Beautifully engraved partially certificate from the SCHINE Chain Theatres, Inc. printed in 1928. This
historic document was printed by the Hamilton Banknote Company and has an ornate border around it.
This item is hand signed by Louis Schine and is over 72 years old.
Schine theatre history information courtesy of Karen
Colizzi Noonan, Geneva, NY
From the large metropolis to the tiny dot on the map, there was always a theater in town. Whether a
fancy "opera house" - although vaudeville and burlesque were usually the nightly fare - or just a
meeting hall with a make-shift stage, the town's center of activity was often the theater. As the movie
business grew from small nickelodeons to grand palaces, the theater continued to be a community
meeting place. Entrepreneurs in the new and exciting industry developed chains of movie theaters.
One of the biggest and most successful was the Schine Circuit Theaters. The story of their rise to
success is worthy of the silver screen. So grab a tub of popcorn and settle back. As the house lights
dim, the curtain parts on a Great American Story... in Cinemascope and Technicolor!
In 1902, eleven year old Junius Myer Schine and his brother Louis, nine, joined their father in
America, coming from their native Latvia with their mother. The boys spoke no English and the family
was not wealthy, but they did possess a strong desire to make something of themselves in their new
country. The brothers worked a succession of jobs in and around Buffalo and Jamestown, New York.
They toiled in the mills; they were candy butchers on the railroad. Louis operated a news stand at the
train station. They worked, saved and learned, awaiting an opportunity to start their own business.
After Louis enlisted in the Army during World War I, Myer discovered the burgeoning motion picture
business. He wound up in the industrial town of Gloversville, New York. There he met Harry King who
was showing silent films in a small upstairs theater. In 1916, the men struck a deal; Harry turned over
the lease on the theater to Myer, and Myer promised to give Harry a lifetime job. A handshake was
their only legal agreement. Myer remodeled the theater into a clean, comfortable family gathering
place. He invested in new equipment and directed all employees to show the utmost courtesy to the
patrons. The "New Hippodrome" was soon a thriving success. After buying a second theater in
Amsterdam, New York, Myer bought several other theaters in rapid succession. Louis came home
from the War and joined his brother in business. The Schine Brothers were on their way to realizing
their fame and fortune in America.
Despite very differing personalities, the brothers worked in perfect harmony. Trim and neat, Myer was
tough; a cool, analytical businessman. He had a keen intuition about people and hired the best and the
brightest employees to fuel his fast growing empire. He continued to develop new properties at an
astounding rate. Louis was a real teddy bear; easy-going and charming, plain spoken with a heart of
gold. He oversaw day-to-day operations and had the most contact with field personnel. From the home
office secretaries to the floor sweeper in the farthest flung theater, everybody loved Louie. Neither
brother alone would have been as successful as the two of them together. Before long, the Schine
Brothers were juggling up to 150 theaters at a time throughout five states. Often the entire holdings of
a small local chain were absorbed into the Schine group at one time. They soon became the largest
independent theater chain in the country, and remained so throughout the life of their business.
The Schine empire encompassed many types and styles. There were small neighborhood theaters and
opulent atmospheric palaces. Patrons might relax in a peaceful Italinate garden and gaze up at stars
winking in a twilight blue sky, with clouds drifting lazily by. In another, crystal chandeliers twinkled
softly in the breeze, rich looking furniture graced the lady's and men's lounges. Lush tapestries
accented the walls. The grand-master of theater architecture, John Eberson, designed a host of art
deco delights for the Schine chain. Chrome moldings set off stunning deco whirls. Bright turquoise,
purple, silver and black reflected in ornately decorated mirrors. Modern trim iced doors of bold red
and black lacquer. Light fixtures were designed as shooting stars and ringed planets. Each theater
sported the obligatory neon-lit-chaser-bulb frenzy of a big marquee. As someone said, "You could have
a flea circus on the stage, but those marquee lights made it look like the greatest show on earth!" A
few still stand; all remain vivid in the memories of their patrons many years later.
Riding an industry tidal wave, the Schine Circuit Theaters had it all except a trendy home office
address. The Schine Brothers felt indebted to the City of Gloversville, where it all began for them.
After adding a newer downtown theater in Gloversville, "The Glove", the offices on the upper floors
became their corporate headquarters. Although satellite offices existed in other cities, the base of
operations remained in Gloversville, providing jobs and notoriety. The Schine connections also brought
Hollywood to the hometown. Everyone from Charles Laughton and Ann Rutherford to Lassie and
Zippy the Chimp made personal appearances, usually in connection with a War Bond drive or a movie
premiere. It was truly a golden time.
The Schine employees were an important link in the rapid growth of their business. In the theaters,
work days stretched into the wee hours; weekends were mandatory. Managers often got just one day
off a week. In the home office, things were always frenzied, bordering on chaotic. But the staff loved it:
"You never wanted to call in sick. There was so much fun everyday you were afraid you'd miss
something!" reminisced a former secretary. "Every day was like the end of the world." Still, most of
the staff worked for the Schine Brothers for 20 or 30 years. Remember Harry King? He passed away
in 1965, still employed by the Schine Theaters.
Throughout the 1940's and into the early 1950's, movie theaters were packed on a nightly basis. So
what happened? Many factors came into play, but the main culprit was the arrival of television.
Suddenly, 2500 seat movie theaters were ghost towns; even racy plots and a scantily clad Jane Russell
were not enough to draw a decent attendance. Many of these theaters were converted into other uses.
