## Facts

- Motion Picture Advertising Service Co. (MPAS) produced and distributed short advertising films for exhibition in movie theaters and shipped films in interstate commerce to theaters in many states and the District of Columbia.
- MPAS entered contracts with theaters for terms up to five years (most for one or two years).
- Many contracts granted MPAS exclusivity, requiring theaters to show only MPAS advertising films, with limited exceptions (e.g., charities, government films, coming attractions).
- MPAS held exclusive contracts with almost 40% of theaters in its operating area.
- MPAS and three other firms collectively had exclusive arrangements covering about three-fourths of U.S. theaters that exhibited advertising films for compensation.
- The Federal Trade Commission found the exclusivity limited competitor access to theaters and contributed to some competitors leaving the business due to inability to secure outlets.

## Issues

1. Whether MPAS’s long-term exclusive dealing contracts that foreclosed substantial theater outlets constituted an “unfair method of competition” under § 5 of the Federal Trade Commission Act.
2. Whether the FTC acted within its remedial discretion by restricting exclusive theater contracts to terms of no more than one year.
3. Whether res judicata barred the FTC proceeding based on an earlier matter involving exclusive agreements.

## Decision

- The Supreme Court reversed the court of appeals and sustained the FTC’s cease-and-desist order.
- The Court held substantial evidence supported the FTC’s finding that MPAS’s exclusivity arrangements unreasonably restrained competition and tended toward monopoly, qualifying as an unfair method of competition under FTC Act § 5.
- The Court upheld the order limiting exclusive contracts to one-year terms as within the FTC’s allowable remedial judgment.
- The Court rejected the res judicata defense because the earlier proceeding involved different issues (including a conspiracy claim) and did not decide the same cause of action.

## Legal Principles

- Exclusive dealing that forecloses a substantial share of available outlets may be condemned as anticompetitive and treated as an unfair method of competition under FTC Act § 5.
- The FTC may proceed under § 5 against conduct that is anticompetitive in substance even if it does not fall neatly within the literal terms of other antitrust statutes.
- Courts give significant deference to the FTC’s remedial choices when the remedy is reasonably related to preventing recurrence of the unlawful practice and reducing its effects.
- Res judicata does not apply where the prior adjudication involved different issues or a different theory of liability.

## Conclusion

The Court sustained the FTC’s determination that MPAS’s exclusive theater contracts materially foreclosed competitors and tended toward monopoly, and it upheld a tailored remedy limiting exclusivity to one-year terms while rejecting res judicata based on a distinct prior proceeding.


Fed. Trade Comm’n v. Motion Picture Advert. Serv. Co., 344 U.S. 392 (1953)