Antitrust Inquiry Reportedly Looks At How Big Theater Chains Snare Movies

Small theaters' claims that large cinema chains keep them from screening first-run movies have reportedly prompted a Department of Justice investigation. News of a federal inquiry comes as arguments over preferential treatment and exclusivity have been heating up in recent years.

NPR's Mandalit del Barco reports:

"A Supreme Court decision in 1948 required that movie studios divest their ownership in theaters. The idea was to guarantee independent theaters could show new movie releases. Since then, major chains have consolidated, and they've been clashing with smaller theaters over who gets dibs on first run films.

"Some small theater owners say the larger chains— owned by just a handful of companies — regularly prevent them from running new releases at the same time. It's a practice known as 'clearing' the market. Small theater owners have filed several legal suits and complaints against AMC, Regal and Cinemark multiplex chains.

"A task force of experts, economists and lawyers are now reportedly working with Department of Justice's antitrust division to look into the accusations."

Both The Los Angeles Times and The Wall Street Journal say the Justice Department's antitrust division is bolstering its investigation. The Times quotes a DOJ spokesman who says the agency won't confirm or deny the inquiry.

Last fall, "a federal judge dismissed a lawsuit brought by Starlight Cinemas, the owner of a few independent movie theaters in California, against exhibition giant Regal Entertainment Group," according to The Hollywood Reporter.

That dismissal followed on the heels of the first signs that the Justice Department was taking a closer look at the relationship between big exhibitors and large movie studios.

The complexities of film distribution were hinted at in a New York City theater's federal lawsuit against Regal and other companies that was argued for years after it was filed in 2003. The owners of Village East theater alleged unfair practices in its densely populated release "zone."

Law 360 reported:

"Because of the perception that theaters in a particular zone compete, exhibitors within the film zones — like the Village Zone in this case — can request exclusive rights to a film.

"The Village Zone, which is one of most densely populated film zones in the U.S., has just three first-run theaters for first-run top commercial films — the Union Square 14, the Loews Village VII and the Village East."

After the Regal-owned Union Square 14 opened near the Village East, Law 360 reported, the new facility drew more than 70 percent of all film revenue in the zone, while the smaller theater got less than 11 percent.

Village East's case against Regal was eventually dismissed; its other allegations ended in either dismissals or settlements.