The Paramount Decree

The consent decree of 29 October 1940, in which the studios agreed to reduce the number of block-booked films to five and replace blind-biding with trade showing, certainly created more opportunities for independent producers but did not achieve the main objectives of the US Justice Department: the elimination of illegal trade practices and the divorcement of exhibition from production and distribution. With America at war between 1941 and 1945, trust-busting campaigns had become less persistent and considerably less focused, bringing only one significant antitrust decision during the period.5 Immediately after the end of the war, however, the Justice Department, under new Attorney General Tom Clarke, reopened the case against the eight dominant film companies. The New York federal district court that examined the case ruled that the studios had indeed conspired to impose a set of illegal trade practices (price-fixing, block booking, favourable agreements with affiliated circuits, zoning and clearance) but, significantly, failed to see that it was the studios' organisation as vertically integrated companies that gave them the power to impose those practices.

Although the federal district court's decision was certainly a victory for the Justice Department, this time the Attorney General wanted both objectives fulfilled. After a series of appeals, the US Supreme Court granted the case a hearing, while at the same time smaller antitrust lawsuits mainly brought in by independent exhibitors against the studios and their affiliated circuits were being upheld by courts around the country. The hearings took place in 1948 and on 3 May of the same year, the Supreme Court reached unanimously its verdict, which this time identified correctly the studios' control of all three aspect of the film business (production, distribution and exhibition) as the source of their power.

Specifically, the Court upheld the federal district court's original decision that had found block booking, price-fixing, zoning and clearance, and other studio practices, illegal restraints of trade and recommended divorcement of exhibition from the other two branches of filmmaking that the eight defendants controlled.

Although studios like 20th Century-Fox and, especially, MGM would fight the decision for almost a decade (MGM did not sell its last theatres until 1957),6 the Supreme Court's decision did not leave the studios any space for compromise. For that reason, when RKO and Paramount became the first two of the eight studios to sign the consent decree, in 1948 and 1949 respectively, the terms were unequivocal. Apart from putting an end to all practices that constrained trade and mobilising the divorcement of exhibition from production and distribution, the consent decree also forced studios to break off their ties with affiliated theatre circuits, especially in 'closed towns' where one such exhibitor had an absolute monopoly.7

The provisions of the Paramount Decree (as the Supreme Court's decision became known) seemed to signal an outright victory for top-rank independent producers. Among the key issues that the Society for Independent Motion Picture Producers (the collective bargaining tool for top-rank independents) had lobbied for after the district court's decision were the end of block booking and the divestiture of theatres, both addressed specifically by the Supreme Court's decision.8 The future seemed bright for these independents as they would be in a position to compete with studio films on an equal basis for access to the best theatres. And as their reputation for producing quality pictures was already in place from the pre-1948 period, the Paramount Decree came to represent for them more freedom from the constraints of the studio system as well as greater profits from improved access to the first-run theatres.

The independents' optimism proved false, however, as a cluster of factors - well underway before the 1948 decree - changed the rosy economic conditions that had brought record profits to the American film industry during the war years and presented a much darker picture for both the studios and the independents. Increased production costs, union and labour problems, the introduction of protective quotas in foreign markets, the House of Un-American Activities Committee investigation of communist infiltration of the film industry and, especially, a drop in theatre attendance from 1947 that continued throughout the 1950s and

1960s, changed dramatically the landscape of American cinema. In this new reality, independent production struggled for the first few years after the decree, before becoming the dominant method of production in the mid-1950s and 1960s.

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