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Justice Department Goes to Court to Lift Paramount Consent Decrees

The Justice Department filed a motion in federal court on Friday to terminate the Paramount consent decrees, the agreements that have governed the theatrical business for 70 years.

Makan Delrahim, the head of the department’s antitrust division, announced in a speech on Monday that he would take action to end the decrees, which he argued are antiquated and “no longer meet consumer interests.”

The decrees were the result of 10 years of antitrust litigation, which ended with a Supreme Court decision in the government’s favor in 1948. The rules required studios to divest themselves of their theatrical arms, and prohibited certain anti-competitive practices in the distribution business. The decrees set industry-wide standards, but technically applied only to the defendants in the case — many of which no longer exist.

“There is no reason to believe that Defendants would or could re-establish the industry-wide horizontal conspiracy or cartel that was the basis for the original enforcement action by the United States and the resulting Decrees,” the department said in its motion. “Such a conspiracy or cartel is particularly unlikely and improbable today because of the technological and marketplace changes that have transformed the movie industry over the last seventy years.”

The department announced in 2018 that it would revisit the Paramount decrees as part of a much broader initiative to sunset decades-old antitrust enforcement decrees. The National Association of Theatre Owners raised an objection last year, arguing that the prohibition on “block booking” remains essential to a thriving movie marketplace.

The decrees barred studios from packaging movies together under one license, effectively forcing theaters to take less popular films on a studio’s slate in order to get its blockbusters. NATO argues that that rule is essential to allowing smaller movies from independent distributors, particularly documentaries, to find a theatrical audience.

The Justice Department is seeking to phase out the bans on block booking and “circuit dealing,” whereby a studio sets a deal with all the theaters in a single circuit with one contract, over the next two years.

The department argues that such practices are not necessarily illegal, and may actually be “efficient, and thus, if allowed, beneficial to competition and consumers.”

The department also argues that on the merits, the practices should be ended immediately, but that it is providing a two-year sunset out of deference to theaters’ concerns.

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