Syllabus.

334 U.S.

UNITED STATES v. GRIFFITH ET AL.

APPEAL FROM THE DISTRICT COURT OF THE UNITED STATES FOR THE WESTERN DISTRICT OF OKLAHOMA.

No. 64. Argued December 15, 1947.-Decided May 3, 1948.

1. Even in the absence of a specific intent to restrain or monopolize trade, it is violative of §§ 1 and 2 of the Sherman Act for four affiliated corporations operating motion picture theatres in numerous towns in three states and having no competitors in some of these towns to use the buying power of the entire circuit to obtain exclusive privileges from film distributors which prevent competitors from obtaining enough first- or second-run films to operate successfully. Pp. 101-110.

(a) It is not always necessary to find a specific intent to restrain trade or to build a monopoly in order to find that §§ 1 and 2 of the Sherman Act have been violated. It is sufficient that a restraint of trade or monopoly results as the consequence of the defendants' conduct or business arrangements. P. 105.

(b) Specific intent in the sense in which the common law used the term is necessary only where the acts fall short of the results prohibited by the Sherman Act. P. 105.

(c) The use of monopoly power, however lawfully acquired, to foreclose competition, to gain a competitive advantage, or to destroy a competitor, is unlawful. Pp. 106-107.

(d) It is unlawful for the operator of a circuit of motion picture theatres to use his monopoly in towns in which he has no competitors to obtain exclusive rights to films for towns in which he has competitors. Pp. 107-109.

(e) The exhibitors in this case having combined with each other and with the distributors to obtain monopoly rights, had formed a conspiracy in violation of §§ 1 and 2 of the Sherman Act. P. 109. 2. The District Court having erroneously dismissed the complaint in this case without making adequate findings as to the effect of the practices found by this Court to be unlawful, the case is remanded to the District Court for further findings and the fashioning of a decree which will undo as near as may be the wrongs that were done and prevent their recurrence in the future. Pp. 109-110.

68 F. Supp. 180, reversed.

100

Opinion of the Court.

In a suit by the United States to restrain violations of §§ 1 and 2 of the Sherman Act, the District Court found that there was no violation of the Act and dismissed the complaint on the merits. 68 F. Supp. 180. On appeal to this Court, reversed and remanded, p. 110.

Robert L. Wright argued the cause for the United States. With him on the brief were Solicitor General Perlman, Assistant Attorney General Sonnett, Milton A. Kallis and Robert W. Ginnane.

Charles B. Cochran argued the cause for appellees. With him on the brief was John B. Dudley.

MR. JUSTICE DOUGLAS delivered the opinion of the Court.

This is a suit brought by the United States in the District Court to prevent and restrain appellees from violating §§ 1 and 2 of the Sherman Act. 26 Stat. 209, as amended, 50 Stat. 693, 15 U. S. C. §§ 1, 2. The District Court, finding there was no violation of the Act in any of the respects charged in the complaint, dismissed the complaint on the merits. 68 F. Supp. 180. The case is here by appeal under § 2 of the Expediting Act of February 11, 1903, 32 Stat. 823, as amended, 15 U. S. C. § 29, and § 238 of the Judicial Code, as amended by the Act of February 13, 1925, 43 Stat. 936, 938, 28 U. S. C. § 345.

The appellees are four affiliated corporations and two individuals who are associated with them as stockholders and officers. The corporations operate (or own stock in

1 Griffith Amusement Co., Consolidated Theatres, Inc., R. E. Griffith Theatres, Inc., Westex Theatres, Inc., H. J. Griffith, and L. C. Griffith. R. E. Griffith, a brother of H. J. and L. C. Griffith, was a defendant, but died while the suit was pending in the District Court and the action was not revived against his estate or personal representative.

corporations which operate) moving picture theatres in Oklahoma, Texas, and New Mexico. With minor exceptions, the theatres which each corporation owns do not compete with those of its affiliates but are in separate towns. In April, 1939, when the complaint was filed, the corporate appellees had interests in theatres in 85 towns. In 32 of those towns there were competing theatres. Fifty-three of the towns (62 per cent) were closed towns, i. e. towns in which there were no competing theatres. Five years earlier the corporate appellees had theatres in approximately 37 towns, 18 of which were competitive and 19 of which (51 per cent) were closed. It was during that five-year period that the acts and practices occurred which, according to the allegations of the complaint, constitute violations of §§ 1 and 2 of the Sherman Act.

