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Justice Department Moves to End Paramount Antitrust Decrees

The Department of Justice will seek to end the Paramount consent decrees, the landmark agreements that have barred studios from owning theaters for the last 70 years.

Makan Delrahim, the head of the department’s antitrust division, made the announcement Monday in a speech to the American Bar Association fall forum on antitrust. He argued that the decrees are a relic of the past, as the old studio system has long since expired.

“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,” Delrahim said. “The Division finds the consent decrees no longer meet consumer interests.”

The department announced in August 2018 that it would be reviewing the Paramount decrees.

The decrees sprang from a 1948 Supreme Court decision siding with the government in a decade-long battle with the major studios. The decision permanently divorced movie production from distribution. The decrees also barred anti-competitive practices in theatrical distribution, such as “block booking,” whereby multiple films are sold together, and “circuit dealing,” in which the studios have one contract with all theaters under a single circuit.

But as technologies have changed, the Justice Department has come to see the decrees as outdated. Studios can now sell their films directly to customers through streaming services. In his speech, Delrahim argued that the antitrust division should not stand in the way of “consumer-enhancing innovation,” even noting MoviePass, the failed subscription service.

“We cannot pretend that the business of film distribution and exhibition remains the same as it was 80 years ago,” he said.

The Justice Department will ask a court to terminate the decrees, with a two-year sunset on circuit dealing and block booking. He said the division is not declaring that those practices are now legal, however.

“Rather, consistent with modern antitrust law, the Division will review the vertical practices initially prohibited by the Paramount decrees using the rule of reason,” he said. “If credible evidence shows a practice harms consumer welfare, antitrust enforcers remain ready to act.”

In October 2018, the National Association of Theatre Owners urged the department to retain the ban on block-booking, arguing that without it, studios could force theaters to accept their entire slate in order to get the latest blockbusters. That would effectively crowd out smaller movies, especially documentaries, the organization argued.

“If exhibitors were forced to book out the vast majority of their screens on major studio films for most of the year, this would leave little to no room for important films from smaller studios,” the group stated, citing documentaries like “RGB” and “Won’t You Be My Neighbor?” that had successful theatrical runs. “Preserving the prohibition on block booking is vital to the ability of all distributors, both large and small, to bring their movies to the big screen and reap the benefits of a theatrical run.”

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