AMC Theatres‘ $1.1 billion deal to acquire the Carmike theater chain will potentially result in the biggest theater circuit around the world. It could also give the U.S. Justice Department an opportunity to reshape licensing practices for first-run films.
After completing the deal, AMC will have more than 600 theater locations in 45 states across the country. The U.S. Justice Department will now commence a review on competition grounds. Some analysts expect that AMC could be forced to divest some of its theaters where there is especially high market concentration — for example, AMC agreed to do this in its acquisition of Starplex Cinemas — but the conditions on the merger might be much broader.
As an indication of the potential here, check out AMC CEO Adam Aron’s noteworthy comment Friday on CNBC.
“AMC is happy in a clearance environment. We’re happy in a nonclearance environment. If the Justice Department would like to rewrite the rules, we think we would prosper and thrive no matter how the rules change,” said Aron.
In referring to “clearance,” Aron was referring to the controversial practice whereby theatrical exhibitors demand exclusivity on first-run studio films in certain geographic regions. AMC is currently facing an antitrust lawsuit in Georgia from Cobb Theaters as well as another lawsuit in Texas from Viva Cinemas, each contending that AMC’s demands for exclusivity coerced studios like Sony and Warner Bros. from holding back on wider distribution of their blockbusters.
The Justice Department has already been investigating the topic. As AMC has acknowledged in regulatory filings, as has rivals Regal and Cinemark, the Justice Department has sent a civil investigative demand for potential violations of the Sherman Act. Attorney generals from various states have also been conducting their own probes.
AMC has denied it is doing anything wrong, but the DOJ’s new review, along with Aron’s comment, could be taken as indication of a potential settlement down the road.