`Case 1:19-mc-00544-AT Document 52 Filed 08/07/20 Page 1 of 17
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`DATE FILED: _8LZ[2020_ Plaintiff,
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`USDC SDNY
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`DOCUIVIENT
`ELECTRONICALLY FILED
`DOC #:—
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`19 Misc. 544 (AT)
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`ORDER
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`UNITED STATES DISTRICT COURT
`SOUTHERN DISTRICT OF NEW YORK
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`UNITED STATES OF AMERICA,
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`-against-
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`PARAMOUNT PICTURES, INC .,
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`UNITED STATES OF AMERICA,
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`Defendant.
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`Plaintiff,
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`-against—
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`LOEW’S INCORPORATED, ET AL.,
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`ANALISA TORRES, District Judge:
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`Defendants.
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`This antitrust action concerns consent decrees known as the Paramount Decrees (the
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`“Decrees”), which ended the motion picture horizontal distributor cartel of the 1930s and 403
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`and have regulated aspects of the movie industry for the last seventy years.1 The Antitrust
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`Division of the United States Department of Justice moves to terminate the Decrees effective
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`immediately, except for a two-year sunset period on the Decrees’ provisions banning block
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`booking and circuit dealing. See Gov’t Mot. at 2, ECF No. 1; Gov’t Mem. at 2, ECF No. 2.
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`Antici curiae, the Independent Cinema Alliance (“ICA”) and the National Association of Theatre
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`1 See United States v. Paramount Pictures, Inc.. Equity No. 87-273, 1948-49 Trade Cas. (CCH)11 62.377 (S.D.N.Y.
`Mar. 3. 1949) (Paramount Pictures. Inc); 1950-51 Trade Cas. (CCH) 11 62,861 (S.D.N.Y. June 7, 1951) (Twentieth
`Century Fox Film Corp.): 1950-51 Trade Cas. (CCH) 11 62.573 (S.D.N.Y. Feb. 8. 1950) (Columbia Pictures Corp..
`Universal Corp.. and United Artists Corp): 1950-51 Trade Cas. (CCH)11 62.765 (S.D.N.Y. Jan. 4. 1951) (Warner
`Brothers Pictures. Inc.): and 1952-53 Trade Cas. (CCH) 11 67.228 (S.D.N.Y. Feb. 7. 1952) (Loew’s Inc.): see also
`ECF No. 2-1 for copies of these Final Consent Judgments.
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`Case 1:19-mc-00544-AT Document 52 Filed 08/07/20 Page 2 of 17
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`Owners (“NATO”) oppose the motion. See ICA Opp., ECF No. 41; NATO Opp., ECF No. 45.
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`For the reasons stated below, the Government’s motion is GRANTED.
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`In 1938, the Department of Justice brought an antitrust action against eight companies—
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`BACKGROUND
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`Paramount Pictures, Inc. (“Paramount”), Twentieth Century Fox Film Corp. (“Fox”), Warner
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`Brothers Pictures, Inc. (“Warner”), Loew’s Incorporated (“Loew’s”), Radio-Keith-Orpheum
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`(“RKO”), Universal Corp. (“Universal”), Columbia Pictures Corp. (“Columbia), and United
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`Artists Corp. (“United Artists”) (collectively, “Defendants”)—that, at the time, dominated the
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`production and distribution of motion pictures in the United States. See United States v.
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`Paramount Pictures, 334 U.S. 131, 140 (1948); see also United States v. Loew’s Inc., 783 F.
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`Supp. 211, 212 (S.D.N.Y. 1992). The companies fell into two groups: (1) those that produced,
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`distributed, and exhibited movies and (2) those that produced or distributed films, but did not
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`exhibit them. See Paramount, 334 U.S. at 140; see also Gov’t Mem. at 6–7.
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`Five of the Defendants, Paramount, Loew’s, Warner, RKO, and Fox (collectively, the
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`“Major Defendants”) owned large movie theater circuits, including over seventy percent of the
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`best and largest “first-run” theaters in the ninety-two largest cities in the United States.
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`Paramount, 334 U.S. at 167. This market structure eventually led to cooperation and collusion,
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`wherein Defendants established a cartel for the purposes of (1) limiting the first run of their
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`pictures, as much as possible, to the theaters that the Major Defendants owned and controlled;
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`and (2) closing off first-run theaters to their competitors, independent motion picture distributors.
