If you’re a movie studio, you want as many people as possible to pay to see your films. If you’re a movie theater chain, you don’t want competing theaters to showing the same movies you’ve got, especially if that competitor has luxury features you don’t offer. But is it legal to use your leverage as the nation’s biggest theater chain to stop movie studios from licensing their films to the newer, fancier kid on the block?
That’s the question in an ongoing legal dispute between iPic Theaters — a chain of around 18 upscale movie houses that offer in-seat dining and drinking, private “pod” booths, and other perks — and two of the nation’s largest theater operators, Regal and AMC.
According to iPic, before the company opened its Houston location in Nov. 2015, Regal told six major film distributors that the nearby Regal-operated theater must get movies before the iPic theater. The company similarly claims that AMC has made such exclusivity demands regarding an AMC-operated Dallas theater that is near a second soon-to-open iPic location.
While the iPic theater charges as much as $28 per ticket for some seats, it still relies on first-run films to attract customers into those pricey seats. If the six distributors allegedly approached by Regal and AMC were to stop licensing movies to iPic, the company says that would kill 90% of its box office revenue.
The smaller chain sued Regal and AMC, alleging violations of Texas antitrust laws, and sought a temporary restraining order prohibiting the two companies from using their leverage to keep high-profile new movies off iPic screens.
iPic said that three of the six companies had apparently ignored the alleged Regal threat of boycott, while the other three tried to judiciously allocate their new releases between the competing theaters.
In response to the request for a restraining order, Regal CEO Amy Miles testified that this “clearance” policy was not unique to the Houston iPic situation, but the theater chain’s nationwide policy. According to Miles, Regal doesn’t want theaters — even its own — located within a three-mile radius to be showing the same films. This policy, contends the company, makes sure that consumers have a variety of titles to choose from.
In fact, nearly 70 years ago in the landmark United States v. Paramount Pictures, ruling the Supreme Court upheld the legality of clearances, but under the condition that the clearance was not “unduly extended as to area or duration.”
Additionally, SCOTUS explicitly stated that “There should be no clearance between theaters not in substantial competition,” which is an important aspect of iPic’s argument.
iPic claims that while its theater and the nearby Regal theater might show the same films, they are not direct competitors. One offers the standard megaplex experience and charges typical ticket prices, while the other charges significantly more, appeals to older moviegoers and to people who want something different from the moviegoing experience.
The trial court eventually granted iPic’s request for a restraining order prohibiting Regal from “directly or indirectly, demanding or requesting exclusive film licenses or the right to exhibit films from any studio to the exclusion of [iPic’s] Houston theater.”
The order also barred Regal from threatening a boycott if a studio chooses to license films for exhibition at iPic.
Regal appealed the restraining order and a state appeals court recently rejected the theater operators’ petition.
The appeals panel opinion [PDF] says that the trial court did not err in granting the restraining order, as iPic had produced “some evidence that Regal’s conduct harmed the market for premium exhibition of first-run films.”
Keep in mind that neither the trial court’s decision to grant the restraining order, nor the appeals court’s decision to uphold the order, mean that Regal (or AMC) have violated any law. That issue is to still to be determined at trial, which is slated for March 2017.
by Chris Morran via Consumerist