Many fell into disrepair and were eventually razed. It was the end of a golden era and an American
Below are some of the highligts from the judgement against Schine Theatres:
Case: SCHINE THEATRES V. UNITED STATES
Case #: 334US110
NO. 10. ARGUED DECEMBER 15, 1947. - DECIDED MAY 3, 1948. - 63
F.SUPP. 229, AFFIRMED IN PART AND REVERSED IN PART.
THE UNITED STATES SUED TO RESTRAIN VIOLATIONS OF SECS. 1 AND 2 OF THE
SHERMAN ACT BY A PARENT CORPORATION, THREE OF ITS OFFICERS AND
DIRECTORS AND FIVE OF ITS SUBSIDIARIES, WHICH OWNED OR HAD A FINANCIAL
INTEREST IN A LARGE CHAIN OF MOTION PICTURE THEATRES LOCATED IN SIX
STATES. THE DISTRICT COURT FOUND THAT THEY HAD USED THE COMBINED
BUYING POWER OF THE ENTIRE CIRCUIT TO NEGOTIATE MASTER AGREEMENTS WITH
THE MAJOR FILM DISTRIBUTORS, WHICH HAD THE EFFECT OF DEPRIVING
COMPETITORS OF FIRST- AND SECOND-RUN FILMS; OBTAINED FROM THE
DISTRIBUTORS UNREASONABLE "CLEARANCES," LONG-TERM AGREEMENTS FOR
RENTALS OF FILMS AND OTHER CONCESSIONS WHICH GAVE THEM UNREASONABLE
ADVANTAGES OVER COMPETITORS; THREATENED TO BUILD THEATRES OR TO OPEN
CLOSED THEATRES IN ORDER TO STOP OR PREVENT COMPETITION; CUT ADMISSION
PRICES; OBTAINED FROM COMPETITORS WHOM THEY BOUGHT OUT AGREEMENTS NOT
TO COMPETE FOR LONG TERMS OF YEARS, WHICH SOMETIMES EXTENDED TO TOWNS
OTHER THAN THOSE IN WHICH THE PURCHASED THEATRES OPERATED; AND THUS
CONSPIRED WITH EACH OTHER AND WITH THE EIGHT MAJOR FILM DISTRIBUTORS TO
VIOLATE SECS. 1 AND 2 OF THE SHERMAN ACT. THE DISTRICT COURT ENJOINED
THESE PRACTICES AND ORDERED DEFENDANTS TO DIVEST THEMSELVES OF CERTAIN
THEATRES. DEFENDANTS APPEALED. HELD:
1. IN NEGOTIATING FOR FILMS, THE COMBINING OF THEATRES IN TOWNS IN
WHICH THE CIRCUIT HAD A MONOPOLY WITH THOSE IN TOWNS IN WHICH IT HAD
COMPETITORS WAS A RESTRAINT OF TRADE AND A USE OF MONOPOLY POWER IN
VIOLATION OF SECS. 1 AND 2 OF THE SHERMAN ACT. UNITED STATES V.
GRIFFITH, ANTE, P. 100. P. 116.
2. THE CONCERTED ACTION OF THE PARENT COMPANY, ITS SUBSIDIARIES, AND
CERTAIN OF THE PARENT COMPANY'S OFFICERS AND DIRECTORS IN THAT ENDEAVOR
WAS A CONSPIRACY WHICH WAS NOT IMMUNIZED BY REASON OF THE FACT THAT THE
MEMBERS WERE CLOSELY AFFILIATED RATHER THAN INDEPENDENT. P. 116.
3. THE NEGOTIATIONS WHICH APPELLANTS HAD WITH THE DISTRIBUTORS AND
WHICH RESULTED IN THE EXECUTION OF MASTER AGREEMENTS BETWEEN THE
DISTRIBUTORS AND EXHIBITORS BROUGHT THE DISTRIBUTORS INTO THE UNLAWFUL
COMBINATION WITH THE DEFENDANTS. P. 116.
4. A CONSPIRACY BETWEEN THE EXHIBITORS AND EACH OF THE NAMED
DISTRIBUTORS HAVING BEEN ESTABLISHED BY INDEPENDENT EVIDENCE, INTER
OFFICE LETTERS AND MEMORANDA BETWEEN OFFICIALS OF THE DISTRIBUTORS WERE
ADMISSIBLE IN EVIDENCE AGAINST ALL CONSPIRATORS AS DECLARATIONS OF SOME
OF THE ASSOCIATES, SO FAR AS THEY WERE IN FURTHERANCE OF THE UNLAWFUL
PROJECT. PP. 116-117.
5. DETAILED CHALLENGES TO CERTAIN FINDINGS ON WHICH THE DISTRICT
COURT BASED ITS HOLDING THAT APPELLANTS HAD VIOLATED THE ACT ARE
EXAMINED AND THE FINDINGS ARE SUSTAINED (PP. 117-124), EXCEPT IN THE
(A) THE FINDING THAT APPELLANTS OBTAINED FILM-RENTAL CONCESSIONS NOT
MADE AVAILABLE TO INDEPENDENT OPERATORS IS NOT INTELLIGIBLE AND IS SET
ASIDE, IN ORDER THAT IT MAY BE CLARIFIED ON REMAND OF THE CAUSE. P.