Prior to the 1938-1939 season these exhibitors used a common agent to negotiate with the distributors for films for the entire circuit. Beginning with the 19381939 season one agent negotiated for the circuit represented by two of the corporate appellees, and another agent negotiated for the circuit represented by the other two corporate appellees. A master agreement was usually executed with each distributor covering films to be released by the distributor during an entire season.3 There were variations among the master agreements. But in the main they provided as follows: (a) They lumped together towns in which the appellees had no competition and towns in which there were competing

2 The circuit includes the four corporate appellees and their affiliated exhibitors. When less than the full ownership of a theatre was acquired, the contract would provide that the buying and booking of films was exclusively in the hands of the Griffith interests.

3 The agreement negotiated by the common agent would be executed between a distributor and each of the corporate appellees or between a distributor and an individual exhibitor.

100

Opinion of the Court.

theatres. (b) They generally licensed the first-run exhibition in practically all of the theatres in which appellees had a substantial interest of substantially all of the films to be released by the distributor during the period of a year. (c) They specified the towns for which second runs were licensed for exhibition by appellees, the secondrun rental sometimes being included in the first-run rental. (d) The rental specified often was the total minimum required to be paid (in equal weekly or quarterly installments) by the circuit as a whole for use of the films throughout the circuit, the appellees subsequently allocating the rental among the theatres where the films were exhibited. (e) Films could be played out of the order of their release, so that a specified film need not be played in a particular theatre at any specified time."

The complaint charged that certain exclusive privileges which these agreements granted the appellee exhibitors over their competitors unreasonably restrained competition by preventing their competitors from obtaining enough first- or second-run films from the distributors to operate successfully. The exclusive privileges charged as violations were preemption in the selection of films and the receipt of clearances over competing theatres.

6

It

There were a few franchise agreements covering films to be released by a distributor during a term of years, usually for three years and in one instance for five years.

The theatres of appellees in Oklahoma City were second, not first, run theatres.

5 The privilege was frequently conditioned on the playing of, or paying for, a designated quantity of the film obligation during stated portions of the season.

Those are the eight major film distributors who originally were defendants. The charge that these distributors conspired with each other was eliminated from the complaint and they were dismissed as defendants by stipulation or on motion of appellant. But the charge that each of the distributors had conspired with the appellee exhibitors was retained.

Opinion of the Court.

334 U.S.

also charged that the use of the buying power of the entire circuit in acquiring those exclusive privileges violated the Act.

The District Court found no conspiracy between the appellee exhibitors or between them and the distributors, which violated the Act. It found that the agreements under which films were distributed were not in restraint of trade; that the appellees did not monopolize or attempt to monopolize the licensing or supply of film for first run or for any subsequent run; that the appellees did not conspire to compel the distributors to grant them the exclusive privilege of selecting films before the films were made available to any competing exhibitor; that there was no agreement between defendants and distributors granting defendants unreasonable clearances; that the appellees did not compel or attempt to compel distributors to grant them privileges not granted their competitors or which gave them any substantial advantage over their competitors; and that appellees did not condition the licensing of films in any competitive situation on the licensing of such films in a non-competitive situation, or vice versa.

The appellant introduced evidence designed to show the effect of the master agreements in some twenty-odd competitive situations. The District Court made detailed findings on this phase of the case to the effect that difficulties which competitors had in getting desirable films after appellee exhibitors entered their towns, the inroads appellees made on the business of competitors, and the purchases by appellees of their competitors were not the result of threats or coercion nor the result of an unlawful conspiracy, but solely the consequence of lawful competitive practices.

In United States v. Crescent Amusement Co., 323 U. S. 173, a group of affiliated exhibitors, such as we have in the present case, were found to have violated §§ 1 and 2 of the Sherman Act by the pooling of their buying power