Film-Tech Forum ARCHIVE: Four Independent Film Exhibitors File Antitrust Suit Against Landmark Theatres

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Posted by Harold Hallikainen (Member # 5405) on 09-27-2017, 12:31 PM:

FOR IMMEDIATE RELEASE

Sept. 27, 2017

Four Independent Film Exhibitors File Antitrust Suit Against Landmark Theatres

Four independent film exhibitors today filed a lawsuit in the U.S. District Court for the District of Columbia against Landmark Theatres, a national chain of specialty film theaters, claiming that Landmark, in violation of federal antitrust law, has denied them access to specialty films they sought to exhibit.

The Denver Film Society (DFS), Cinema Detroit, West End Cinema, and the Avalon Theatre (the latter two of Washington, D.C.) are seeking relief from Landmark’s unlawful anticompetitive practices. Specifically, the plaintiffs allege that Landmark uses its market dominance to demand exclusive rights to screen specialty films, resulting in no local competition for those films despite consumer demand.

“We did not reach this decision lightly,” said Andrew Rodgers, Executive Director of the Denver Film Society. “After years of trying to work within the system and talking with partners and peers about how we can overcome the unfair competition we face from Landmark, we have come to the painful conclusion that this is a nationwide problem that affects the entire independent film community. The deck is stacked against community theaters like ours, and the only way we can solve the problem we all face and serve our audiences properly is to seek a remedy through the courts.”

To exhibit a film, a movie theater must obtain a license from the film’s distributor, which is responsible for marketing the film and acting as a middleman between the production studio and the theater.

The suit claims that Landmark’s business practice of “clearing” films – an agreement limiting a film distributor’s ability to provide other theaters with a license to screen a desired film to the public – is harming marketplace competition by excluding independent movie theaters from screening the specialty films necessary to their competitive success. In addition, the process is reducing output, restricting price competition, and denying moviegoers their choice of theaters to see select films.

Landmark, a private corporation that forms part of a group of companies owned by venture capitalist Mark Cuban, is the self-described dominant theater chain, with a nationwide “circuit” dedicated to exhibiting specialty films in the United States. The company operates 51 theaters with 242 screens in 22 major metropolitan areas, including theaters in each of the plaintiff’s local markets, Denver, Detroit, and Washington, D.C.

Landmark controls most theaters and screens showing specialty films in the plaintiffs’ locations – and uses its national “circuit” power to prohibit independent theaters from showing those films. The result is that these independent theaters, many of them run as non-profits, are often prohibited from showing the high-profile specialty films its audiences want to watch, injuring the theaters’ economic prospects.

In Washington, D.C., Landmark repeatedly blocked West End Cinema from showing films at the same time as its own theaters, forcing the theater to shut down in 2015. One month after West End Cinema closed, Landmark acquired the building lease and opened its own theater. “After more than four years of unrelenting anticompetitive squeezing by Landmark, I was forced to close West End Cinema on March 29, 2015 – which was followed less than one month later by an announcement that Landmark was leasing the space and ‘reopening’ it as the Landmark West End Cinema,” said Josh Levin, a co-founder of West End Cinema. “So they killed me and my business, then moved into my house.”

The other three theaters represented in the suit allege that Landmark’s anticompetitive practices and the continued use of its national “circuit” power prevent them from obtaining desirable specialty films.

In Washington, D.C., the Avalon Theatre has faced significant competitive challenges with Landmark since the Avalon opened as a nonprofit in 2003.

In Denver, since 2010 when it opened the Sie FilmCenter, the nonprofit Denver Film Society has been unable to book a single film that Landmark was also showing locally at one of its theaters.

In Detroit, the local Landmark and Cinema Detroit are the only two theaters that show specialty films. Although the theaters are more than 11 miles apart, Landmark still prevents Cinema Detroit from showing almost every specialty film.

“I wish that this legal action was avoidable,” said Paula Guthat, co-founder of Cinema Detroit. “Unfortunately, Landmark actively engages in unfair business practices that limit our ability to screen certain types of films in the metro Detroit market. It’s unfair to us as a business and to our patrons who look for Cinema Detroit to offer the best in independent films and documentaries.”

Last year, Landmark filed a similar lawsuit against Regal Entertainment Group, another national theater chain, accusing Regal of similar anticompetitive conduct aimed at Landmark with respect to commercial films.

“Landmark went to court to fight against clearances for the films it wanted to show,” said Bill Oberdorfer, Executive Director of the Avalon Theatre. “We are doing the exact same thing and simply asking for the same opportunities with respect to specialty films.”

The suit seeks monetary damages and an injunction prohibiting Landmark from seeking clearances against plaintiffs’ theaters. The plaintiffs are represented by Hausfeld, a global litigation firm with expertise in antitrust law.

