THE GOVERNMENT: Constructive Effort

In 1918, Cinemagnate Adolph Zukor wrote: “The evil of producing and exhibiting coalitions is one of the gravest perils that has ever confronted the motionpicture industry. For some time past this condition has been developing and now threatens to halt the industry’s progress. . . .” Last week this prediction came home to roost as the U. S. Department of Justice, acting under the Sherman Anti-Trust Act and quoting Mr. Zukor’s words, brought suit against him and almost every other bigwig in the cinema business. But, vast as this trust-busting procedure appeared, it was no New Deal crackdown in the manner of those launched against the oil, aluminum and automobile-finance businesses. Instead, in an unprecedented apology and explanation attached to its complaint, the Government took the manner of a family dentist remarking, as he starts extracting a sore tooth from a small boy’s jaw, “I am sorry if this hurts, but it can’t be helped and you’ll feel better when it’s out. So please hold still.”

When Mr. Zukor made his prediction, cinema production, distribution and exhibition were largely separate. But a struggle for control of the industry was developing between producers and exhibitors. Such producers as Paramount got into exhibition; such exhibitors as Loew’s got into production. With ever-increasing clamor during recent years, the chief trade organization of independent exhibitors, Allied States Association of Motion Picture Exhibitors, has claimed that the result has been monopolization of the cinema industry to such an extent that independents could barely exist (TIME, June 7, 1937). The Department of Justice investigated, agreed. Hence last week’s suit in Manhattan’s Federal Court against eight of the major cinema companies,* 25 of their affiliates and 132 of their officers.

Sample charges: 1) That in acquiring theatre chains the major producers avoided competing in the same territories and since their output is enough to keep all theatres comfortably full, they can and do exchange pictures and actors freely, meanwhile deny such privileges to independents except upon hard terms. 2) That they insist on block-booking, full-line forcing, high rentals. 3) That as a result, independents are being driven out of business, new competitors are effectively forestalled; independent theatres cannot exercise free choice of films; independent producers find it virtually impossible to market their films; new capital investment is discouraged; theatre patrons in any given community must take whatever films are handed to them; “there is no opportunity for new forms of artistic expression which are not approved by those in control of the major companies. . . .”

Therefore, concluded the Department of Justice, the best thing to do was to force separation of production and distribution from exhibition. As he promised when he took office in March, Assistant Attorney General Thurman Arnold carefully explained his aims. Excerpt: “It is the belief of the Department of Justice that certain rearrangements must be made in the moving-picture industry in order to maintain competitive conditions in the future. Those rearrangements require a more constructive effort than mere prosecution for past practices. . . . Under this policy a lawsuit should be considered as the beginning of co-operation between the courts, the legislature, the Department of Justice and the industry to achieve a common end. . . .”

Taking this at its face value, thin-lipped Cinema Tsar Will Hays replied: “Motion-picture producers, wholesale distributors and leading exhibitors of the nation will generally welcome the prospect of a comprehensive, fair and conclusive endeavor to clarify the application of existing laws to the trade customs inherent in the development of the motion-picture industry. . . .”

Last week the U. S. Government also did the following for and to U. S. Business:

¶Began applying the “death sentence” to the utility industry.

¶Considered taxing future issues of State and Federal bonds, heretofore taxexempt. Sent to the Treasury by the Department of Justice was a five-volume report offering the opinion that such taxation would probably be upheld by the Supreme Court “under the present trend” but should not be made retroactive. Opposition meanwhile gathered quietly in a group of men representing 17 States and called the Conference on State Defense. It was said to fear that the New Deal, having taxed everything from U. S. bonds to U. S. credulity, might next try taxing the States themselves.

¶Fined 17 of the 46 defendants found guilty of conspiracy to fix gasoline prices in the Madison oil trials last January. Federal Judge Patrick Stone fined twelve companies and five individuals an aggregate of $65,000, let ten individuals and one company go scot-free, offered a new trial for 15 individuals and three companies. Those fined immediately appealed.

¶Took first step under the Natural Gas Act of 1938 to lower gas rates. The Federal Power Commission gave Hope Natural Gas Co. of West Virginia 30 days to answer complaints that it was charging too much for gas in Cleveland.

*The eight: Paramount Pictures, Inc.; Loew’s, Inc.; Irving Trust Co. as trustee in bankruptcy for Radio-Keith-Orpheum Corp.; Warner Bros. Pictures, Inc.; Twentieth Century-Fox Film Corp.; Columbia Pictures Corp.; Universal Corp.; United Artists Corp.