The Paramount Decrees marked the end of the old Hollywood system as it separated major film studios from theater chains and over 70 years later it appears the Department of Justice is prepared to terminate this clause as a federal judge has given them the greenlight to do so, according to Deadline.
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The DOJ’s Antitrust Division began a review of the decrees in November 2019 with the goal to terminate them, believing them to be outdated for the contemporary film industry and, in U.S. District Judge Analisa Torres’ ruling, found that “changes in antitrust law and administration have diminished” their importance as new laws still provide protection between the theater chains and studios.
Restrictions on block booking, where theaters must take a package of films from a studio in one license, and circuit dealing, in which a studio can demand a single license covers all theaters in a circuit, will be lifted over the course of a two-year sunset period. Torres noted in her ruling that “seventy years of technological innovation, new competitors and business models” have changed the industry for the better and that some studios bound by the decrees, namely RKO, MGM and Fox, no longer exist while others like The Walt Disney Co. weren’t major players at the time they were introduced.
“None of the internet streaming companies—Netflix, Amazon, Apple and others—that produce and distribute movies are subject to the Decrees,” Torres wrote. “Thus, the remaining Defendants are subject to legal constraints that do not apply to their competitors.” She wrote that distributors who were not subject to the decrees have “shown no propensity to acquire major movie theater circuits or engage in the type of collusive practices the Decrees targeted.”
Torres agreed with the Justice Department on the belief that current antitrust laws have established a low likelihood of any future violation by the studios and that merger laws have also changed in the years since that wold drastically affect the original decrees.
Despite the DOJ being on the side of termination, the National Association of Theater Owners and Directors Guild of America have expressed opposition to the decision, with NATO warning that the impact it would have on the exhibition business would be problematic as independent theaters would not be protected by current antitrust law.
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“The Paramount Decrees were a remedy fashioned for extreme, anticompetitive behavior in the movie industry,” a NATO spokesperson said in a statement. “We agree with the Court that anticompetitive behavior remains anticompetitive under existing antitrust law. This decision simply shifts the mechanism for enforcement into regular, existing channels.”
“As the Court points out, Gone with the Wind, The Wizard of Oz and It’s a Wonderful Life were the blockbusters when these Decrees were litigated; the movie industry and how Americans enjoy their movies have changed leaps and bounds in these intervening years,” Makan Delrahim, chief of the DOJ’s Antitrust Division, said in a statement. “Without these restraints on the market, American ingenuity is again free to experiment with different business models that can benefit consumers.”
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