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Antitrust Experts Weigh in on DOJ Warning Over Oscar Rules Changes

WASHINGTON — The Netflix vs. Spielberg debate over potential rules changes at the Oscars has until now been one of, “When is a movie a movie, and when is it a TV show?”

The Justice Department’s warning to the Academy of Motion Picture Arts & Sciences, first reported in Variety, adds a twist. Is the motive behind the potential exclusion of Netflix and other streaming platforms to shut out fierce rivals?

In a letter to AMPAS CEO Dawn Hudson, Makan Delrahim, the chief of the Antitrust Division, suggested that it raises competition issues as Oscars are of value when it comes to box office grosses and sales. He wrote that “agreements among competitors to exclude new competitors can violate the antitrust laws when their purpose or effect is to impede competition by goods or services that consumers purchase and enjoy but which threaten the profits of incumbent firms.”

Diana Moss, the president of the American Antitrust Institute, said via email that the concerns were justified as “competition by non traditional forms of original content and distribution (e.g. streaming services) remain at risk from exclusive anticompetitive conduct by incumbents like film production and cable and broadband distribution.”

She said that the letter focuses on the “very real concern” that AMPAS is a trade association that are “by definition, forums where competitors gather” and reach consensus. AMPAS is described as a professional honorary organization, and has 501(c)6 status, given the trade associations and professional associations.

“Antitrust laws kick in when agreements among competitors have the effect of constraining competition,” Moss said. “Not everything that trade associations do would fall into this category, but the kind of rule that [AMPAS] is contemplating in regard to streaming services would be suspect.”

Others were skeptical that antitrust concerns even come into play. Geoffrey Manne, president and founder of the International Center for Law & Economics, wrote on Twitter that the DOJ warning “is just politicized silliness. This is where the absurd obsession with ‘non-discrimination’ in antitrust is taking us.” He said that “the only foreclosure is from a club that should be able to control its membership.”

Hal Singer, managing director at Economic One Research, wrote on Twitter that the DOJ would face several challenges in bringing a case as the Academy is not a horizontal rival to Netflix, as it is made up of members from across the industry, and “getting an Oscar isn’t necessary for Netflix to compete effectively.”

The letter, though, certainly got attention at a time when Netflix is making inroads in industry institutions. Earlier this year, it became a member of the Motion Picture Association of America, the studio trade association that, unlike the Academy, is also made up of the six major studios. MPAA CEO Charles Rivkin addressed the exhibitor convention CinemaCon on Tuesday and told the theater owners that they “must adapt quickly to deliver what consumers want.” But he has said that the MPAA will refrain from taking up issues like theatrical windows, a flashpoint between Netflix and exhibitors, as it could raise antitrust concerns.

Larry Downes, senior industry and innovation fellow at Georgetown University, said that the DOJ letter was “unusual for the Antitrust Division to reach out to an industry preemptively about a change they haven’t even discussed making, particularly with such a stern warning.”

He added, “Obviously the industry has a long history of antitrust troubles, and as it broadens into a tech-enabled media ecosystem, it wouldn’t be surprising for the government to look closely at any behavior that might signal a return to previous harms that might have been litigated, even if that was decades ago.”

Downes pointed to the Justice Department’s previous concerns over cooperation between studios and theater owners during Hollywood’s Golden Age, which led to the landmark Paramount consent decrees that have governed those relationships for more than 70 years. The DOJ actually is in the process of reviewing those decrees for changes or for lifting them altogether.

Delrahim’s letter came in response to reports that Steven Spielberg, an Academy board member, was planning to push for rules changes to Oscars eligibility, restricting movies that debut on Netflix and other streaming services around the same time that they show in theaters.

An Academy spokesperson indicated that the next opportunity for a potential rules change to be considered would be later this month.

“We’ve received a letter from the Dept. of Justice and have responded accordingly,” the spokesperson said. “The Academy’s Board of Governors will meet on April 23 for its annual awards rules meeting, where all branches submit possible updates for consideration.”

Ketan Jhaveri, co-CEO of legal analytics firm Bodhala and a former trial lawyer in the Antitrust Division, said that the “law frowns on professionals creating cartels.” He cited a 2015 Supreme Court decision that sided with the Federal Trade Commission crackdown on a dentists’ licensing board in North Carolina that tried to restrict non-dentists from offering teeth whitening services.

He said that the Academy “cannot kneecap Netflix making art from the same directors and actors in order to protect theaters or studios or directors in order to protect studios or directors who do not want to work with the streaming competitors. The court or agency would see that having an Oscar nomination or win is a big driver of subscriptions, and this is meant to protect the current system of theater releases followed by [pay per view] and then streaming.”

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