprive a competitor of needed trade relations, which satisfies the requirements of a conspiracy, constitutes a boycott even if a single exhibitor and a single distributor are involved.
Southway Theatres, Inc. But the case is difficult to justify on its facts; the court emphasized that the offending agreement was for the mutual economic benefit of the defendants -- a factor that would seem to imply a legitimate business purpose rather than predatory intent. The result, moreover, is difficult to reconcile with a later Second Circuit decision, Oreck Corp. Whirlpool Corp. These factors make it easier to infer that an [ Cal.
But appellant has produced no evidence of predatory intent. Neither has it shown that the alleged agreements were dictated by the exhibitor, concerned with its own position, rather than granted in the exercise of the distributors' independent discretion. See United States v. The evidence actually suggests that the alleged agreements reflect the perceived business advantages to the distributors of dealing with large theatre circuits.
This showing plainly falls short of the evidentiary threshold required to sustain a boycott theory of per se liability. Respondents have insisted that this is the proper conceptual framework for the case. Under Continental T. The court there was concerned with a market dominated by a few major distributors. The practices of circuit dealing and franchising were enjoined because of their link with the anticompetitive market structure in the motion picture industry. We regard the two approaches as being potentially complementary; an anticompetitive practice may be linked to anticompetitive market conditions.
The question whether a specific practice offends the Sherman Act ought not to exclude a broader inquiry into market structure. A suggestive footnote indicated only that the rule of reason required a "balancing [of] intrabrand and interbrand competitive effects of vertical [ Cal. But as observed in Valley Liquors, Inc.
Renfield Importers, Ltd. The courts have therefore looked for shortcuts. A popular one is to say that the balance tips in the defendant's favor if the plaintiff fails to show that the defendant has significant market power that is, power to raise price significantly above the competitive level without losing all of one's business. Since the Sylvania decision, several other federal courts applying the rule of reason to vertical restraints have required this threshold inquiry into the defendant's market power.
Atlas Van Lines, Inc. Itek Corp. Stewart Co.