Antitrust Law Daily Wrap Up, ANTITRUST NEWS: Luxury movie theater sues Regal, AMC over alleged boycott threat, (Nov 19, 2015)

By Linda O’Brien, J.D., LL.M.

Two leading national movie exhibitors—Regal and AMC— have engaged in anticompetitive business practices to eliminate competition by coercing major film studios to deny licenses of first run movies to a small luxury theater operator, according to a complaint filed in Harris County district court in Houston, Texas (iPic-Gold Class Entertainment, LLC v. Regal Entertainment Group, November 17, 2015).

iPic-Gold Class Entertainment operates 12 luxury movie theaters with a total of 89 screens in eight states. iPic markets its theaters as a high-end alternative with premium amenities, such as full beverage service, upscale dining, and reserved seating. Regal Entertainment Group, AMC Entertainment, Inc., and Cinemark USA are the largest movie exhibitors in the U.S., controlling more than 60 percent of the revenue from movie ticket sales.

The complaint states that movie exhibitors and studios have seen the advantage of open access to film licenses in the current environment of movie megaplexes and the constant demand for product. In recent years, Regal, AMC, and Cinemark allegedly have begun a campaign to exploit their market power to prevent new competition from entering the market. Specifically, the three movie exhibitors have threatened to boycott studios that don’t concede to their demands of denying film licenses to new theaters, the lawsuit claimed.

Boycott threats from Regal, AMC, and Cinemark carry significant weight. It would be difficult for a major studio to choose to license a film to a small theater with less revenue if it meant losing the revenue expected from a megaplex or multiplex theater chain. The defendants’ tactics were calculated to financially coerce studios to participate in their boycott conspiracy, iPic alleged.

According to the complaint, in early November 2015, iPic opened a new theater in Houston, which has been very popular with the public. iPic plans to open another theater in Frisco in April 2017. iPic theaters do not compete with Regal or AMC, which do not offer upscale dining or other amenities that iPic provides. Their ticket prices are correspondingly cheaper to reflect a lower-quality experience.

Regal and AMC allegedly have informed every major film studio that if a studio licenses a film to play at iPic theaters, they will refuse to play that film at their theaters. The threat is real and substantial as it is directed at the popular first run films that iPic needs to show on its screens to survive, the plaintiff charged. The threats have been effective, since three major studios have notified iPic that they will be allocating films. While iPic was able to obtain licenses for certain films in 2015, it has been able to license only one film for 2016 from these studios. If iPic is unable to obtain a variety of first run films to fill its schedule, then it cannot support itself financially, the complaint states.

The complaint also notes that the boycott is contrary to the economic self-interest of Regal and AMC. The only rational explanation for the boycott is to exclude a new competitor from market by coercing studios to refuse licenses to iPic.

The plaintiff asserts claims for tortious interference and restraint of trade, monopolization, and attempted monopolization in violation of the Texas Antitrust Act. The action seeks declaratory and injunctive relief, treble damages, pre- and post-judgment interest, costs of suit, attorney fees, and any other just and proper relief.

The case is No. 201568745.

Attorneys: R. Paul Yetter, Bryce Callahan, Marc Tabolsky, and Elizabeth Wyman (Yetter Coleman LLP) for iPic-Gold Class Entertainment, LLC and iPic Texas, LLC.

Companies: iPic-Gold Class Entertainment, LLC; iPic Texas, LLC; Regal Entertainment Group; AMC Entertainment Holdings, Inc.; AMC Entertainment, Inc.; American Multi-Cinema, Inc.

News: Antitrust TexasNews