Justice Won’t Oppose Theater Ban on Studios : Antitrust Chief Says Industry Isn’t Interested in Seeking Change in Court

The Justice Department said Wednesday that it will not seek to end or change the antitrust consent decrees that have kept several major film studios from owning movie theater chains for more than three decades.

Assistant Atty. Gen. J. Paul McGrath, the department’s antitrust chief, said Wednesday that a key factor in the decision was his finding that the studios were not interested enough to push for changes in court on their own.

Although the Justice Department’s practice has been to support motions by defendants to terminate or modify decrees where it believes that it is in the public interest, McGrath noted, the department itself has not instituted such motions.

“Under the circumstances,” McGrath said, “I am not prepared to expend resources to terminate the decrees.”

However, he stated in a letter of notification to the federal judge who has presided over the decrees for 30 years that it “may be appropriate for the court and the parties to consider whether a termination date” should be added to the decrees.

Organized theater exhibitors, which have opposed major alterations in the decrees, recently warned antitrust enforcers that two major studios already had made approaches to big theater chains with an eye to acquiring them.

McGrath’s decision concluded a departmental review begun in October, 1981, by his predecessor, William F. Baxter.

Hollywood studios were mostly noncommittal in the wake of the Justice Department decision, saying they had not yet seen the text.

However, David Handelman, a senior vice president and general counsel at 20th Century Fox Film Corp., commented that the consent decree proceeding is “very complex and expensive,” adding that “it is unfortunate that we have to live with this outmoded decree.”

Handelman also denied the theater operators’ allegations that Fox had made overtures to General Cinema Corp., the nation’s largest exhibitor, and Loews Corp., which operates theaters in seven states. The allegation was in a memorandum to the Justice Department last month by the National Assn. of Theatre Owners.

The theater owner group also said in its memorandum that it believed that Paramount Pictures Corp. had approached the owners of Commonwealth Theatres, a Midwestern chain, about possible acquisition. A Paramount spokesman said Wednesday that he had no comment on that allegation.

Often referred to as the “Paramount decrees,” the series of consent settlements was entered between 1948 and 1952 against eight of the major movie companies then operating in this country.

According to the Justice Department, it filed the original antitrust case against the eight studios in 1938 as the “culmination of a series of efforts . . . to end anti-competitive practices in the movie business.” The suit alleged price-fixing and attempts to monopolize trade in motion pictures through theater ownership. Of the eight studios, Fox, Warner Bros. and MGM/UA Entertainment Co. cannot own or operate movie theaters unless they obtain the court’s approval.

Three other major studios, however, were structured differently at the time of the decrees and are not barred from owning theaters. They are Paramount, Universal Studios and Columbia Pictures.

Paramount and Universal have no theater holdings, but Columbia owns about 41% of the Walter Reade Organization Inc., a New York theater chain.

All six of the big distributors are required under the decrees to license their films on a picture-by-picture, theater-by-theater basis, which has been a sore point for the studios.

In his letter to U.S. District Judge Edmund L. Palmieri in New York, who has monitored the decrees for some 30 years, McGrath said that during the last several months he had undertaken to determine whether most or all of the movie studios involved were “prepared to file motions seeking termination of the decrees and to demonstrate in court that this action was in the public interest.”

“At the current time,” McGrath’s letter added, “most of the distributor defendants are not willing to make this commitment.”

After noting his decision that the antitrust division will not move for changes itself, McGrath said in his letter:

“The division has had a policy for a number of years that, except in the most extraordinary circumstances, decrees should be entered for a period of no longer than 10 years. This policy is based on our experience with perpetual decrees and the related observation that market conditions change over time.”

Noting that it might be appropriate for the court and the parties to consider a termination date, the letter added:

“My conclusion with respect to our current review of the decrees is not meant to suggest that we would oppose establishment of a future termination date.” Later, in response to a question, Justice Department spokesman Mark Sheehan said McGrath’s letter carried “no veiled meaning” concerning the department’s intentions in the case.

Times staff writer Kathryn Harris contributed to this story.