Indie Cinema Alliance Warns Amazon May Buy Movie Theaters, Abuse Power If DOJ Gets Its Way

77-Year-Old Silent Movie Theater Remade as Fairfax Cinema - Publicity - H 2019
Sam Frost/Courtesy Fairfax Cinema

The Independent Cinema Alliance, a coalition representing 236 independent cinema companies around the country, is telling a judge that the future of small town movie screens is at stake and that Amazon could be primed to become a predator. On Friday, the ICA filed a scathing opposition to the Department of Justice's recent move to terminate the Paramount Consent Decrees.

The Paramount Consent Decrees have been in effect since the late 1940s when the government pursued a major antitrust action against film studios, which in those days, were vertically aligned with national theater chains. As a result of the U.S. Supreme Court's landmark 1948 decision in United ?States v. Paramount Pictures, the studios had to divest themselves of their exhibition holdings. A court-approved settlement then established rules governing the licensing relationship between certain studios such as Paramount and Warner Bros. and theater owners. Other studios such as The Walt Disney Company weren't part of the original case, but have nevertheless been guided by those Paramount Consent Decrees.

Enter the Trump Administration.

The Justice Department has been reviewing hundreds of old consent decrees, and in November, the Antitrust Division formally brought a motion to end rules that have influenced movie exhibition for more than 75 years.  A DOJ motion submitted to a New York federal court explained that the marketplace had radically changed with new distributors in the tech space, and that total bans on practices like "block-booking" (bundling multiple films into one theater license) and "circuit dealing" (the practice of licensing films to all movie theaters under common ownership, as opposed to licensing each film on a theater-by-theater basis) had outlived their usefulness.

Not so fast, responds the Independent Cinema Alliance in a brief (read here) filed today.

Calling the Paramount Consent Decrees a "magnificent antitrust achievement," one that has "become an integral part of industry culture," the ICA opines that the rules remain relevant and have offered a "continuing lifeline" for smaller theaters once teetering on the edge of bankruptcy. The ICA adds that the theater-by-theater mandate has come up in recent antitrust litigation such as Cobb Theatres' suit against AMC over overbroad clearances. The opposer tells the judge that a "much fuller factual inquiry than the DOJ has done" is required before the government rips off the rules and "threatens to unravel decades of industrial stability and innovation."

"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 tens of thousands of Americans in small towns and rural areas," the brief adds.

The DOJ's Antitrust Division, led by Makan Delrahim, points to streaming services and new and evolving video business models as a large factor in getting rid of the Paramount Consent Decrees. Companies like Netflix and Amazon are now in both the production and distribution business so does it really make sense to impose restrictions on traditional movie distributors?

"Much of the 'change' touted by the DOJ is simply a name change among the Big Players," states the opposition brief. "It has no structural significance. It is true, for example, that the motion picture industry is far less vertically integrated today than it was when the DOJ instituted the Paramount litigation. But it is significantly more concentrated and consolidated. In other words, the Big Players have different names, but the Big Squeeze on independents persists in exactly the ways it did in the 1940s."

The Independent Cinema Alliance sounds the alarm.

"Combined with more concentrated distribution, and more concentrated exhibition, the advent of Big Streaming makes the Paramount Consent Decrees so much more relevant to the 'changing' motion picture industry," continues the brief. "Streaming services with massive market power are the new, potentially scarier, 'television.' If they purchase cinemas, and throw around their ample weight, independent cinemas confront the predations of Big Distribution, Big Exhibition, and Big Streaming. On the other hand, if the Paramount Consent Decrees continue to be respected, the entry of behemoths like Amazon into the exhibition business would more likely be on terms that deterred Amazon from abusing its market power either to favor its own cinemas with its content or to punish fairly competing exhibitors with terms such as overbroad clearances."

The DOJ has anticipated certain concerns by noting that where market abuse occurs, victims can still go to court with new antitrust lawsuits.

That's not enough, argues the ICA.

"Disturbing a consent decree, especially an antitrust decree reached, as here, after extensive litigation proving abundant antitrust abuse, has always required a substantial showing by the moving party," writes ICA's G. Kendrick Macdowell. "The DOJ cannot now shift the burden to some other party to 'prove' the future recurrence of antitrust abuse."