(B) A BARE FINDING THAT APPELLANTS AT TIMES CUT ADMISSION PRICES
WITHOUT A SHOWING THAT SUCH ACTION WAS IN PURPOSE OR EFFECT EMPLOYED AS
AN INSTRUMENT OF MONOPOLY POWER IS NOT ADEQUATE TO SUPPORT AN
INJUNCTION AGAINST PRICE CUTTING. PP. 120-121.
(C) THE FINDINGS AS TO "UNREASONABLE CLEARANCES" ARE SET ASIDE, IN
ORDER THAT THE DISTRICT COURT MAY MAKE FURTHER FINDINGS WHICH REFLECT
AN APPRAISAL OF THE COMPLEX FACTORS BEARING ON THE QUESTION OF
REASONABLENESS. SEE UNITED STATES V. PARAMOUNT PICTURES, INC., POST,
P. 131. PP. 121-124.
6. DETAILED OBJECTIONS TO THOSE PARTS OF THE DECREE WHICH ENJOINED
APPELLANTS FROM SPECIFIED ACTS OR PRACTICES ARE CONSIDERED AND THE
DECREE IS SUSTAINED (PP. 125-126), EXCEPT IN THE FOLLOWING RESPECTS:
(A) TO THE EXTENT THAT PROVISIONS OF THE DECREE ARE DIRECTED TO
PRACTICES REFLECTED IN FINDINGS SET ASIDE BY THIS COURT, THEY MUST BE
RE-EXAMINED BY THE DISTRICT COURT ON REMAND OF THE CAUSE. P. 125.
(B) THE GENERAL INJUNCTION AGAINST "MONOPOLIZING" FIRST- AND SECOND
RUN FILMS IS SET ASIDE, SINCE THE PRECISE PRACTICES FOUND TO HAVE
VIOLATED THE ACT SHOULD BE SPECIFICALLY ENJOINED. PP. 125-126.
7. THE PROVISIONS OF THE DECREE WHICH REQUIRE APPELLANTS TO DIVEST
THEMSELVES OF CERTAIN THEATRES ARE SET ASIDE SO THAT THE DISTRICT COURT
CAN MAKE THE FINDINGS NECESSARY FOR AN APPROPRIATE DECREE. PP. 126
(A) IN THIS TYPE OF CASE, AN INJUNCTION AGAINST FUTURE VIOLATIONS IS
NOT ADEQUATE TO PROTECT THE PUBLIC INTEREST, AND DIVESTITURE OR
DISSOLUTION IS AN ESSENTIAL FEATURE OF THE DECREE. P. 128.
(B) DIVESTITURE OR DISSOLUTION MUST TAKE ACCOUNT OF THE PRESENT AND
FUTURE CONDITIONS OF THE PARTICULAR INDUSTRY AS WELL AS PAST
VIOLATIONS. P. 128.
(C) IT SERVES SEVERAL FUNCTIONS: (1) IT PUTS AN END TO THE
COMBINATION OR CONSPIRACY WHEN THAT IS ITSELF THE VIOLATION; (2) IT
DEPRIVES THE DEFENDANTS OF THE BENEFITS OF THEIR CONSPIRACY; AND (3) IT
IS DESIGNED TO BREAK UP OR RENDER IMPOTENT THE MONOPOLY POWER WHICH
VIOLATES THE ACT. PP. 128-129.
(D) IN APPLYING THIS REMEDY, IT IS ESSENTIAL FOR THE DISTRICT COURT
TO DETERMINE WHAT WERE THE FRUITS OF THE UNLAWFUL CONSPIRACY AND TO
CONSIDER WHAT IS THE BEST WAY OF REQUIRING APPELLANTS TO SURRENDER
THEM. P. 129.
(E) EVEN AFTER APPELLANTS ARE DEPRIVED OF THE FRUITS OF THEIR
CONSPIRACY, IT WILL BE NECESSARY FOR THE DISTRICT COURT TO CONSIDER
WHETHER APPELLANTS' THEATRE CIRCUIT WILL STILL CONSTITUTE A MONOPOLY
POWER OF THE KIND WHICH THE ACT CONDEMNS, IN SPITE OF THE RESTRICTIVE
PROVISIONS OF THE DECREE. PP. 129-130.
8. THE PROVISIONS OF THE DECREE PROVIDING FOR THE DISSOLUTION OF THE
POOLING AGREEMENTS, THE PROHIBITION AGAINST BUYING OR BOOKING FILMS FOR
THEATRES IN WHICH APPELLANTS HAVE NO FINANCIAL INTEREST, AND THE
RESTRICTION ON FUTURE ACQUISITIONS OF THEATRES, ARE APPROVED. PP. 127
SCHINE CHAIN THEATRES, INC. ET AL. V. UNITED STATES.
APPEAL FROM THE DISTRICT COURT OF THE UNITED STATES FOR THE WESTERN
DISTRICT OF NEW YORK.
IN A SUIT BY THE UNITED STATES TO RESTRAIN VIOLATIONS OF SECS. 1 AND
2 OF THE SHERMAN ACT BY A LARGE CHAIN OF MOTION PICTURE EXHIBITORS, THE
DISTRICT COURT ENTERED A DECREE ENJOINING CERTAIN PRACTICES AND
REQUIRING THE CHAIN TO DIVEST ITSELF OF CERTAIN THEATRES. 63 F.SUPP.