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`Id. at 154–55. In other words, Defendants created an intricate system of sequential and non-
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`overlapping theatrical “runs” for their films. Gov’t Mem. at 8–9. Pursuant to that scheme,
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`Defendants classified all movie theaters into specific “run” categories. Id.; see also Paramount,
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`2
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`334 U.S. at 144 n.6 The first run was exclusively reserved what were then called first-run
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`theaters. Gov’t Mem. at 8–9. This was the highest priced and most profitable “run” because
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`most moviegoers saw movies within a few weeks of release. Id. Defendants agreed to designate
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`almost all of the theaters that Major Defendants owned and controlled as first-run. Id. at 9.
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`After the first run ended, Defendants distributed their movies to discount-priced theaters in the
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`second-run market, and after the second run, to a more-discounted third, fourth, or later theatrical
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`run. Id. Defendants agreed to relegate most independent theaters to the later and less profitable
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`runs. Id.
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`At trial, the district court found that Defendants had (1) monopoly power in the
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`distribution market for first-run motion pictures; and (2) engaged in a conspiracy to fix licensing
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`practices, including admission prices, run categories, and “clearances” for substantially all
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`theaters located in the United States. Paramount, 334 U.S. at 170–71; United States v.
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`Paramount Pictures, 85 F. Supp. 881, 884, 896 (S.D.N.Y. 1949) (“[W]e have found that a
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`conspiracy has been maintained through price fixing, runs and clearances, induced by vertical
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`integration,” and that “this conspiracy resulted in the exercise of monopoly power”); see also
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`Loew’s Inc., 783 F. Supp. at 212 (“The proof at trial established that the five [Major Defendants]
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`had, inter alia, engaged in a ‘horizontal’ conspiracy to monopolize the exhibition business by
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`foreclosing independent exhibitors from access to first-run films, and the [other Defendants]
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`acquiesced in that scheme.”).
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`The Supreme Court affirmed the district court’s finding that Defendants were liable under
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`the Sherman Act, and remanded the matter to the district court to fashion relief that would
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`“uproot all parts of [the] illegal scheme—the valid as well as the invalid—in order to rid the
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`3
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`trade or commerce of all taint of the conspiracy” and undo “what the conspiracy achieved.”
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`Paramount, 334 U.S. at 148, 171; see id. at 141–61.
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`On remand, the United States and each Defendant entered into separate decrees, now
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`known as the Paramount Decrees, to remedy the competitive harms. The Decrees required the
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`Major Defendants to sell their theaters to new independent companies. See Gov’t Mem. at 11.
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`For the Major Defendants, the Decrees applied equally to the distribution companies and the new
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`companies set up to own and operate each of their movie theater circuits. Id. The Warner, Fox,
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`and Loew’s decrees also prohibited their distribution companies from acquiring any theaters
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`unless the district court found that such acquisitions would not unreasonably restrain
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`competition. Id. Because they were entered earlier, the RKO and Paramount decrees did not
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`contain that restriction. Id. RKO and Paramount, like Universal, Columbia, and United Artists,
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`have always been free to acquire theaters without court approval. Id. at 11–12.
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`In addition to the theater divestiture requirements, the Decrees restricted the ways in
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`which all Defendants could license and distribute movies to theaters. Specifically, the Decrees
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`barred each Defendant from engaging in the following practices:
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`• Resale price maintenance – setting minimum movie ticket prices (section II, paragraph 1
`and section III, paragraph 1 of the Warner decree);
`• Unreasonable clearances – granting exclusive film licenses for overly broad geographic
`areas (section II, paragraphs 2, 3, and 4 and section III, paragraphs 2, 3, and 4 of the
`Warner decree);
`• Block booking – bundling multiple films in one theatrical license (section II, paragraph 7
`and section III, paragraph 7 of the Warner decree); and
`• Circuit dealing – licensing a film to all theaters under common ownership or control
`instead of theater by theater (section II, paragraphs 6 and 8 and section III, paragraphs 6
`and 8 of the Warner decree).
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`Id. at 12.
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`In 2018, the Antitrust Division announced an initiative to review, and where appropriate,
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`terminate or modify “legacy antitrust judgments that no longer protect competition” because of
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`4
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`“changes in industry conditions, changes in economics, changes in law, or for other reasons.”
