Antitrust Law Daily Wrap Up, ANTITRUST—D.D.C.: Final judgment compelling divestitures to resolve U.S., Texas concerns over movie theater combination approved, (Aug 15, 2013)

By Tobias J. Gillett, J.D., LL.M.

The federal district court in Washington, D.C., has granted approval of a final judgment resolving Justice Department and State of Texas concerns regarding Cinemark Holdings Inc.’s $220 million acquisition of Rave Cinemas movie theaters (U.S. v. Cinemark Holdings, Inc., August 15, 2013, Howell, B.).

According to the competitive impact statement filed by the Justice Department and the State of Texas on May 20, 2013, with their proposed final judgment, the transaction as initially proposed would have been likely to reduce price competition among Cinemark, Rave Cinemas, and Movie Tavern in parts of Kentucky, New Jersey, and Texas. Cinemark, one of the nation’s largest theater operators, owns and operates 298 theaters with a total of 3,916 screens in 39 states. Rave Cinemas owns and operates 35 movie theaters with a total of 518 screens in 12 states. Movie Tavern, which offers in-cinema dining, is owned by Alder Wood Partners L.P., a Dallas-based limited partnership controlled by Cinemark’s chairman, Lee Roy Mitchell, and his wife.

The Justice Department alleged that Cinemark and Rave Cinemas were each other’s most significant competitor in the area in and around Voorhees-Somerdale, New Jersey, and in the eastern portion of Louisville, Kentucky. The Justice Department also contended that Dallas-based Movie Tavern competed directly with Rave Cinemas in the western portion of Fort Worth, Texas, and that in and around Denton, Texas, all three companies operated theaters. In markets in which Movie Tavern and Rave Cinemas competed, the Justice Department said that Mitchell would have an ability and financial incentive to dampen competition once Rave Cinemas was acquired by Cinemark.

Under the terms of the final judgment, Cinemark must divest three movie theaters in the locations where Cinemark and Rave Cinemas were each other’s closest competitor in Kentucky, New Jersey, and Texas. In addition, Mitchell must divest Movie Tavern Inc. and its 16 theaters in seven states. If Cinemark or Alder Wood Partners are unable to obtain consent from the landlords of one or more of the properties the judgment requires them to divest, the companies must divest alternative assets that effectively compete with the theatre or theatres for which they were unable to obtain consent.

Cinemark announced on May 29 that it had completed the acquisition of Rave Cinemas.

The case is Civil Action No. 13-727 (BAH).

Attorneys: Justin M. Dempsey for U.S. Department of Justice Antitrust Division. Kim VanWinkle for Office of the Attorney General, State of Texas. Paul B. Hewitt (Akin Gump Strauss Hauer & Feld LLP) for Cinemark Holdings, Inc. Marimichael O. Skubel (Kirkland & Ellis LLP) for Rave Holdings, LLC. Glenn A. Mitchell (Stein, Mitchell, Muse & Cipollone) for Alder Wood Partners, L.P.

Companies: Cinemark Holdings, Inc.; Rave Holdings, LLC; Alder Wood Partners, L.P.

Cases: Antitrust AntitrustDivisionNews DistrictofColumbiaNews