229. ON APPEAL TO THIS COURT, AFFIRMED IN PART, REVERSED IN PART, AND
REMANDED, P. 130.
MR. JUSTICE DOUGLAS DELIVERED THE OPINION OF THE COURT.
THIS IS A COMPANION CASE TO NO. 64, UNITED STATES V. GRIFFITH, ANTE,
P. 100, AND IS HERE BY WAY OF APPEAL FROM THE DISTRICT COURT. THE
APPELLANTS, WHO WERE DEFENDANTS BELOW, ARE A PARENT COMPANY, THREE OF
ITS OFFICERS AND DIRECTORS, AND FIVE OF ITS WHOLLY OWNED SUBSIDIARIES -
TO WHOM WE REFER COLLECTIVELY AS SCHINE. AS OF MAY 19, 1942, SCHINE
OWNED OR HAD A FINANCIAL INTEREST IN A CHAIN OF APPROXIMATELY 148
MOTION PICTURE THEATRES FN1 LOCATED IN 76 TOWNS IN 6 STATES, FN2 THE
GREATER PORTION BEING 78 THEATRES IN 41 TOWNS IN NEW YORK AND 36
THEATRES IN 17 TOWNS IN OHIO. OF THE 76 TOWNS, 60 WERE CLOSED TOWNS,
I.E., PLACES WHERE SCHINE HAD THE ONLY THEATRE OR ALL THE THEATRES IN
TOWN. FN3 THIS CHAIN WAS ACQUIRED BEGINNING IN 1920 AND IS THE
LARGEST INDEPENDENT THEATRE CIRCUIT IN THE COUNTRY. SINCE 1931 SCHINE
ACQUIRED 118 THEATRES. SINCE 1928 THE CLOSED TOWNS INCREASED BY 56.
IN 1941 THERE WERE ONLY THREE TOWNS IN WHICH SCHINE'S COMPETITORS WERE
PLAYING MAJOR FILM PRODUCTS.
THE UNITED STATES SUED TO PREVENT AND RESTRAIN APPELLANTS FROM
VIOLATING SECS. 1 AND 2 OF THE SHERMAN ACT. 26 STAT. 209, 50 STAT.
693, 15 U.S.C. SECS. 1, 2. THE COMPLAINT CHARGED THAT THE SCHINE
INTERESTS BY POOLING THEIR ENTIRE CIRCUIT BUYING POWER IN THE
NEGOTIATION OF FILMS FROM THE DISTRIBUTORS SO AS TO COMBINE ITS CLOSED
AND OPEN TOWNS GOT ADVANTAGES FOR ITSELF AND IMPOSED RESTRICTIONS ON
ITS COMPETITORS WHICH OTHERWISE WOULD NOT HAVE BEEN POSSIBLE. IT
CHARGED THAT THE DISTRIBUTORS GRANTED CERTAIN FAVORS TO SCHINE WHICH
WERE WITHHELD FROM SCHINE'S COMPETITORS, E.G., GIVING SCHINE THE FIRST
RUN, REFUSING AT TIMES SECOND RUNS TO SCHINE'S COMPETITORS, CHARGING
SCHINE WITH LOWER RENTALS THAN IT CHARGED OTHERS, LICENSING TO SCHINE
FILMS IN EXCESS OF SCHINE'S REASONABLE REQUIREMENTS.
THE COMPLAINT ALSO CHARGED THAT SCHINE HAD FORCED OR ATTEMPTED TO
FORCE COMPETITORS OUT OF BUSINESS AND WHERE COMPETITORS WOULD NOT SELL
OUT TO SCHINE HAD THREATENED TO BUILD OR HAD BUILT AN OPPOSITION
THEATRE, HAD THREATENED TO DEPRIVE OR HAD DEPRIVED COMPETITORS OF A
DESIRABLE FILM OR RUN, HAD CUT ADMISSION PRICES, AND HAD ENGAGED IN
OTHER UNFAIR PRACTICES. IN THESE AND OTHER WAYS IT WAS CHARGED THAT
SCHINE HAD USED ITS CIRCUIT BUYING POWER TO MAINTAIN ITS MONOPOLY AND
TO RESTRAIN TRADE. THE CONSPIRACY CHARGED WAS BETWEEN THE SCHINE
DEFENDANTS THEMSELVES AND BETWEEN THEM AND THE DISTRIBUTORS.