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`See U.S. Department of Justice Press Release, Department of Justice Announces Initiative to
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`Terminate “Legacy” Antitrust Judgments (Apr. 25, 2018),
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`https://www.justice.gov/opa/pr/department-justice-announces-initiative-terminate-legacy-
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`antitrust-judgments.
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`The Government’s review of the Decrees included a 60-day notice and public comment
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`period. Gov’t Mem. at 4–5. It received over eighty comments, many of which oppose
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`termination of the Decrees. Id. at 5. The Government now moves to terminate the Decrees,
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`effective immediately, and, in response to the comments received, proposes to add a two-year
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`sunset period to the Decrees’ block booking and circuit dealing provisions to provide a transition
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`period to minimize market disruption. Id. at 5–6.
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`I.
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`Standard of Review
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`DISCUSSION
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`Under Rules 60(b)(5) and 60(b)(6) of the Federal Rules of Civil Procedure, on “motion
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`and just terms, the court may relieve a party . . . from a final judgment [when] . . . applying it
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`prospectively is no longer equitable; or any other reason that justifies relief.” Fed. R. Civ. P.
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`60(b). Each of the Decrees provides that this Court retains jurisdiction to enable “any of the
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`parties . . . and no others, to apply to the Court at any time for any such further order . . . as may
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`be necessary or appropriate for the construction, modification, or carrying out of the same, . . . or
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`for other or further relief.” See, e.g., Loew’s Inc. Decree 1952-53 Trade Cas. (CCH) ¶ 67,228
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`(S.D.N.Y. Feb. 7, 1952) at Section X, ECF No. 2-1 at 74.
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` “Where, as here, the United States consents to the proposed termination of the judgment
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`in a Government antitrust case, the issue before the Court is whether termination of the judgment
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`is ‘in the public interest.’” Loew’s Inc., 783 F. Supp. at 213 (internal quotation marks and
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`citations omitted) (terminating Decree in 1992 as to Loew’s, on Government consent); see also
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`United States v. Int’l Bus. Machines Corp., 163 F.3d 737, 740 (2d Cir. 1998) (“By statute . . . the
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`court may approve an antitrust consent decree only upon finding that it is ‘in the public
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`interest[.]’. Although the Tunney Act, by its terms, applies only to the approval of consent
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`decrees, we have held that termination also requires judicial supervision—and ‘consider[ation of]
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`the public interest’—as a corollary to the Tunney Act.” (quoting United States v. Am. Cyanamid
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`Co., 719 F.2d 558, 565 (2d Cir. 1983))).
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`The district court’s “‘public interest’ determination must be based on the same analysis
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`that it would use to evaluate the underlying violation.” United States v. Int’l Bus. Machines
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`Corp., 163 F.3d 737, 740 (2d Cir. 1998). That evaluation “is necessarily forward-looking and
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`probabilistic . . . focused on the likelihood of a potential future violation, rather than the mere
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`possibility of a violation.” Id. at 741–42.
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`“The Supreme Court has held that where the words ‘public interest’ appear in federal
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`statutes designed to regulate public sector behavior, they ‘take meaning from the purposes of the
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`regulatory legislation.’” Loew’s Inc., 783 F. Supp. at 213 (quoting NAACP v. FPC, 425 U.S.
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`662, 669 (1976)). The antitrust laws, the “regulatory legislation” involved here, “were enacted
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`for the protection of competition, not competitors.” Brunswick Corp. v. Pueblo Bowl-O-Mat,
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`Inc., 429 U.S. 477, 488 (1977) (internal quotation marks and citation omitted); see also United
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`States v. Penn-Olin Chemical Co., 378 U.S. 158, 170 (1964).
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`“[T]he Department of Justice has broad discretion in controlling government antitrust
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`litigation.” Loew’s Inc., 783 F. Supp. at 214 (citing Sam Fox Publishing Co. v. United States,
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`366 U.S. 683, 689 (1961)). “[T]he Court, in making its public interest finding,
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`should . . . carefully consider the explanations of the government . . . and its responses to
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`comments in order to determine whether those explanations are reasonable under the
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`circumstances.” Id. (citation omitted).
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`II.
