2 Theater Chains Face Bid-Rigging Charges

The two largest drive-in theater chains in California, which each operate a drive-in theater in Orange County, were accused of stifling competition in an indictment handed down Thursday by a Los Angeles federal grand jury.

The indictment accuses Pacific Theaters of Los Angeles and Syufy Enterprises, based in San Francisco, of violating the Sherman Antitrust Act by rigging bids they offered motion picture distribution companies, said Gary R. Spratling, chief of the U.S. Department of Justice antitrust division in San Francisco.

“They would agree among themselves as to the motion pictures for which they would submit bids and agree with one another to refrain from competitive bids on certain motion pictures,” Spratling said. Theaters often bid for the right to show a film, he explained.

The alleged conspiracy between Pacific and Syufy lasted from December, 1981, to August, 1985, Spratling said.

Syufy operates Stadium Drive-In, 1501 W. Katella Ave. in Orange, according to Grace Denton of the U.S. attorney’s office in Los Angeles. Pacific Theaters, through subsidiaries, operates the Anaheim Drive-In, 1520 N. Lemon St., Denton said.

‘A Bunch of Nonsense’

Maxwell M. Blecher, the Los Angeles attorney for Syufy, said the indictment “is a bunch of nonsense. The indictment is stale; it’s an abandoned practice.” Syufy and Pacific ended a “split” agreement more than a year ago, he said.

“Split” refers to an agreement among motion picture distributors as to which of them will negotiate--without competition from the others--for a particular movie.

In the 1940s, splitting bids on motion pictures “was a very common practice” for exhibitors, Blecher said. But now many distribution companies also own theater chains and do not need to seek exhibitors, he said.

Jack R. Myhill, general manager of Syufy Enterprises, said the legality of splitting competitive bids “is a difficult issue.”

Several court cases have upheld the practice as long as the distributors of the motion pictures were fully aware of the practice, Myhill said. In this case, the distributors, such as Paramount Pictures and Warner Brothers, were aware of a bid-splitting agreement between Syufy and Pacific, he said.

However, a more recent court case ruled that splitting competitive bids is against the law, Myhill said. He declined to outline the agreement between Syufy and Pacific.

If convicted, the companies face a fine of $1 million or twice the amount the companies gained through the bidding, whichever is greater, Denton said.

Jay Swerdlow, an administrative assistant with Pacific Theaters, said the company wished to make no public response to the indictment.

In Los Angeles County, Syufy operates the South Bay Drive-In and Pacific operates the Torrance Drive-In, Denton said.