Business: Sherman Act Redefinition

When businessmen of a feather flock together, does a conspiracy automatically exist? In the recent past, the answer of the U.S. Supreme Court has seemed to be yes. In the cement industry’s basing-point price case five years ago. the Federal Trade Commission ruled—and the Supreme Court agreed—that the “parallel business behavior” of the cement companies in issuing identical price lists for their products was ample evidence of illegal conspiracy to restrain trade. But last week, in a decision that might set a far-reaching precedent, the Supreme Court had a change of heart.

The suit was brought by the Crest Theater, a movie house in the suburbs of Baltimore. Getting ready for its big opening in 1949, the Crest’s owners went around to the eight biggest film distributors: Loews, Paramount, RKO, Fox, Warner, Universal, United Artists and Columbia. The Crest asked for a crack at first-run movies. One by one the distributors turned down the request; first-run films, they said, were for first-run houses, and by that they meant the downtown theaters that did the biggest business.

The Crest Theater sued the distributors for treble damages, charging conspiracy and a breach of the Sherman Antitrust Act. In Baltimore’s Federal District Court, the Crest lost; in the Court of Appeals it lost again. Not many years ago, the Supreme Court might have upheld the Crest Theater just as it upheld Chicago’s Jackson Park neighborhood theater when it sued in a somewhat similar case involving first-run movies (TIME, March u, 1946). But last week, speaking for the majority, Justice Tom Clark dealt the final blow to the Crest’s case. Said he: “This court has never held that proof of parallel-business behavior conclusively establishes agreement, or … that such behavior itself constitutes a Sherman Act offense.” In short, actual agreement to conspire must be shown in addition to parallel behavior.