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`Analysis
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`A. Whether Termination is in the Public Interest
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`The Government has concluded that terminating the Decrees would be in the public
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`interest for four reasons. First, the Decrees achieved the Supreme Court’s remedial mandate to
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`this Court: they “uproot[ed]” and ended Defendants’ illegal conspiracy and, along with the
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`passage of time, “rid” the industry of “all taint of the conspiracy,” “undoing what the conspiracy
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`achieved.” Paramount, 334 U.S. at 148, 171; see Gov’t Mem. at 16. Second, changes in the
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`motion picture industry over the last seventy years have made it unlikely that the remaining
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`Defendants could or would reinstate their cartel to monopolize the motion picture distribution
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`and theater markets. Id. Third, antitrust case law has evolved to undermine the Decrees’
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`ongoing regulatory provisions. Id. Although the Decrees bar vertical licensing practices as per
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`se illegal, under current Supreme Court precedent, courts judge such conduct under the fact-
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`specific “rule of reason” standard. Id. Finally, Defendants remain subject to liability under the
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`antitrust laws. Absent the Decrees, the Sherman Act would continue to provide effective
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`deterrence against any industry-wide attempts to re-establish a cartel to monopolize the film
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`distribution and exhibition markets. Id.
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`The Court now assesses whether the Government “has offered a reasonable and
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`persuasive explanation of why the termination of the [Decrees] . . . would serve the public
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`interest in free and unfettered competition.” Loew’s, 783 F. Supp. at 214; see also N. Pac. Ry.
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`Co. v. United States, 356 U.S. 1, 4 (1958) (“The Sherman Act was designed to be a
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`comprehensive charter of economic liberty aimed at preserving free and unfettered competition
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`as the rule of trade.”).2
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`1. Necessity of the Decrees
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`The Government argues that, after seventy years, the Decrees are no longer necessary.
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`The gravamen of the Paramount case was a long-standing horizontal conspiracy among
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`Defendants to monopolize the first-run motion picture theater market. Critical to this illegal
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`cartel was that (1) Defendants collectively had monopoly power in the distribution market for
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`first-run films; and (2) the Major Defendants also owned the best “first-run” theaters in the most
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`important geographic locations. This market structure led to collusion that foreclosed
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`independent distributors from sufficient access to the first-run theater market.
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`The Decrees put an end to Defendants’ collusion and cartel and, in their absence, the
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`market long-ago reset to competitive conditions. Both the market structure and distribution
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`system that facilitated that collusion are no longer the same. As the Court explains below,
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`seventy years of technological innovation, new competitors and business models, and shifting
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`consumer demand have fundamentally changed the industry. As another court in this district
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`previously stated in granting a motion to terminate an antitrust judgment: “In view of the
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`changed environment in which the [f]inal [j]udgment now operates, there is no persuasive reason
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`for maintaining it and imposing upon the defendants a decree which no longer comports with the
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`current state of the market.” United States v. Columbia Artists Mgmt., Inc., 662 F. Supp. 865,
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`870 (S.D.N.Y. 1987).
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`2. Changes to the Motion Picture Industry
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`In the seventy years since the Decrees were entered, the motion picture industry has seen
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`significant changes. First, the Decrees forced the Major Defendants to separate their distribution
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`2 The Tunney Act does not require a court to conduct an evidentiary hearing. 15 U.S.C. § 16(e)(2).
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`Case 1:19-mc-00544-AT Document 52 Filed 08/07/20 Page 9 of 17
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`and theater operations; today, none of them own an appreciable percentage of the nation’s movie
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`theaters. Gov’t Mem. at 18. In fact, no movie distributor owns a major theater. Id. Second,
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`although the Decrees concerned first-run motion picture theater markets, films today are broadly
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`released in single theatrical runs. Id. In the 1930s and 40s, the only way that the public could
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`view a motion picture was in a single-screen movie theater. Multiplexes, broadcast and cable
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`television, DVDs, and the internet did not exist. The singles-creen, theater-only distribution
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`market provided Defendants with the incentive and ability to limit the first-run distribution of
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`their films to a select group of owned or controlled theaters in order to maximize their profits,
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`and to relegate independent theaters to subsequent less profitable runs. Id. at 18–19.
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`Today, subsequent theatrical runs, as well as subsequent-run theaters, no longer exist in
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`any meaningful way. Id. at 19. Rather, major films are released broadly to thousands of multi-
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`screen theaters at the same time in a single theatrical run. This material change in motion picture
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`distribution was apparent in 1989, when the Second Circuit noted that, among other changes to
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`this industry,
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`the development of national television advertising . . . changed the business
`realities of the industry so that movie producers and distributors have every
`incentive to disseminate their products as quickly, and as widely, as possible.