THE DISTRICT COURT FOUND THAT THE APPELLANTS HAD CONSPIRED WITH EACH
OTHER AND WITH THE EIGHT MAJOR FILM DISTRIBUTORS N4 TO VIOLATE SEC. 1
AND SEC. 2 OF THE SHERMAN ACT. ITS FINDINGS MAY BE SUMMARIZED AS
THE ENTIRE CIRCUIT BUYING POWER WAS UTILIZED TO NEGOTIATE FILMS FOR
ALL THE THEATRES FROM THE DISTRIBUTORS, THE NEGOTIATIONS ENDING IN
MASTER AGREEMENTS BETWEEN A DISTRIBUTOR AND THE EXHIBITOR. THIS LARGE
BUYING POWER FN5 GAVE SCHINE THE "OPPORTUNITY TO EXERT PRESSURE ON
THE DISTRIBUTORS TO OBTAIN PREFERENCES." MOREOVER, SCHINE BY COMBINING
ITS CLOSED AND OPEN TOWNS IN ITS NEGOTIATIONS FOR FILMS WAS ABLE "TO
DICTATE TERMS TO THE DISTRIBUTORS." SCHINE BOUGHT FILMS FOR SOME
THEATRES IN WHICH IT HAD NO FINANCIAL INTEREST (BUT AS RESPECTS MOST OF
WHICH IT HAD AN OPTION TO PURCHASE). IT ALSO PERFORMED THE SERVICE
(UNDER SO-CALLED POOLING AGREEMENTS) FOR GROUPS OF THEATRES IN WHICH IT
AND OTHERS WERE INTERESTED. THROUGH THE USE OF SUCH BUYING POWER
SCHINE ARBITRARILY DEPRIVED COMPETITORS OF FIRST- AND SECOND-RUN
PICTURES, WAS ABLE IN MANY TOWNS TO SECURE UNREASONABLE CLEARANCES FN6
YEAR AFTER YEAR OF FROM 90 TO 180 DAYS, OBTAINED LONG-TERM AGREEMENTS
FOR RENTAL OF FILM (FRANCHISES) WHICH GAVE IT PREFERENCES NOT GIVEN
INDEPENDENT OPERATORS, FN7 AND RECEIVED MORE ADVANTAGEOUS CONCESSIONS
FROM THE DISTRIBUTORS RESPECTING ADMISSION PRICES THAN COMPETITORS WERE
ABLE TO GET. SCHINE MADE THREATS TO BUILD OR TO OPEN CLOSED THEATRES
IN ORDER TO FORCE SALES OF THEATRES IN VARIOUS TOWNS OR TO PREVENT
ENTRY BY AN INDEPENDENT OPERATOR. SCHINE CUT ADMISSION PRICES. SCHINE
OBTAINED FROM COMPETITORS WHOM IT BOUGHT OUT AGREEMENTS NOT TO COMPETE
FOR LONG TERMS OF YEARS WHICH AGREEMENTS AT TIMES EXTENDED TO OTHER
TOWNS AS WELL. SCHINE OBTAINED FILM-RENTAL CONCESSIONS NOT MADE
AVAILABLE TO INDEPENDENTS. THE DISTRICT COURT ENTERED A DECREE
ENJOINING THESE PRACTICES AND REQUIRING A DIVESTITURE BY SCHINE OF
VARIOUS OF ITS THEATRES. 63 F.SUPP. 229.
FIRST. FOR THE REASONS STATED IN UNITED STATES V. GRIFFITH, ANTE, P.
100, THE COMBINING OF THE OPEN AND CLOSED TOWNS FOR THE NEGOTIATION OF
FILMS FOR THE CIRCUIT WAS A RESTRAINT OF TRADE AND THE USE OF MONOPOLY
POWER IN VIOLATION OF SEC. 1 AND SEC. 2 OF THE ACT. THE CONCERTED
ACTION OF THE PARENT COMPANY, ITS SUBSIDIARIES, AND THE NAMED OFFICERS
AND DIRECTORS IN THAT ENDEAVOR WAS A CONSPIRACY WHICH WAS NOT IMMUNIZED
BY REASON OF THE FACT THAT THE MEMBERS WERE CLOSELY AFFILIATED RATHER
THAN INDEPENDENT. SEE UNITED STATES V. YELLOW CAB CO., 332 U.S. 218,
227; UNITED STATES V. CRESCENT AMUSEMENT CO., 323 U.S. 173. THE
NEGOTIATIONS WHICH SCHINE HAD WITH THE DISTRIBUTORS RESULTED IN THE
EXECUTION OF MASTER AGREEMENTS BETWEEN THE DISTRIBUTORS AND
EXHIBITORS. THIS BROUGHT THE DISTRIBUTORS INTO UNLAWFUL COMBINATIONS
WITH THE SCHINE DEFENDANTS. SEE UNITED STATES V. PARAMOUNT PICTURES,
INC., POST, P. 131. THE COURSE OF BUSINESS MAKES PLAIN THAT THE
COMMERCE AFFECTED WAS INTERSTATE. UNITED STATES V. CRESCENT AMUSEMENT
CO., SUPRA, PP. 180, 183-184.
SECOND. APPELLANTS OBJECT TO ADMISSION IN EVIDENCE OF NUMEROUS INTER
OFFICE COMMUNICATIONS BETWEEN OFFICIALS OF THE DISTRIBUTORS WITH WHOM
SCHINE DEALT. THE DISTRICT COURT PLACED CONSIDERABLE RELIANCE ON THEM
IN MAKING ITS FINDINGS. WE WILL ADVERT LATER TO THE USE OF THESE
DOCUMENTS TO PROVE THE UNREASONABLENESS OF CLEARANCES. IT IS
SUFFICIENT AT THIS POINT TO SAY THAT SINCE A CONSPIRACY BETWEEN SCHINE
AND EACH OF THE NAMED DISTRIBUTORS WAS ESTABLISHED BY INDEPENDENT
EVIDENCE, THESE INTER-OFFICE LETTERS AND MEMORANDA WERE ADMISSIBLE
AGAINST ALL CONSPIRATORS AS DECLARATIONS OF SOME OF THE ASSOCIATES SO
FAR AS THEY WERE IN FURTHERANCE OF THE UNLAWFUL PROJECT. HITCHMAN COAL
& COKE CO. V. MITCHELL, 245 U.S. 229, 249; UNITED STATES V. CRESCENT
AMUSEMENT CO., SUPRA, P. 184; UNITED STATES V. GYPSUM CO., 333 U.S.
