SUPREME COURT OF THE UNITED STATES
SCHINE CHAIN THEATRES, INC. ET AL. v. UNITED STATES
334 U.S. 110
No. 10. Argued December 15, 1947 -- Decided May 3, 1948
APPEAL FROM THE DISTRICT COURT OF THE UNITED STATES FOR THE WESTERN DISTRICT OF NEW YORK.
The United States sued to restrain violations of §§ 1 and 2 of the Sherman Act by a parent corporation, three of its officers and directors and five of its subsidiaries, which owned or had a financial interest in a large chain of motion picture theatres located in six states. The District Court found that they had used the combined buying power of the entire circuit to negotiate master agreements with the major film distributors, which had the effect of depriving competitors of first- and second-run films; obtained from the distributors unreasonable "clearances," long-term agreements for rentals of films and other concessions which gave them unreasonable advantages over competitors; threatened to build theatres or to open closed theatres in order to stop or prevent competition; cut admission prices; obtained from competitors whom they bought out agreements not to compete for long terms of years, which sometimes extended to towns other than those in which the purchased theatres operated; and thus conspired with each other and with the eight major film distributors to violate §§ 1 and 2 of the Sherman Act. The District Court enjoined these practices and ordered defendants to divest themselves of certain theatres. Defendants appealed.
1. In negotiating for films, the combining of theatres in towns in which the circuit had a monopoly with those in towns in which it had competitors was a restraint of trade and a use of monopoly power in violation of §§ 1 and 2 of the Sherman Act. United States v. Griffith, ante, p. 100. P. 116.
2. The concerted action of the parent company, its subsidiaries, and certain of the parent company's officers and directors in that endeavor was a conspiracy which was not immunized by reason of the fact that the members were closely affiliated rather than independent. P. 116.
3. The negotiations which appellants had with the distributors and which resulted in the execution of master agreements between the distributors and exhibitors brought the distributors into the unlawful combination with the defendants. P. 116.
4. A conspiracy between the exhibitors and each of the named distributors having been established by independent evidence, inter-office letters and memoranda between officials of the distributors were admissible in evidence against all conspirators as declarations of some of the associates, so far as they were in furtherance of the unlawful project. Pp. 116-117.
5. Detailed challenges to certain findings on which the District Court based its holding that appellants had violated the Act are examined and the findings are sustained (pp. 117-124), except in the following respects:
(a) The finding that appellants obtained film-rental concessions not made available to independent operators is not intelligible and is set aside, in order that it may be clarified on remand of the cause. P. 120.
(b) A bare finding that appellants at times cut admission prices without a showing that such action was in purpose or effect employed as an instrument of monopoly power is not adequate to support an injunction against price cutting. Pp. 120-121.
(c) The findings as to "unreasonable clearances" are set aside, in order that the District Court may make further findings which reflect an appraisal of the complex factors bearing on the question of reasonableness. See United States v. Paramount Pictures, Inc., post, p. 131. Pp. 121-124.
6. Detailed objections to those parts of the decree which enjoined appellants from specified acts or practices are considered and the decree is sustained (pp. 125-126), except in the following respects:
(a) To the extent that provisions of the decree are directed to practices reflected in findings set aside by this Court, they must be re-examined by the District Court on remand of the cause. P. 125.
(b) The general injunction against "monopolizing" first- and second-run films is set aside, since the precise practices found to have violated the Act should be specifically enjoined. Pp. 125-126.
7. The provisions of the decree which require appellants to divest themselves of certain theatres are set aside so that the District Court can make the findings necessary for an appropriate decree. Pp. 126-130.
(a) In this type of case, an injunction against future violations is not adequate to protect the public interest, and divestiture or dissolution is an essential feature of the decree. P. 128.
(b) Divestiture or dissolution must take account of the present and future conditions of the particular industry as well as past violations. P. 128.
(c) It serves several functions: (1) It puts an end to the combination or conspiracy when that is itself the violation; (2) it deprives the defendants of the benefits of their conspiracy; and (3) it is designed to break up or render impotent the monopoly power which violates the Act. Pp. 128-129.
(d) In applying this remedy, it is essential for the District Court to determine what were the fruits of the unlawful conspiracy and to consider what is the best way of requiring appellants to surrender them. P. 129.
(e) Even after appellants are deprived of the fruits of their conspiracy, it will be necessary for the District Court to consider whether appellants' theatre circuit will still constitute a monopoly power of the kind which the Act condemns, in spite of the restrictive provisions of the decree. Pp. 129-130.
8. The provisions of the decree providing for the dissolution of the pooling agreements, the prohibition against buying or booking films for theatres in which appellants have no financial interest, and the restriction on future acquisitions of theatres, are approved. Pp. 127-130.
63 F.Supp. 229, affirmed in part and reversed in part.
MR. JUSTICE DOUGLAS delivered the opinion of the Court.
MR. JUSTICE FRANKFURTER concurs in the result.
MR. JUSTICE MURPHY and MR. JUSTICE JACKSON took no part in the consideration or decision of the case.