## Facts

- Interstate Circuit, Inc. and related entities operated motion picture theaters in Texas and New Mexico and held monopolies over first-run theaters in several Texas cities.
- Eight major motion picture distributors (collectively supplying most first-class feature films) licensed copyrighted films to exhibitors for public exhibition.
- Interstate’s general manager sent an identical letter to each distributor, listing all recipients, so each distributor knew the others received the same demand.
- The letter demanded that, as a condition of continued dealing, each distributor impose two uniform restrictions on licenses to subsequent-run theaters in Interstate’s first-run cities: (1) minimum evening admission prices (generally at least 25 cents, and for certain films 40 cents), and (2) a prohibition on exhibiting the films as part of double features.
- Conferences occurred between Interstate and individual distributors; each distributor ultimately adopted the same restrictions and incorporated them into licenses used with subsequent-run exhibitors in the relevant markets.
- There was no direct evidence that the distributors communicated with each other or expressly agreed among themselves; the evidence showed separate vertical dealings plus each distributor’s knowledge that effective implementation required broad distributor participation.
- The United States sued under § 1 of the Sherman Act; the district court found an agreement among defendants to enter and carry out the restrictive contracts and enjoined continuation and enforcement of the restraints.

## Issues

1. Whether a § 1 conspiracy could be inferred among competing distributors based on circumstantial evidence of parallel acceptance of a common proposal with awareness of interdependence, despite no direct evidence of distributor-to-distributor agreement.
2. Whether coordinated minimum admission prices and a ban on double features for subsequent-run theaters constituted an unreasonable restraint of interstate commerce under § 1.
3. Whether distributors’ copyright interests in films immunized the challenged licensing restrictions from Sherman Act scrutiny.

## Decision

- The Supreme Court affirmed the decree for the United States.
- The Court held the evidence supported an inference that the distributors acted in concert with each other and with Interstate in adopting and enforcing identical restrictive terms.
- The Court held the minimum-price and no-double-feature restrictions unreasonably restrained interstate commerce.
- The Court rejected the argument that copyright ownership insulated contracts that restrained competitive distribution to protect favored exhibitors from competition.

## Legal Principles

- A Sherman Act § 1 agreement may be proved by circumstantial evidence; direct proof of an express agreement among competitors is not required.
- Parallel acceptance by competitors of an invitation to participate in a plan, with knowledge that coordinated action is contemplated and necessary to achieve the plan’s restraint, can support an inference of unlawful conspiracy.
- In assessing whether concerted action exists, courts may consider the structure of the proposal, each actor’s knowledge of others’ involvement, the interdependence of participation, and the absence of a credible alternative explanation for uniform adoption.
- Concerted imposition of minimum price requirements and uniform exhibition constraints that protect a dominant exhibitor from competitive pressure constitutes an unreasonable restraint of trade under § 1.
- Copyright ownership does not provide immunity for licensing arrangements that restrain competitive distribution in violation of the antitrust laws.

## Conclusion

The Court upheld § 1 liability where competing film distributors, aware of a common, interdependent proposal sent to all of them, uniformly adopted restrictive licensing terms that fixed minimum admission prices and barred double features to protect a dominant first-run exhibitor; the distributors’ copyrights did not excuse the anticompetitive restraints.


Interstate Circuit, Inc. v. United States, 306 U.S. 208 (1939)