THIRD. APPELLANTS MAKE DETAILED CHALLENGES TO MANY OF THE OTHER
FINDINGS OF THE DISTRICT COURT ON WHICH IT BASED ITS HOLDINGS THAT
APPELLANTS VIOLATED THE ACT.
(1) THEY VIGOROUSLY ATTACK THE FINDINGS THAT SCHINE ARBITRARILY
DEPRIVED INDEPENDENTS OF FIRST- AND SECOND-RUN PICTURES. THEIR CHIEF
CONTENTION IS THAT THERE IS NO SUPPORT FOR THE FINDING OF ARBITRARY
ACTION ON THE PART OF SCHINE, THAT SCHINE DID NOT BUY PICTURES BEYOND
ITS NEEDS IN ORDER TO KEEP THEM AWAY FROM ITS COMPETITORS, THAT ANY
SUCCESSFUL PURCHASER OF A FIRST- OR SECOND-RUN PICTURE HAS AN EXCLUSIVE
PRIVILEGE THAT NECESSARILY DEPRIVES COMPETITORS OF THE FILM FOR THE
PERIOD OF THE RUN, AND THAT ANY ADVANTAGE WHICH SCHINE OBTAINED IN THIS
REGARD WAS THE RESULT OF THE OPERATION OF FORCES OF COMPETITION.
AS WE READ THE EVIDENCE UNDERLYING THIS FINDING, IT WAS THE USE OF
SCHINE'S MONOPOLY POWER - REPRESENTED BY COMBINING THE BUYING POWER OF
THE OPEN AND CLOSED TOWNS - WHICH ENABLED IT TO OBTAIN THAT WHICH ITS
COMPETITORS COULD NOT OBTAIN. DEPRIVATION OF COMPETITORS OF FIRST- AND
SECOND-RUN PICTURES IN THAT WAY WAS INDEED ARBITRARY IN THE SENSE THAT
IT WAS THE PRODUCT OF MONOPOLY POWER, NOT OF COMPETITIVE FORCES. THAT
IS THE CONSTRUCTION WE GIVE THE FINDING OF THE DISTRICT COURT; AND AS
SO CONSTRUED IT IS SUPPORTED BY SUBSTANTIAL EVIDENCE. THERE MAY BE
EXCEPTIONS IN THE CASE OF SOME SUBSIDIARY FINDINGS. BUT WE DO NOT STOP
TO RELATE THEM. FOR EVEN IF WE LAY THEM ASIDE AS CLEARLY ERRONEOUS FOR
LACK OF SUPPORT IN THE EVIDENCE, THE CONCLUSION IS IRRESISTIBLE THAT
SCHINE SO USED ITS MONOPOLY POWER TO GAIN ADVANTAGES AND PREFERENCES
WHICH, ON A PURELY COMPETITIVE BASIS, IT COULD NOT HAVE ACHIEVED.
(2) DEFENSE OF THE LONG-TERM FILM-RENTAL AGREEMENTS - THE FRANCHISES
- IS MADE ON THE GROUND THAT THEY WERE ACCEPTED METHODS OF DOING
BUSINESS IN THE INDUSTRY, FN8 THAT THEY WERE FAVORED BY DISTRIBUTORS
AS DEVICES TO STABILIZE THEIR END OF THE BUSINESS AND TO SAVE EXPENSE,
AND THAT THEY WERE NOT CHOSEN BY SCHINE AS INSTRUMENTS TO SUPPRESS
COMPETITION. BUT IT SEEMS TO US APPARENT THAT THEIR USE SERVED TO
INTENSIFY THE IMPACT OF SCHINE'S MONOPOLY POWER ON ITS COMPETITORS.
FOR WHEN SCHINE'S BUYING POWER WAS USED TO ACQUIRE FILMS PRODUCED BY A
DISTRIBUTOR FOR TWO OR THREE YEARS RATHER THAN FOR ONE YEAR ALONE, IT
PLAINLY STRENGTHENED THROUGH THE EXERCISE OF MONOPOLY POWER SUCH
DOMINANT POSITION AS SCHINE HAD OVER EACH OF ITS COMPETITORS.
APPELLANTS ALSO CHALLENGE THE FINDING THAT SCHINE OBTAINED
PREFERENCES THROUGH THE FRANCHISES, IN ADDITION TO LONG-TERM SUPPLIES
OF PICTURES, WHICH WERE NOT GRANTED INDEPENDENT OPERATORS. ONE OF
THESE PREFERENCES WAS FOUND TO BE THE UNFAIR AND INEQUITABLE CLEARANCE
PROVISIONS; ANOTHER, SPECIAL FILM-RENTAL CONCESSIONS. WE WILL CONSIDER
THESE LATER. THE OTHER ASPECTS OF THE FINDINGS WE DO NOT STOP TO
ANALYZE. FOR THE FRANCHISE AGREEMENTS AS EMPLOYED BY SCHINE ARE
UNREASONABLE RESTRAINTS OF TRADE FOR THE REASONS STATED; AND THEY MUST
BE PERMANENTLY ENJOINED, EVEN THOUGH WE ASSUME THEIR COLLATERAL ASPECTS
ARE NOT ACCURATELY DESCRIBED BY THE DISTRICT COURT AND SO MAY NOT BE
(3) APPELLANTS CHALLENGE THE FINDING THAT SCHINE MADE THREATS TO
BUILD THEATRES OR TO OPEN CLOSED ONES IN ORDER TO FORCE SALES OF
THEATRES IN VARIOUS TOWNS OR TO PREVENT ENTRY BY AN INDEPENDENT
OPERATOR. THERE ARE INACCURACIES IN SOME OF THE SUBSIDIARY FINDINGS.
