Recent Decisions
Do Not Affect Legality Of Film Buying Practices
Block Booking: Still Illegal
by Steven John Fellman
NATO Washington Counsel
Recently we
were asked whether the decision in the Microsoft case and some of
the other high tech decisions had the effect of legalizing the practice
of block booking in the motion picture industry context. The answer
is emphatically no! Block booking is still illegal.
Block booking is a term used to describe what is known under the
antitrust law as a “tie in” sale. In the motion picture
industry context, block booking would include the practice of a
distributor coming to an exhibitor and telling the exhibitor that
if the exhibitor wants to get one picture (perhaps a film expected
to gross more than $200 million), the exhibitor has to agree to
take one or more other pictures (perhaps a film or two with far
dimmer prospects). Block booking is illegal not only under the federal
antitrust laws but also under the antitrust laws of many states.
The key element in a block booking case is whether or not the desirable
motion picture is tied to the less desirable motion picture. If
the condition of obtaining the desirable motion picture is that
you also agree to accept the less desirable motion picture there
is an illegal tie in which is a clear violation of the antitrust
laws.
Companies engaged in attempts to illegally tie one product to another
have used various arguments to justify their action. One argument
that is constantly used is that the two products involved are interdependent.
It is argued that the first product will not operate properly unless
it is used with the second product. Although such an argument has
limited validity in certain applications, it has no validity at
all in a motion picture industry context. In the motion picture
context, a distributor cannot tie licensing one film to an exhibitors’
agreeing to take a second film.
A second question raised after a block booking discussion is whether
a distributor must sell to an exhibitor. Under federal law, the
general rule is that a seller may refuse to sell to any buyer as
long as the refusal to sell is a decision made individually by the
seller and is not made for anticompetitive purposes. As an example,
a distributor could not enter into an agreement with an exhibitor
whereby the exhibitor would get all of the distributor’s film
in one area and a second exhibitor in that area would get no films.
Such an agreement would violate not only the federal antitrust laws,
but many state laws which require bidding. However, if there is
no requirement to bid, a distributor might unilaterally decide not
to deal with a certain exhibitor.
A third question that has been asked is whether the principles applicable
to block booking and refusals to deal apply in a digital context.
The answer is clearly yes! A distributor could decide to release
a certain picture only in a digital format. A distributor could
decide to release a certain picture only in a film version. A distributor
could decide to release a certain picture in both a film and digital
version. The antitrust laws would not limit the right of the distributor
to release a picture in whatever format or combinations of formats
that the distributor decided was appropriate for the picture. However,
if a distributor chooses to release a motion picture in both a digital
and traditional film format, the distributor could not tie the availability
of the picture in film format to the exhibitor agreeing to take
the picture in digital format. Such a tie would be an illegal tie
and violate the antitrust laws. Such a tie might also violate the
copyright statutes. Similarly, if a distributor chooses to release
a motion picture in both digital and film formats, the distributor
could not require the exhibitor to install digital equipment in
order to play the film format as well.
The antitrust laws are designed to protect consumers by ensuring
that there is competition in the marketplace. Consumers are best
served when the widest variety of product is available in the market
at competitive prices. With the establishment of new technologies
such as those allowing the digital transmission of motion pictures,
it is important that all facets of an industry work together, within
the confines of the law, to ensure that the benefits of new technology
are available on an equal basis to all competitors and all consumers
in all markets. 
