The Sherman Anti-Trust Act was one of the most notable federal laws of the 19th Century: "Every contract, combination in the form of a trust or otherwise, or conspiracy in restraint of trade or commerce among the several states, or with foreign nations, in hereby declared to be illegal." This law resulted in a fundamental restructuring of motion pictures.
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The motion picture industry had avoided anti-trust actions for decades. From 1915, it had been the subject of periodic attention from the Unites States Justice Department.
Major studios flirted with "vertical monopoly," a control of the commercial process from beginning to end. Studios cultivated a web of contract practices and ownership combinations that placed a strangle-hold on the motion picture exhibition business.
In 1938, the Roosevelt Administration brought charges. The studios successfully negotiated a consent decree that suspended litigation in 1940. The Justice Department renewed the charges in 1944. In 1946, a federal court under Judge Augustus Hand ruled for the government, ordering the institution of a competitive bidding process for the right to exhibit major studio productions. The government appealed, seeking an order of divestment. In 1948, the Supreme Court, in a 7-1 decision written by Justice William O. Douglas, threw out the bidding scheme as involving the judiciary too intimately in business management and remanded the case to the district court to find another remedy. With its bidding scheme rejected, the district court began the process of seeking the best way to compel divestment.
Major studios flirted with "vertical monopoly," a control of the commercial process from beginning to end. Studios cultivated a web of contract practices and ownership combinations that placed a strangle-hold on the motion picture exhibition business.
In 1938, the Roosevelt Administration brought charges. The studios successfully negotiated a consent decree that suspended litigation in 1940. The Justice Department renewed the charges in 1944. In 1946, a federal court under Judge Augustus Hand ruled for the government, ordering the institution of a competitive bidding process for the right to exhibit major studio productions. The government appealed, seeking an order of divestment. In 1948, the Supreme Court, in a 7-1 decision written by Justice William O. Douglas, threw out the bidding scheme as involving the judiciary too intimately in business management and remanded the case to the district court to find another remedy. With its bidding scheme rejected, the district court began the process of seeking the best way to compel divestment.
The Federal Communications Commission (FCC) resolved the case. The FCC adopted a policy that applicants for television broadcasting licenses must be free from any taint of monopolistic tendencies. Several of the major studio defendants in the Paramount case were eager to enter television broadcasting. In order to present "clean hands" with their applications for TV licensing, these defendants dropped all opposition to Justice Department demands and quickly divested themselves of their movie theater holdings.
Deprived of a certain market for their films, studios cut back substantially on the number of features they produced; at the same time, television cut in to the average American's movie attendance.
There is still some debate over whether or not the case of U.S. v. Paramount was a success as an anti-trust action, but it resulted in changes in the motion picture industry.
Timeline
1938: The Roosevelt Administration brought charges1940: A consent decree suspended litigation
1944: The Justice Department renewed the charges
1946: Judge Augustus Hand ruled for the government, ordering the creation of a competitive bidding process for the right to exhibit major studio productions. The government appealed, seeking an order of divestment
1948: The Supreme Court threw out the bidding scheme and remanded the case to the district court
An All Star Cast
WILLIAM O. DOUGLAS Wrote the majority opinion for the US Supreme Court. Longest serving justice in the history of the Supreme Court.
AUGUSTUS HAND Presiding judge at the district level; cousin to the famed judge/philosopher Learned Hand.
TOM C. CLARK Attorney General, argued the case for the United States. Later justice of the US Supreme Court. Father of Ramsey Clark, Attorney General in the Johnson Administration.
JAMES F. BYRNES Counsel for 20th Century Fox. Former US Senator from South Carolina; former Supreme Court Justice; former Director of the Office of War Mobilization; Secretary of State in the Truman Administration.
JOHN W. DAVIS Counsel for Loews, Inc. (MGM), argued the case for the defendants. Democratic nominee for President of the US, 1924.
WILLIAM J. “WILD BILL” DONOVAN Counsel for Radio-Keith-Orpheum Corp. (RKO) Director of wartime Office of Strategic Services, considered the "father of the CIA."
AUGUSTUS HAND Presiding judge at the district level; cousin to the famed judge/philosopher Learned Hand.
TOM C. CLARK Attorney General, argued the case for the United States. Later justice of the US Supreme Court. Father of Ramsey Clark, Attorney General in the Johnson Administration.
JAMES F. BYRNES Counsel for 20th Century Fox. Former US Senator from South Carolina; former Supreme Court Justice; former Director of the Office of War Mobilization; Secretary of State in the Truman Administration.
JOHN W. DAVIS Counsel for Loews, Inc. (MGM), argued the case for the defendants. Democratic nominee for President of the US, 1924.
WILLIAM J. “WILD BILL” DONOVAN Counsel for Radio-Keith-Orpheum Corp. (RKO) Director of wartime Office of Strategic Services, considered the "father of the CIA."