Antitrust Law Daily Wrap Up, ANTITRUST NEWS: AMC theatre chain alleged to have deprived competitive access to first run Spanish films, (Apr 21, 2015)

By Linda O’Brien, J.D., LL.M.

A major film theatre operator has engaged in anticompetitive conduct by coercing film distributors to limit access by a competing cinema operator to first run Spanish language films, according to a complaint filed in the federal district court of Houston (Viva Cinemas Theaters and Entertainment LLC v. AMC Entertainment Holdings, Inc., April 20, 2015).

AMC Entertainment, a subsidiary of Chinese conglomerate Dalian Wanda Group, owns and operates theatres worldwide, and is the second-largest theatre circuit in the United States.

The complaint alleges that the City of Houston is home to many individuals for whom Spanish is their primary language and has the third largest Hispanic community of any U. S. metropolitan area. Prior to 2013, there were no modern multi-screen theaters in the city devoted to the exhibition of first run from major Hollywood studios with Spanish subtitles or dubbed in Spanish. Viva Cinemas Theaters and Entertainment developed a business plan to address this market. Viva Cinemas invested substantial time and money to renovate an existing multi-screen theater and create a premium entertainment venue offering films, food and beverages, and recreational facilities to serve the Hispanic and Spanish-speaking communities. Viva secured standard license agreements to license first run films and commenced operations in spring 2013.

Although AMC also operated a multi-screen theater in Houston approximately three miles from Viva Cinemas’ theater, AMC and Viva Cinemas were not in substantial competition with each other since they had different film offerings and their customers did not substantially overlap. Specifically, Viva Cinemas showed films in Spanish or with Spanish subtitles, whereas AMC showed virtually no such films, the complaint alleges.

According to the complaint, once AMC learned of Viva Cinemas operations, AMC reacted by threatening the distribution businesses of seven major Hollywood studios. AMC told each distributor that AMC would not show any first run film if the distributor licensed that first run film in Spanish to Viva Cinemas. However, during Viva Cinemas’ operations, AMC infrequently showed films in Spanish or with Spanish subtitles.

The distributors agreed to AMC’s demand for exclusivity by allocating films between AMC and Viva Cinemas, with Viva Cinemas being allocated virtually none of the most popular, highest grossing first run films when those films had the strongest commercial value. Between May and November 2013, Viva Cinemas was only able to license one first run Spanish language film for exhibition on the film’s opening day. Thus, AMC threats were successful and Viva Cinemas ceased operations in November 2013, the complaint states.

AMC’s conduct was anticompetitive, unlawful, and harmful to Viva Cinemas as well as Houston’s Hispanic and Spanish-speaking community. Specifically, Viva Cinemas was deprived of fair competitive access to first run Spanish films for exhibition to the Spanish-speaking public and Spanish-speaking consumers were deprived of any choice with respect to when, where, which, and at what price they could see first run Spanish language films, the complaint charges.

The plaintiff asserts claims for tortious interference with existing contracts, tortious interference with ongoing business relationships, and violations of Section 1 of the Sherman Act and Texas Free Enterprise and Antitrust Act. The action seeks declaratory relief, disgorgement, treble damages, costs of suit, attorneys’ fees, and any other just and proper relief.

The case is No. 4:15-cv-01015.

Attorneys: Michael A. Hawash and Jeremy Gaston (Hawash Meade Gaston Neese & Cicack LLP) for Viva Cinemas Theaters and Entertainment LLC.

Companies: Viva Cinemas Theaters and Entertainment LLC; AMC Entertainment Holdings, Inc.; AMC Entertainment Inc.; American Multi-Cinema, Inc.

News: Antitrust TexasNews