THERE ARE EPISODES WHICH ARE SUSCEPTIBLE OF TWO INTERPRETATIONS, ONE
WHOLLY INNOCENT AND THE OTHER UNLAWFUL. THERE ARE STILL OTHER EPISODES
WHICH HAVE THE UNMISTAKABLE EARMARKS OF THE USE OF MONOPOLY POWER WITH
INTENT TO EXPAND AN EMPIRE AND TO RESTRAIN COMPETITION. ON THE WHOLE
WE THINK THE DISTRICT COURT WAS JUSTIFIED IN DRAWING THE INFERENCE OF
UNLAWFUL PURPOSE FROM THE AMBIGUOUS EPISODES AND THAT THOSE COUPLED
WITH THE OTHERS ARE ADEQUATE TO SUPPORT THESE FINDINGS OF THE DISTRICT
(4) WE REACH THE SAME RESULT AS RESPECTS THE AGREEMENTS NOT TO
COMPETE WHICH SCHINE EXACTED FROM COMPETITORS WHOM IT BOUGHT OUT. IT
IS NOT ENOUGH THAT THE AGREEMENTS MAY BE VALID UNDER LOCAL LAW. EVEN
AN OTHERWISE LAWFUL DEVICE MAY BE USED AS A WEAPON IN RESTRAINT OF
TRADE OR IN AN EFFORT TO MONOPOLIZE A PART OF TRADE OR COMMERCE.
AGREEMENTS NOT TO COMPETE HAVE AT TIMES BEEN USED FOR THAT UNLAWFUL
PURPOSE. SEE UNITED STATES V. AMERICAN TOBACCO CO., 221 U.S. 106, 174;
UNITED STATES V. CRESCENT AMUSEMENT CO., SUPRA, P. 181. IF WE HAD HERE
ONLY AGREEMENTS NOT TO COMPETE, THE INFERENCES DRAWN BY THE DISTRICT
COURT MIGHT NOT BE WARRANTED. BUT IN THE SETTING OF THIS RECORD, AND
AGAINST THE BACKGROUND OF SCHINE'S OTHER MONOPOLISTIC PRACTICES, IT
SEEMS TO US THAT THE DISTRICT COURT MIGHT INFER THAT THE REQUISITE
PURPOSE WAS PRESENT AND THAT THESE AGREEMENTS WERE ADDITIONAL WEAPONS
IN SCHINE'S ARSENAL OF POWER THROUGH THE USE OF WHICH ITS MONOPOLY WAS
SOUGHT TO BE EXTENDED.
(5) THE FINDING THAT SCHINE OBTAINED FILM-RENTAL CONCESSIONS NOT
MADE AVAILABLE TO INDEPENDENT OPERATORS IS NOT INTELLIGIBLE TO US. FOR
THE DISTRICT COURT WENT ON TO STATE THAT "THESE PROVISIONS WERE ALSO IN
CONTRACTS WITH INDEPENDENTS." HOW THOSE CONCESSIONS CONSTITUTE A
RESTRAINT OF TRADE IS THEREFORE NOT APPARENT. WE SET ASIDE THIS
FINDING SO THAT IT MAY BE CLARIFIED ON REMAND OF THE CAUSE.
(6) THERE IS CHALLENGE TO THE FINDINGS THAT SCHINE'S RENTAL
AGREEMENTS CONTAINED MINIMUM ADMISSION PRICES, OR MINIMUM ADMISSION
PRICES LOWER THAN THOSE TO BE CHARGED BY THE INDEPENDENT OPERATORS FOR
SUBSEQUENT RUNS, OR RELIEVED SCHINE OF REQUIREMENTS FOR MINIMUM
ADMISSION PRICES THOUGH IMPOSING THEM ON ITS COMPETITORS. THERE IS
EVIDENCE TO SUPPORT THE FINDINGS THAT MINIMUM PRICES WERE FIXED. IT IS
WELL SETTLED THAT THE FIXING OF MINIMUM PRICES, LIKE OTHER TYPES OF
PRICE FIXING, IS UNLAWFUL PER SE. UNITED STATES V. SOCONY-VACUUM OIL
CO., 310 U.S. 150. THE FINDINGS THAT SCHINE WAS EITHER GRANTED MINIMUM
ADMISSION PRICES MORE FAVORABLE THAN THOSE REQUIRED OF ITS COMPETITORS,
OR THAT SCHINE, UNLIKE ITS COMPETITORS, WAS RELIEVED OF ALL
REQUIREMENTS FOR MINIMUM PRICES, ARE ALSO SUPPORTED BY EVIDENCE. IT IS
SAID THAT THESE PROVISIONS OF THE AGREEMENTS WERE NOT ADHERED TO. BUT
SINCE THEY DID EXIST, IT IS NOT FOR US TO SPECULATE AS TO WHAT FORCE OR
SANCTION THEY MAY HAVE HAD. (7) THERE IS ALSO CHALLENGE TO THE
FINDING THAT SCHINE CUT ADMISSION PRICES. THIS SEEMS UNCONTROVERTED.