`Many more exhibitors exhibit on many more screens than was the case when the
`consent judgments were entered into.
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`United States v. Loew’s Inc., 882 F.2d 29, 33 (2d Cir. 1989).
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`Moreover, as internet movie streaming services proliferate, film distributors have become
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`less reliant on theatrical distribution. See Brooks Barnes, The Streaming Era Has Finally
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`Arrived. Everything Is About to Change, New York Times (Nov. 18, 2019),
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`https://www.nytimes.com/2019/11/18/business/media/streaming-hollywood-revolution.html
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`(discussing the advent and rise of internet movie streaming services). For example, some
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`independent distributors, relying on subscription, instead of box office revenues, currently
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`release movies to theaters with either limited theatrical runs or on the same day as internet movie
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`streaming services. Netflix, which plans to release over fifty movies this year, “mostly bypasses
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`theaters.” Brooks Barnes, Netflix’s Movie Blitz Takes Aim at Hollywood’s Heart, New York
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`Times (Dec. 16, 2018), https://www.nytimes.com/2018/12/16/business/media/netflix-movies-
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`hollywood.html; see Gov’t Mem. at 20.
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`The competitors have also changed since the advent of the Decrees. Id. at 20–21. Many
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`of the original defendants are no longer in business, including the RKO film distribution
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`company, and all of the Loew’s, Paramount, RKO, Warner, and Fox theater companies that were
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`created as a result of the Decrees’ divestiture provisions. Id. Others distribute far fewer films.
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`For example, MGM, one of the largest motion picture studios in the 1930s and 40s, distributed
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`52 movies in 1939, including Gone with the Wind, The Wizard of Oz, and It’s a Wonderful Life,
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`but only three films in 2018. Id.
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`Motion picture distributors that are not subject to the Decrees have entered the market
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`since the 1940s—most significantly, The Walt Disney Company, the leading movie distributor in
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`2018 with about $3 billion in domestic box office revenues. See id. at 21. Other motion picture
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`distributors not subject to the Decrees include Lionsgate (20 films released in 2018), Focus
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`Features (13 films), Roadside Attractions (12 films), and STX Entertainment (10 films). See id.
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`None of the internet streaming companies—Netflix, Amazon, Apple and others—that produce
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`and distribute movies are subject to the Decrees. Thus, the remaining Defendants are subject to
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`legal constraints that do not apply to their competitors.
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`Amici argue that although the Decrees apply only to Defendants, “the stakes of this
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`deregulatory effort extend” beyond the specific Defendants in this case. NATO Reply at 14,
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`ECF No. 51; see also ICA Opp. at 12–13. They contend that the “[c]onsent decrees serve as a
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`yardstick of acceptable behavior, exerting a normative effect on industry actors who are not
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`parties to them.” NATO Reply at 14. But termination of the Decrees does not give Defendants,
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`or other market participants, free rein to implement the same anti-competitive practices that the
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`Decrees remedied. Termination simply implies that this Court, in performing a “necessarily
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`forward-looking and probabilistic” evaluation, determined that termination would be in the
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`public interest because there is a low “likelihood of a potential future violation,” IBM, 163 F.3d
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`at 741–42, given the changes in the market and the fact that motion picture distributors not
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`subject to the Decrees have shown no propensity to acquire major movie theater circuits or
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`engage in the type of collusive practices the Decrees targeted, Gov’t Mem. at 21. If there is a
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`future violation, however, that party would be subject to the liability under the full extent of
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`federal and state antitrust laws, as they are today.
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`Given this changing marketplace, the Court finds that it is unlikely that the remaining
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`Defendants would collude to once again limit their film distribution to a select group of theaters
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`in the absence of the Decrees and, finds, therefore, that termination is in the public interest.
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`3. Changes in Antitrust Law
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`Changes in antitrust law also suggest that the potential for future violation is low. The
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`Decrees’ treatment of certain conduct as per se illegal and subject to criminal penalties—no
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`matter what the factual circumstances—prohibits conduct that today may be deemed legal and
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`beneficial to competition and consumers. For example, the Decrees outlawed vertical integration
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`in order to end Defendants’ horizontal conspiracy. Paramount, 334 U.S. at 174; Paramount, 85
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`F. Supp. at 893. Today, vertical integration would be reviewed under a different standard. The
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`Supreme Court has recognized that vertical integration can create efficiencies that lower costs
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`and encourage innovation that often results in better products and lower prices for consumers.
