FTC Probing 2 Studios’ Ban of On-Screen Advertising

The controversy over on-screen advertising in the nation’s movie theaters has moved to the Federal Trade Commission.

A spokesman for the Justice Department on Wednesday confirmed a report that the FTC is investigating policies of Walt Disney Studios and Warner Bros. for potential restraint of trade. Both studios have banned advertising from theaters where their movies are shown.

The FTC would neither confirm nor deny the report.

But Justice Department spokesman Joe Krovisky acknowledged that Fred Haynes, who runs the antitrust division’s motion picture section, revealed the investigation during a recent board meeting of the National Assn. of Theater Owners in Washington. Krovisky said Justice knew of the FTC investigation because both agencies check with each other to avoid duplicated efforts.

Spokesmen for both Disney and Warner said Wednesday that the studios have not been contacted by the FTC and would not comment on its investigation, which was reported Wednesday in Daily Variety.

At issue is what some theater owners believe is their right to offset their costs by showing commercials, while both Disney and Warner have cited the public’s alleged antipathy toward on-screen ads. Both companies said they would allow theaters’ existing advertising contracts to run their course before initiating the ban on ads.

Disney and Warner policies forbid all advertising on screens after the lights go down but make an exception for public service announcements.

The Daily Variety report said Warner would make an exception for Los Angeles Times ads shown in Mann Theaters, a chain whose parent company, Cineamerica Theaters, is jointly owned by Warner and Paramount Communications.

However, Barry Reardon, Warner president of domestic theatrical distribution, denied that report. He said he hasn’t yet “addressed the Los Angeles Times” matter.

About 1,000 theaters in Los Angeles and Orange counties show commercials for The Times in exchange for reduced advertising rates in the paper.