The Merger Movement in the Motion Picture Industry

• Published date: 01 January 1930
• DOI: 10.1177/000271623014700112
• Author: Ralph Culver Bennett
• Date: 01 January 1930
• Subject Matter: Articles

The Merger Movement in the Motion Picture Industry
By RALPH CULVER BENNETT
Lecturer in Motion Picture Law, University of Southern California, Los Angeles, California
I T is universally agreed that the distribution and exhibition that have
motion picture industry is today
been put in issue at law by the Govern-
one of the leading industries of Amer-
ment, through the Department of
ica. The rapid transition of motion
Justice and the Federal Trade Com-
pictures from the arcade penny peep-
mission, have already been conformed
shows of yesterday to the colossal fea-
to, and thus obviated, by the defend-
ture films of today is without parallel.
ant companies themselves. A few of
Within a period of a little over two
the issues, however, remain as yet
decades, the industry has progressed
unsettled at law. Premising that those
by such unprecedented leaps and
remaining contentions will be duly
bounds that today it is of gigantic
determined and that proper adaptation
proportions. The legal status of its
will be made by the picture companies
representative component units in
to any constraint that may be finally
their various workings is in some ways
sustained at law, the discussion in this
yet undetermined and undefined at
article is limited to the question: To
law, because of the fact that the in-
what extent and under what circum-
dustry is of such comparatively recent
stances, so far as can be fairly deduced
origin, and also because it has had such
and determined, can motion picture
rapid and unusual growth.
companies, as such, legally combine
From the business of merely produc-
and operate?
ing motion pictures, the leading or-
Unfortunately, no judicial decisions
ganizations in the industry have of
have been rendered in the instance of
recent years reached out into the field
motion picture mergers. Therefore,
of distributing their own productions,
in discussing this subject, we can only
while several have even gone to the
proceed by analogy from decisions
extent of controlling and operating
rendered in cases of merger in other
theaters for the exhibition of their own
industries, necessarily bearing in mind,
productions.
however, the distinctive and controlling
features that are peculiar to the motion
LEGAL EFFECTS NOT DETERMINED
picture industry itself, for the so-called
The question as to what extent and
&dquo;rule of reason&dquo; which the Supreme
under what circumstances motion
Court of the United States, in the
picture companies, without violating
epochal Standard Oil and American
the Sherman Anti-Trust Act and the
Tobacco cases, laid down eighteen
amendments and statutory enactments
years ago as applicable in all such
that supplement this Law, can operate
cases, must be applied separately to
in the distribution and public exhibi-
each new set of facts arising in any
tion of their own productions is not yet
given case. That &dquo;rule of reason&dquo;
settled at law, although test cases on
was founded upon public policy and
these issues are now pending, on appeal,
was designed to guard society against
in the upper courts. Some of the
economic oppression in cases where
purported objectionable features of
there appeared to be a suppression or
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90
stifling of free competition. But, in
of the law and furnish proper premises
applying the &dquo;rule of reason,&dquo; the
from which to philosophize on princi-
truth, as Justice Stone expressed it in
ples appertaining to industrial mergers.
the Trenton Potteries case,l must be
There is clearly no rigid rule nor
observed, namely, that &dquo;reasonableness
inflexible standard by which industrial
is not a concept of definite and un-
mergers can be tested as to legality
changing content.&dquo; In mergers, there-
or non-legality of existence. Too lib-
fore, the particular facts of each con-
eral license and too wide freedom of
solidation must be scrutinized-the
action in industrial amalgamation is
circumstances of the formation, the
bad, as is also too narrow restriction.
method of the formation, the motivat-
If, however, in any instance it is evi-
ing factors back of the formation, the
dent that the consolidation is for the
policies pursued and their effect, the
purpose of obtaining the natural ad-
detriments to independent rivals and
vantages derived from reduced cost of
the advantages accruing to customers
maintenance, greater efficiency of meth-
and consumers.
ods and better quality of product, then
the consolidation is not only legal,...