Probe Continues Into Movie Theater ‘Split’ Agreements

Federal antitrust officials are pressing an investigation into movie theater operators who agree not to bid against each other for the rights to show films.

In the most recent action, U.S. District Judge Jim Carrigan of Denver on Thursday imposed a $400,000 fine against Mann Theatres after the chain, one of the nation’s largest, acknowledged its part in an arrangement with two other chains in Denver not to bid against one another for the rights to show movies. The arrangement between the theater chains lasted from 1979 to 1984.

The case stemmed from a nationwide investigation of theater chains by the Justice Department’s antitrust division. Seven chains have been charged with Sherman Act antitrust violations during the past year, and the investigation into so-called split agreements is continuing in California and elsewhere.

“I anticipate there will be others,” said Gary Spratling, head of the Western regional office of the antitrust division, which is based in San Francisco.

Under the plea bargain with the Los Angeles-based theater chain, the government agreed not to prosecute Mann for any other antitrust violations that it may have turned up during its investigation, while Mann agreed to help in the federal investigation.

Lawyers for the government and Mann had agreed that the fine would be $375,000. Carrigan increased the penalty to $400,000 but did not specify why, attorneys who were at the hearing said.

The $400,000 fine against Mann, the nation’s eighth-largest theater chain, was the second largest to date. General Cinema Theatres, the largest chain, was fined $750,000 last August, said Christopher Crook, a prosecutor in the antitrust division office in San Francisco.

Crook said Mann conspired with Commonwealth Theatres, which is the seventh-largest chain, and American Multi-Cinema, the fourth largest. Commonwealth and American have not been charged.

So far, the agreements have been discovered in mid-size markets, including South Bend, Ind.; Quincy, Ill., and Birmingham, Ala. Denver is the largest market in which such an agreement was unearthed.

The main victim of such agreements appears to be movie studios, which, through their distribution arms, negotiate with theater chains for the rights to show their pictures, Crook said.

In areas where exhibitors had “split” arrangements, prices paid to distributors for the right to show movies might have been lower than otherwise would have been the case, prosecutors say.

But Lee Loevinger, Mann’s lawyer, said movie distributors knew about the widespread practice. He said the practice had virtually no effect on the amount of money that exhibitors paid for the right to show movies.

“There are a half-dozen major distributors and thousands of exhibitors. Ultimately the distributors got the prices they wanted,” Loevinger said.

The current investigations actually date back to April 1, 1977, when, in an announcement dubbed by movie house operators as the April Fool’s Decision, the Justice Department declared that such arrangements were illegal.

Until then, the Justice Department did not challenge the agreements.