About the Avalon Theatre

Avalon Theatre Project, Inc. is a nonprofit, community-supported film and education center in Washington, D.C., which runs the two-screen Avalon Theatre, the oldest operating movie house in the area. The historic Avalon Theatre has been a cornerstone of Northwest D.C. since its opening in 1923, and offers exciting and diverse film programming in a comfortable and accessible venue. Avalon Theatre contact: Bill Oberdorfer (bill.oberdorfer@theavalon.org or 202-966-2149)

About Cinema Detroit

Founded in 2013 by two lifelong Detroiters, Cinema Detroit is a nonprofit movie theater located in Detroit, Michigan. As Detroit’s only seven-day-a-week truly independent movie theater, Cinema Detroit aims to deliver an eclectic, quirky, and quality mix of films in the heart of the city and provide a community gathering place for the community dialogue that they spark. Cinema Detroit contact: David E. Rudolph at D. Ericson & Associates Public Relations (dericsonpr@gmail.com or 313-605-3600)

About Denver Film Society

Founded in 1978, the Denver Film Society (DFS) is a nonprofit organization located in Denver, Colorado, that provides specialty film programming to the Denver community through year-round screenings, film festivals, and other special events. DFS operates a single, three-screen theater, the Sie FilmCenter, and produces the annual Denver Film Festival. Denver Film Society contact: Marty Schechter (marty@schechterpr.com or 303-987-8163)

About West End Cinema

West End Cinema was a three-screen art house cinema in Washington, DC from 2010-15, dedicated to bringing audiences the best in independent, foreign and documentary films. West End was named Best Independent Movie Theatre in DC (Washington CityPaper); Best Movie Theatre Food Selection in DC (Washington CityPaper); and Best Popcorn in DC (TBD.com). West End Cinema contact: Josh Levin (josh@westendcinema.com or 212-300-6086)

About Hausfeld

Hausfeld is a leading global law firm with offices in Berlin, Boston, Brussels, Dusseldorf, London, New York, Philadelphia, San Francisco, and Washington, DC. The firm has a broad range of complex litigation expertise, particularly in antitrust/competition, financial services, sports and entertainment, environmental, mass torts, consumer protection, and human rights matters, often with an international dimension. Hausfeld contact: Sathya Gosselin (sgosselin@hausfeld.com or 202-540-7175)

https://www.denverfilm.org/2017/09/27/four-independent-film-exhibitors-file-antitrust-suit-landmark-theatres/?utm_source=DFS+Master+List&utm_campaign=9984c0c7dd-EMAIL_CAMPAIGN_2017_09_27&utm_medium=email&utm_term=0_92a68d8fde-9984c0c7dd-119840273

Posted by Bobby Henderson (Member # 840) on 09-27-2017, 03:14 PM:

Clearances suck. I'm used to them being applied in geographic terms where one theater can't play a certain movie if another theater within 2 or so miles is playing it. This policy allows crappy theaters to poach product from better quality theaters. It sounds like Landmark is weaseling complete market exclusivity for indie movie releases. And that's a bunch of bullshit. I hope Landmark loses this suit. Markets like Denver and Washington, DC are more than large enough to support multiple theaters playing indie content.

Posted by Marcel Birgelen (Member # 6801) on 09-28-2017, 02:12 AM:

What I don't understand is, why aren't they suing the studios that are into this?

It takes two to tango, it's the studios who do allow this clearances system to be in place.

Posted by Steve Guttag (Member # 268) on 09-28-2017, 06:56 AM:

These are independent "studios" by and large. And the small-time distributors are more easily bullied by the likes of Landmark since their distribution resources are limited. All it would take is for Landmark to say, "fine, we won't play your product...ANYWHERE" to force an indie's hand at booking.

Posted by Marcel Birgelen (Member # 6801) on 09-28-2017, 07:56 AM:

I understand, and I think I skipped the part that it concerned indie "studios" and distributors.

Still, shouldn't they be part of the lawsuit? Actually, if they're bullied, they should be part as the claimant. Then again, they're probably afraid of losing Landmark as an exhibitor...

Posted by Harold Hallikainen (Member # 5405) on 09-28-2017, 12:54 PM:

This is an interesting issue. In general, I think a manufacturer has the right to determine how the product is sold (though there are limits, such as they cannot tell authorized resellers what price to sell for, though they used to be able to do that under "fair trade" laws). A manufacturer can decide to only sell direct, sell through a limited set of dealers, or whatever. Similarly, in television, network affiliation and syndicated programming is generally sold on a market exclusivity basis. Cable television systems are not allowed to import a syndicated program on a channel they normally import into a market if a station in that market has an exclusivity agreement with the program producer ( see http://mai.hallikainen.org/org/FCC/FccRules/2016/76/101/ ). Exclusivity makes the program more valuable to the station, so the distributor can charge more for it.

Exclusivity agreements are very common in various businesses. When it becomes anti-competitive is the question. That's something for the courts to decide.

