Regal Said to Have Abused Movie Theater Monopoly in Nation's Capital

32 REP Premieres Regal Cinemas H
Courtesy of AEG

The escalating legal controversy over how the nation's largest cinema chains have demanded exclusive licenses for popular studio films has hit Washington, D.C.

A new lawsuit brought by Mark Cuban-owned Landmark Theatres on Tuesday alleges that Regal Entertainment holds monopoly power in the nation's capital and has used its nationwide footprint to coerce film distributors like Sony, Lionsgate and Disney into depriving its smaller competitor of first-run films like the new James Bond film, Hunger Games: Mockingjay — Part 2 and Star Wars: The Force Awakens.

While it's too soon to call the development a tipping point, the lawsuit comes on the heels of an injunction order against Regal in Houston, Texas, and will be litigated in the nation's capital, where the U.S. Department of Justice continues to investigate whether to bring action against Regal Entertainment and fellow theater chains AMC Entertainment and Cinemark. Additionally, the lawsuit from one of the nation's largest independent exhibitors is being handled by Perkins Coie, a heavyweight among law firms and a sign that legal strife over so-called "clearance" pacts has hit the big leagues.

According to the complaint, Regal controls 3,350 of 3,694 total commercial film seats in the "District Core," defined in the suit as most of the neighborhoods in densely populated Northwest Washington D.C. Regal is said to have amassed a 91 percent market share — "indeed, monopoly," states the lawsuit — in part because of high barriers to entry including scarce real estate and those restrictive clearance pacts.

Despite these hurdles, Landmark says it opened the Atlantic Plumbing Cinema, a six-screen, 344-seat theater located in the Shaw/Howard University neighborhood on Oct. 15, which it says put it in competition with the nearby Regal Gallery Place Stadium 14, a 3,350-seat theater. Landmark says that Regal's operation hasn't been renovated since opening in 2004 and is the place to go if you want "large, loud, and unpleasant crowds (including teens and children) that can destroy the movie-going experience, a virtually constant police presence, sold-out shows, exorbitantly priced concessions, ticket price surcharges/fees, bag searches, dirty bathrooms and standard (non-plush/oversized) seating."

Landmark sees its own establishment as better priced and more comfortable, but it hasn't been able to show many of the more popular films. It blames the nation's largest theater chain.

"Regal’s message to the distributors was clear," states the complaint. "If you license a commercial film to Landmark’s Atlantic Plumbing theater, Regal can and will use its monopoly power in the District Core, its dominance in the greater D.C. DMA, and its national circuit power, to retaliate against you, both by denying your film its full grossing potential in the District Core by not playing it at the Gallery Place, and by reserving the right to disadvantage your film’s prospects at any of Regal’s 575 theaters across the country."

Landmark gives examples. The smaller chain says it sought without success to license Burnt from The Weinstein Co., Our Brand Is Crisis from Warner Bros., Mockingjay: Part 2 from Lionsgate, Spectre (the latest James Bond film) from Sony and Star Wars: The Force Awakens from Disney.

"In all of these cases, the distributor refused to license the film to Landmark’s Atlantic Plumbing theater because Regal’s Gallery Place had demanded an exclusive license for the film and had informed the distributor that it would not play the film at its Gallery Place theater if the film were licensed to Landmark’s Atlantic Plumbing theater," says Landmark.

The Atlantic Plumbing theater was able to license Steve Jobs from Universal, Love the Coopers from Lionsgate and Miss You Already from Roadside Attractions. The lawsuit says Regal "made good on its threat to deprive the distributor of its film's grossing potential in the District Core by refusing to play the film at the Gallery Place," though the complaint is silent as to whether Regal also refused to show those films in other locations — either in Washington D.C. or beyond. Since the lawsuit alleges Regal is abusing its national circuit power, and since Regal is likely to argue this is merely competition between two theaters, it's an omission that is perhaps notable.

Nevertheless, the lawsuit speaks to the harm incurred by exhibitor-distributor pacts locking up exclusivity in certain geographic regions.

According to the lawsuit, "If Regal could not leverage its monopoly power in the District Core, dominant presence in the greater D.C. DMA, and national circuit power to exclude Landmark’s Atlantic Plumbing theater from the market, Landmark’s theater would exert a competitive constraint on Regal, forcing it to lower its prices or increase its quality for the benefit of consumers."

Here's the full complaint alleging circuit dealing, agreements in restraint of trade and monopolization under the Sherman Act as well as tortious interference. Landmark is seeking an injunction, trebled damages and disgorgement of unlawfully obtained profits. Barry Reingold at Perkins Coie is the attorney for the plaintiff.

Regal has told The Hollywood Reporter that it has a policy against commenting on matters involving litigation.