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`See, e.g., Leegin Creative Leather Prod., Inc. v. PSKS, Inc., 551 U.S. 877 (2007). Under a fact-
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`based “rule of reason” analysis, a court must weigh the competitive harm of foreclosing
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`competitors—either motion picture distributors from theaters, or movie theaters from a movie
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`distributor’s films—against any procompetitive efficiencies to determine whether a transaction
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`violates the antitrust laws. See, e.g., Loew’s Inc., 882 F.2d at 33.
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`Statutory merger law also has changed significantly. At the time the Decrees were
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`entered, companies could merge without any notification to the antitrust authorities. Today, the
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`Hart-Scott-Rodino Antitrust Improvements Act of 1976 (the “HSR Act”), 15 U.S.C. § 18a,
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`requires parties who engage in a significant merger transaction (e.g., where the merger involves
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`an acquisition of securities or assets valued over $90 million) to notify the federal antitrust
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`agencies and permit them to investigate before their transaction can close. In the absence of the
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`Decrees, there would still exist industry oversight because a merger between any major movie
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`distributor and one of the large national theater circuits would very likely require HSR filings,
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`thereby providing the antitrust agencies with notice and opportunity to evaluate the competitive
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`effects of the transaction.
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`The legal framework used to evaluate the Decrees’ film licensing practices—including
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`block booking, circuit dealing, and resale price maintenance—has also changed. Although per
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`se illegal seventy years ago, today, courts would analyze such restraints under the rule of
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`reason—evaluating the specific market facts to determine whether a practice’s anticompetitive
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`harm outweighs its procompetitive benefits. See, e.g., Leegin, 551 U.S. at 907 (extending rule of
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`reason analysis to minimum resale price maintenance claims); Jefferson Parish Hosp. Dist. No. 2
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`v. Hyde, 466 U.S. 2, 26–29 (1984) (holding that tying arrangements [like block booking] are
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`presumed to be per se illegal only in certain factual circumstances, including where the
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`defendant had market power and where the tie foreclosed competitors from the tied market);
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`Continental T.V., Inc. v. GTE Sylvania, Inc., 433 U.S. 36, 59 (1977) (holding that non-price
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`vertical restraints are judged under rule of reason), abrogated by Illinois Tool Works Inc. v.
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`Indep. Ink, Inc., 547 U.S. 28 (2006).
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`Lastly, maintaining the Decrees in perpetuity “would not be consistent with the current
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`Department of Justice Antitrust Division policy of limiting consent judgments to a period of ten
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`years.” Columbia Artists Mgmt., Inc., 662 F. Supp. at 866–67. Given the increased penalties
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`that Congress has mandated for per se violations of the antitrust laws, the Antitrust Division
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`concluded that a successful criminal prosecution under the Sherman Act would more effectively
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`deter antitrust recidivists than a criminal contempt proceeding under provisions of a longstanding
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`consent decree. See id.; see also Gov’t Mem. at 4 n.6.
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`Because changes in antitrust law and administration have diminished the importance of
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`the Decrees’ restrictions, while still providing protections that will keep the probability of future
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`violations low, the Court finds that termination of the Decrees is in the public interest.
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`4. Antitrust Laws as an Effective Deterrence
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`Finally, the Government argues that although terminating the Decrees would release
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`Defendants from the Decrees’ restrictions, they would still be subject to liability under federal
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`and state antitrust law. Gov’t Mem. at 26–28. Absent the Decrees, any plaintiff, whether the
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`United States or a private plaintiff, would still have the advantage of the Supreme Court’s and
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`this Court’s rulings in the Paramount litigation that resulted in the Decrees. Antitrust laws, and
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`their faithful enforcement, weigh in favor of the Court’s finding that there is a low likelihood of a
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`potential future violation absent the Decrees. IBM, 163 F.3d at 740.
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`Case 1:19-mc-00544-AT Document 52 Filed 08/07/20 Page 14 of 17
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`B. Public Comments
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`Having concluded that the Government has “offered a reasonable and persuasive
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`explanation” for why termination of the Decrees would “serve the public interest in free and
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`unfettered competition,” Loew’s Inc., 783 F. Supp. at 214, the Court turns to whether the
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`comments received by the Government and the Court provide sufficient basis for denying the
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`Government’s motion, see id. The Court concludes that they do not.