BUT PRICE CUTTING WITHOUT MORE IS NOT A VIOLATION OF THE SHERMAN ACT.
IT IS INDEED A COMPETITIVE PRACTICE WHICH THIS RECORD SHOWS TO HAVE
BEEN COMMON IN THE INDUSTRY. IT MAY BE USED IN VIOLATION OF THE ACT.
THUS IT MAY BE THE INSTRUMENT OF MONOPOLY POWER TO ELIMINATE
COMPETITORS OR TO BRING THEM TO THEIR KNEES. BUT SINCE IT IS NOT
UNLAWFUL PER SE, FACTS AND CIRCUMSTANCES MUST BE ADDUCED TO SHOW THAT
IT WAS IN PURPOSE OR EFFECT EMPLOYED AS AN INSTRUMENT OF MONOPOLY
POWER. HERE THERE IS NOTHING EXCEPT A BARE FINDING THAT AT TIMES
SCHINE CUT ADMISSION PRICES. THAT FINDING IS NOT SUFFICIENTLY
DISCRIMINATING TO WITHSTAND ANALYSIS AND IS NOT ADEQUATE TO SUPPORT AN
INJUNCTION AGAINST PRICE CUTTING.
(8) THE FINDING AS TO UNREASONABLE CLEARANCES PRESENTS RATHER LARGE
ISSUES. WE HAVE ELABORATED THE POINT IN UNITED STATES V. PARAMOUNT
PICTURES, INC., POST, P. 131, AND NEED NOT REPEAT WHAT IS SAID THERE.
CLEARANCE IS AN AGREEMENT BY A DISTRIBUTOR NOT TO EXHIBIT A FILM NOR TO
LICENSE OTHERS TO DO SO WITHIN A GIVEN AREA AND FOR A STATED PERIOD
AFTER THE LAST DATE OF THE SHOWING OF THE FILM BY THE LICENSEE WITH
WHOM THE AGREEMENT IS MADE. FN9 IT IS, IN OTHER WORDS, AN AGREEMENT
BY A DISTRIBUTOR TO LICENSE FILMS ONLY FOR SPECIFIED SUCCESSIVE DATES.
IT IS IN PART DESIGNED TO PROTECT THE VALUE OF THE LICENSE WHICH IS
GRANTED. WHILE IT THUS PROTECTS THE INCOME OF THE FIRST EXHIBITOR,
THERE IS NO CONTENTION THAT CLEARANCE AGREEMENTS ARE PER SE UNLAWFUL
RESTRAINTS ON COMPETITION BY REASON OF THE EFFECT THEY MAY HAVE ON
ADMISSION PRICES OR OTHERWISE. ALL THE DISTRICT COURT PURPORTED TO
CONDEMN, AND ALL THE APPELLEE MAINTAINS IS UNLAWFUL, ARE "UNREASONABLE
CLEARANCES." IF REASONABLENESS IS THE TEST, THE FACTORS WHICH BEAR ON
IT WOULD APPEAR TO BE NUMEROUS. FN10 THE FINDINGS AND OPINION OF THE
DISTRICT COURT, HOWEVER, DO NOT GREATLY ILLUMINATE THE PROBLEM. WHAT
STANDARDS OR CRITERIA OF UNREASONABLENESS WERE APPLIED DOES NOT CLEARLY
APPEAR. THERE ARE, HOWEVER, IN SOME OF THE SUBSIDIARY FINDINGS IN THIS
CASE A FEW CLUES AS TO THE BASIS USED BY THE DISTRICT COURT IN
CLASSIFYING CLEARANCES AS UNREASONABLE. THUS IT SAID THAT SCHINE GOT
SOME CLEARANCES "OVER TOWNS IN WHICH SCHINE DID NOT OPERATE." BUT THAT
IS IRRELEVANT TO THE PROBLEM OF REASONABLENESS OF CLEARANCES, SINCE BY
DEFINITION CLEARANCES RUN TO BOTH THEATRES AND TOWNS NOT OWNED BY HIM
WHO HAS THE CLEARANCE.
THE DISTRICT COURT ALSO FOUND THAT CLEARANCES "WERE GIVEN OVER TOWNS
OVER WHICH THERE HAD BEEN NO PREVIOUS CLEARANCE." BUT THAT WITHOUT
MORE WOULD NOT MAKE A CLEARANCE "UNREASONABLE." THE DISTRICT COURT
FOUND THAT SCHINE GOT CLEARANCES OVER "SOME TOWNS DISTANT FROM 10 TO
UPWARDS OF 20 MILES" AND THAT CLEARANCES WERE ALSO OBTAINED OVER
"OUTSIDE TOWNS OF COMPARABLY SMALL POPULATION, DISTANT SO FAR THAT NO
CLEARANCE IS JUSTIFIED." IF THE BASIS FOR THESE FINDINGS IS THAT THE
TOWNS WERE IN DIFFERENT COMPETITIVE AREAS, IT WOULD COME CLOSEST TO
REVEALING THE STANDARD USED BY THE DISTRICT COURT IN DETERMINING
WHETHER THE CLEARANCES WERE OR WERE NOT REASONABLE, UNLESS POSSIBLY IT
BE THE FINDING THAT IN A FEW INSTANCES SCHINE GOT CLEARANCES OVER TOWNS
WHERE THERE WERE NO THEATRES.
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