Harold

Posted by Jack Ondracek (Member # 1466) on 09-28-2017, 04:15 PM:

The studios play both sides of this game. On one hand, they'll stand on their right to market their products to achieve the "best business outcome" for the company. On the other, they claim a clearance has to be requested by a competing theatre (or company).

Haven't had to deal with this in a long time, but I've been around long enough to have been affected by both approaches.

Posted by Marcel Birgelen (Member # 6801) on 09-28-2017, 04:23 PM:

quote: Harold Hallikainen
Exclusivity agreements are very common in various businesses. When it becomes anti-competitive is the question. That's something for the courts to decide.

Yes, but I think the FTC is pretty clear about what they see as Anti-competitive practices:

quote: FTC
It is illegal for businesses to act together in ways that can limit competition, lead to higher prices, or hinder other businesses from entering the market. The FTC challenges unreasonable horizontal restraints of trade. Such agreements may be considered unreasonable when competitors interact to such a degree that they are no longer acting independently, or when collaborating gives competitors the ability to wield market power together. Certain acts are considered so harmful to competition that they are almost always illegal. These include arrangements to fix prices, divide markets, or rig bids.

Posted by Leo Enticknap (Member # 534) on 10-02-2017, 11:05 PM:

The issue is that the Sherman Act has inherently subjective wording as to "reasonable" and "unreasonable" things done by a company in order to acquire or maintain a monopoly. Therefore, the distinction between the two has been defined in a very complicated way through a slew of court precedents.

I'm not an attorney, but it seems to me that at first glance, the plaintiffs appear to have a substantive case under the refusal to deal SCOTUS decision that resulted from a Sherman Act case:

quote: FTC Website
For example, in a case from the 1950's, the only newspaper in a town refused to carry advertisements from companies that were also running ads on a local radio station. The newspaper monitored the radio ads and terminated its ad contracts with any business that ran ads on the radio. The Supreme Court found that the newspaper's refusal to deal with businesses using the radio station strengthened its dominant position in the local advertising market and threatened to eliminate the radio station as a competitor.

If (and this is a big if) the plaintiffs can prove that Landmark told distributors that they would not play a movie that was offered to a local competitor to one of their theaters, this would seem to be to be an equivalent situation.

Posted by Marcel Birgelen (Member # 6801) on 10-03-2017, 08:21 AM:

The problem here is that they sued Landmark Theatres and not the studios/distributors themselves, as mentioned earlier.

It's pretty easy to prove they (the studios and distributors) denied them certain releases, in order to prove it was a result of Landmark's bullying is obviously more difficult.

Yet, I guess they do have at least a smoking gun, or otherwise they probably wouldn't engage in this lawsuit.

Posted by Jack Ondracek (Member # 1466) on 10-03-2017, 01:40 PM:

Given the studios' insistence that a competitor has to request a clearance, I suppose it would be easy enough for the plaintiff to pull the studio in as a witness and subpoena that documentation.

My bet is this one will settle quickly.

Posted by Martin Brooks (Member # 1269) on 11-02-2017, 07:21 PM:

quote: Harold Hallikainen
In general, I think a manufacturer has the right to determine how the product is sold (though there are limits, such as they cannot tell authorized resellers what price to sell for, though they used to be able to do that under "fair trade" laws).

It used to be that manufacturers could only dictate minimum advertised prices (MAP) and not minimum selling prices (MSP). That's why we had "recommended selling prices" which were considered the "list price". But the Supreme Court ruled some years ago that manufacturers could indeed dictate minimum selling prices and that's why a lot of products are sold only at list price or within $5 of that price. You see this with cameras and many consumer electronics, especially at the high end.

That ruling never made sense to me and seemed to reek of price fixing.

Back around 1990 when I worked in publishing and we were doing a deal with a distributor to create a special version of a product for them, as soon as we walked into the meeting, we were told by the lawyers that the one thing we could not discuss was the price they would sell the product for. We could negotiate wholesale prices, but not retail. But as I understand the subsequent Supreme Court ruling, if we were doing the deal today, we could dictate a minimum selling price.

Posted by William Kucharski (Member # 7246) on 01-04-2018, 08:13 AM:

I support the DFS wholeheartedly on this, especially as all of Landmark's local venues are universally horrible, showing at best Blu-rays and, if you remember a previous post of mine, a copy of a movie recorded off of HDNet Movies on a DVR.

Posted by Mitchell Dvoskin (Member # 751) on 01-04-2018, 12:24 PM:

quote: Martin Brooks
That ruling never made sense to me and seemed to reek of price fixing.

Yet, just a couple of years ago, the Supreme Court ruled against Apple for allowing publishers to set the prices for iBooks (or whatever they were called) sold by Apple. Price fixing. Apparently, publishers can set a minimum price for multiple retailers, but a retailer can not let multiple publishers set their own prices.