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`The Government solicited public comments with regard to whether the Decrees should be
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`terminated or modified. The comments focused on vertical integration in the motion picture
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`industry and movie distribution and licensing practices. See Gov’t Mem. at 29–38. The
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`Government argues that the comments fail to establish that (1) there is a likelihood that the
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`remaining Paramount Defendants would again collude to impose an anticompetitive distribution
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`system or anticompetitive terms in their theatrical film licensing agreements, and (2) that current
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`antitrust laws are inadequate to police any such collusion. Id. at 30.
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`With respect to vertical integration, commenters argued that terminating the ban on
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`vertical integration would allow major movie studios to merge with one of the large national
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`theater circuits—AMC, Cinemark, or Regal. Id. The Government notes, however, that the
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`Decrees do not prohibit the vertical integration commenters warn about because vertical
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`restrictions apply only to a subset of movie distributors; the Decrees do not apply to every
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`distributor in the market and do not even apply to every Defendant. See id. at 31. Moreover, the
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`Court finds that changes to antitrust administration, in particular, the HSR Act, provide federal
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`antitrust agencies with notice and the opportunity to evaluate the competitive significance of any
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`major transaction between a movie distributor and a theater circuit, which suggests a low
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`likelihood of potential future violation. IBM, 163 F.3d at 741–42.
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`With respect to distribution and licensing practices, commentators, including amici ICA
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`and NATO, argue that the restrictions on block booking and circuit dealing should be preserved.
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`See Gov’t Mem. at 32–36; NATO Opp. at 10–20. Block booking is the “the practice of
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`licensing . . . one feature or a group of features on condition that the exhibitor will also license
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`another feature or group of features,” Paramount, 334 U.S. at 156, “tying” multiple films
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`together in one theatrical license, instead of licensing films on a film-by-film basis, see id. at
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`158. Circuit dealing is the practice of licensing films to all movie theaters under common
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`ownership, as opposed to licensing each film on a theater-by-theater basis. Id. at 153–57.
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`In the 1930s and 40s, Defendants required block booking provisions in many of their
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`theatrical licenses and they often required first-run theaters to license their entire season’s output
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`of films. United States v. Paramount Pictures, 66 F. Supp. 323, 347 (S.D.N.Y. 1946), aff’d in
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`part, rev’d in part, 334 U.S. 131(1948); United States v. Paramount Pictures, 70 F. Supp. 53, 63
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`(S.D.N.Y. 1946). Requiring a key group of marquee theaters to show all of Defendants’ films—
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`one after the other—tied them up for weeks or months, thus foreclosing independent distributors
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`from the first-run theaters they needed to successfully launch and distribute their films. In
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`today’s landscape, although there may be some geographic areas with only a single one-screen
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`theater, most markets have multiple movie theaters with multiple screens simultaneously
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`showing multiple movies from multiple distributors. There also are many other movie
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`distribution platforms, like television, the internet and DVDs, that did not exist in the 1930s and
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`40s. Given these significant changes in the market, there is less danger that a block booking
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`licensing agreement would create a barrier to entry that would foreclose independent movie
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`distributors from sufficient access to the market.
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`Market changes have also limited any dangers posed by the practice of circuit dealing. In
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`Case 1:19-mc-00544-AT Document 52 Filed 08/07/20 Page 16 of 17
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`the 1930s and 40s, Defendants illegally agreed among themselves to use circuit deals to ensure
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`that the first run of their films played in the theaters that the Major Defendants owned and
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`controlled, thus foreclosing independent theaters from those films’ first runs. Paramount, 70 F.
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`Supp. at 63. By doing so, Defendants used their collective market power in film distribution to
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`gain a monopoly in the first-run theater market. Because the Decrees ended the collusion and
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`required the Major Defendants to separate their film distribution and theater operations, and the
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`industry no longer uses sequential theatrical runs, it is unlikely that any collective attempt by
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`Defendants to once again monopolize the theater market would or could reoccur.
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`The Government moves to terminate the Decrees immediately, but with a two-year sunset
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`period for the Decrees’ block booking and circuit dealing provisions which would provide movie
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`theaters a transitional time period to adjust their business models and stra