## Facts

- The United States sued major motion-picture distributors and affiliated theater-owning companies under Sherman Act §§ 1–2 to restrain alleged anticompetitive conduct in film distribution and exhibition.
- Five defendants were vertically integrated producer–distributor–exhibitors that owned or controlled significant theater chains; other defendants distributed films but did not own theaters.
- The government alleged a conspiracy to restrain and monopolize interstate trade in film exhibition in major cities and a broader scheme to restrain distribution and exhibition through coordinated licensing practices.
- The challenged practices included fixing substantially uniform minimum admission prices through distributor agreements with exhibitors and among distributors.
- Defendants used a “runs and clearances” system that granted preferred theaters earlier runs and imposed clearance periods barring nearby competitors from showing the same films.
- Distributors employed block booking (conditioning access to desirable films on licensing packages of multiple films) and engaged in circuit dealing and discriminatory terms that advantaged large theater circuits over independent exhibitors.
- A three-judge district court found violations of Sherman Act §§ 1–2, entered injunctive and other relief, and rejected claims that defendants had monopolized film production; all sides appealed.

## Issues

1. Whether conspiracies to fix minimum admission prices for film exhibitions violate Sherman Act §§ 1–2, and whether copyright ownership immunizes such restraints.
2. Whether the system of runs and clearances, as imposed, constituted an unreasonable restraint of trade.
3. Whether block booking, circuit dealing, and discriminatory licensing practices were unlawful restraints or methods supporting monopolization.
4. What remedies were appropriate, including whether structural relief separating distribution from theater ownership should be ordered and in what form.

## Decision

- The Supreme Court largely affirmed the district court’s findings of Sherman Act violations and sustained substantial injunctive relief.
- The Court upheld the finding of unlawful price fixing and approved an injunction barring licenses (other than to a distributor’s own theaters) that fixed minimum admission prices.
- The Court rejected the claim that copyright ownership permitted concerted restraints on admission prices, holding intellectual property rights do not authorize collusion that suppresses competition among licensees.
- The Court upheld the finding that defendants conspired to impose unreasonable clearances and approved restrictions limiting clearances to those reasonably necessary to protect a licensee and confined to theaters in substantial competition.
- The Court approved condemnation of exclusionary distribution practices such as block booking and circuit dealing as unlawful restraints supporting market power in distribution and exhibition.
- The Court remanded for further proceedings on aspects of structural and remedial details, including the precise scope and implementation of divorcement or divestiture-related relief.

## Legal Principles

- Agreements among competitors (and coordinated distributor–exhibitor arrangements) that fix minimum prices charged to consumers constitute unlawful price fixing under Sherman Act § 1 and may support § 2 violations when used to maintain market power.
- Copyright ownership does not confer immunity from antitrust liability; intellectual property may not be used as a vehicle for collusive restraints that suppress competition among licensees.
- Runs and clearances are not unlawful per se, but clearances that exceed what is reasonably necessary to protect a licensee, or that are imposed between theaters not in substantial competition, are unreasonable restraints of trade.
- Conditioning the licensing of desirable films on acceptance of unwanted films (block booking) and granting preferential, circuit-wide terms that disadvantage independents can constitute unlawful restraints when used to foreclose competition.
- In fashioning antitrust relief, courts may impose forward-looking injunctions and, where necessary to eliminate proven anticompetitive structures and practices, consider structural remedies, subject to tailoring and factual development on remand.

## Conclusion

The Court held that coordinated price fixing and exclusionary film-licensing practices in distribution and exhibition violated the Sherman Act, rejected copyright-based defenses, sustained broad injunctive relief regulating pricing and clearances, and remanded for further determination of remedial details, including potential structural separation between distribution and theater ownership.


United States v. Paramount Pictures, Inc., 334 U.S. 131 (1948)