Justice Department Moves to Terminate Paramount Consent Decrees

Department of Justice in Washington, DC. - Getty-H 2019

The U.S. Department of Justice is moving to terminate the Paramount Consent Decrees, which have been in effect since the late 1940s and regulate how certain movie studios distribute films to theaters.

In a speech Monday to the American Bar Association, Assistant Attorney General Makan Delrahim said that the DOJ’s Antitrust Division is moving to terminate the decrees, “except for a two-year sunset period on the bans on block booking and circuit dealing.” The sunset period is designed to allow the movie studios and theater chains time to adjust to the change. The DOJ will require court approval to terminate the Consent Decrees.

“We have determined that the decrees, as they are, no longer serve the public interest, because the horizontal conspiracy — the original violation animating the decrees — has been stopped,” said Delrahim.

The DOJ antitrust division announced in August 2018 that it would be reviewing the Paramount Decrees, which were created after the 1948 Supreme Court ruling in United States v. Paramount Pictures. The major film studios at the time essentially controlled all aspects of filmmaking, from the talent to the productions to the theaters. The Supreme Court ruling and the Consent Decrees have been in force, with no sunset period, ever since.

Delrahim told the ABA that the Consent Decrees are no longer necessary, as they, along with the passage of time, "have already remedied the effects of the violation, ridding the industry of "all taint" of the horizontal conspiracy and undoing what the conspiracy had achieved."

He added, "Changes over the course of more than half a century also have made it unlikely that the remaining defendants can reinstate their cartel. Evolution in antitrust law has further made blanket prohibitions of certain vertical restraints inappropriate. Accordingly, the Division finds the consent decrees no longer meet consumer interests."

Delrahim also cited streaming services and new and evolving video business models as a factor in the decision.

The National Association of Theatre Owners had filed a comment last year urging the DOJ to keep the Consent Decrees active because of the potential harm that could come from block booking, in which studios demand that theater owners carry their other films.

“NATO submitted comments to the Department previously and we stand by those comments," the organization said in a statement Monday. "We will wait to review any actual motion the Department may file in court before commenting further.”

Block booking will be covered under the sunset provision, allowing theater owners and studios to prepare for the new rules. Delrahim left open the possibility that the DOJ could take action if there is "credible evidence" of harm.

Going forward, assuming the Consent Decrees are terminated, "the Division will review the vertical practices initially prohibited by the Paramount decrees using the rule of reason," Delrahim said. "If credible evidence shows a practice harms consumer welfare, antitrust enforcers remain ready to act.”

He ended his speech by quoting Martin Scorsese, contrasting the director's role in making cinema to that of the government's.

"As filmmaker Martin Scorsese says, 'Cinema is a matter of what’s in the frame and what’s out.' Antitrust enforcers, however, were not cast to decide in perpetuity what’s in and what’s out with respect to innovation in an industry," Delrahim said. "Our role is instead to weigh evidence-based arguments to enforce the antitrust laws — not to act as directors in the marketplace."