Judge Agrees to End Paramount Consent Decrees

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

After nearly three quarters of a century being the quiet influence on how Hollywood operated, the Paramount Consent Decrees are officially over. On Friday, a New York federal judge granted a motion by the U.S. Department of Justice to terminate the movie industry's long-lasting licensing rules.

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.

But with some deregulatory fervor, the Trump-era DOJ has been taking a hard look at long-lasting behavioral remedies for older antitrust abuses. Last November, the DOJ moved to terminate the decrees. In the government's estimation, 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. It was time to sunset them and get rid of other rules. Some indie theaters warned the move would usher in new consolidation with tech giants like Amazon swooping in to acquire theaters.

U.S. District Court Judge Analisa Torres agrees with the government that times have changed, and so must the rules.

"Given this changing marketplace, the Court finds that it is unlikely that the remaining Defendants would collude to once again limit their film distribution to a select group of theaters in the absence of the Decrees and, finds, therefore, that termination is in the public interest," she writes in a 17-page opinion.

She accepts that certain conduct once deemed per se illegal may now be pro-competitive as theaters fight to remain relevant in the tech age while lingering anticompetitive behavior would be better scrutinized through new legal actions absent of strict rules.

As for the possibility that terminating the ban on vertical integration would allow major movie studios to merge with large national theater circuits, the judge notes that such restrictions have never applied to certain studios like Disney and adds that "the Court finds that changes to antitrust administration, in particular, the HSR Act, provide federal antitrust agencies with notice and the opportunity to evaluate the competitive significance of any major transaction between a movie distributor and a theater circuit, which suggests a low likelihood of potential future violation."

The changes with surefire impact, though, will be a lifting of the ban on studios licensing their works on a packaged basis. Again, the judge looks to a shifting market as a justification for allowing this to happen two years hence when a sunset period expires.

"In today’s landscape, although there may be some geographic areas with only a single one-screen theater, most markets have multiple movie theaters with multiple screens simultaneously showing multiple movies from multiple distributors," states the order. "There also are many other movie distribution platforms, like television, the internet and DVDs, that did not exist in the 1930s and 40s. Given these significant changes in the market, there is less danger that a block booking licensing agreement would create a barrier to entry that would foreclose independent movie distributors from sufficient access to the market."