District Court Overturns “The Paramount Decrees” over 70 Years Later

By Nicholas Ashenfelter

In the Supreme Court case United States v. Paramount Pictures, Inc., the Department of Justice (DOJ) took on eight corporations in the entertainment industry for “[conspiring] to control the motion picture industry,” as stated on the DOJ website. On Aug 7, 2020, the resulting decrees were repealed, causing change for the entertainment industry. 

The DOJ filed their accusations of conspiracy in 1938, and in 1948 the Supreme Court found these claims to have merit. They released “The Paramount Decrees” in an effort to remove monopolistic practices. Each decree was settled individually for each corporation, meaning that the regulations that applied to one may not apply to the others, and any new businesses would not have such restrictions.The varying practices that were outlawed included “block booking […], circuit dealing […], resale price maintenance […], and granting overboard clearances.” 

In addition, five of the defendants owned movie theaters as well as movie distribution companies, and these companies were forced to split themselves or sell off some of their assets. To engage in these practices again, they would need court approval. Over the 70 years since this legislation was filed, the film industry has grown with the increased capability to show movies. This is due to increases in the number of movie theaters, number of screens per theater, and the advent of streaming services. “As a consequence of all these changes, the DOJ decided to reevaluate the legislation they had fought to enact.

On Nov 22, 2019, the DOJ filed to remove “The Paramount Decrees.” The DOJ’s Antitrust Division stated that their efforts “undid the effects of that conspiracy on the marketplace” in reference to the monopolistic behavior their original brief addressed. However, they now believe these policies “may actually harm American consumers,” in the words of Assistant Attorney General Makan Delrahim, who said this legislation could interfere with the “innovative business models” corporations could otherwise implement. This claim was found to have merit by a federal judge in New York, who officially overruled “The Paramount Decrees” on Aug 7, 2020. 

Analisa Torres, the District Court Judge responsible for the verdict, explained her reasoning. She said it was “unlikely that the remaining Defendants would collude to […] limit their film distribution to a select group of theaters, and found that “termination [was] in the public interest. In addition, she noted that streaming services like Netflix weren’t limited by these decrees- nor were any major players in the film industry that emerged after 1948. Different companies in the same industry faced different limitations, and it was this imbalance that Torres sought to remedy through her ruling. 

The Independent Cinema Alliance (ICA) disagreed with Torres’ assessment. On Jan 17 of 2020, shortly after the Department of Justice proposed the removal of “The Paramount Decrees,” the ICA argued in a formal brief that they should remain, describing the DOJ’s work as having “a breezy and inadequate factual inquiry and literally no meaningful investigation.” In particular, they expressed concern over more major players entering the film industry, such as Amazon, that could take advantage of smaller producers.  

G. Kendrick Macdowell, legal counsel of the ICA, explained how without the Decrees, independent studios would be forced to prove monopolistic behavior on their own- a difficult endeavor. He described this as the DOJ “shifting the burden” away from themselves. Only time will tell how much of this concern is warranted, but Macdowell cautions that such a change may “tempt big players into the kinds of predations that are difficult to detect and prohibitively expensive to litigate.”

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