Antitrust Law Daily Wrap Up, ANTITRUST NEWS: Regal theater chain allegedly blocked competitor’s access to first run films, (Jan 27, 2016)

By Linda O’Brien, J.D., LL.M.

A major film theater operator has used its national circuit power, dominant market presence, and monopoly power to coerce major film distributors to limit a competing cinema operator’s access to first run, feature length motion pictures, according to a complaint filed in the federal district court in Washington, D.C. (Silver Cinemas Acquisition Co. Inc. v. Regal Entertainment Group, January 26, 2016).

Silver Cinemas Acquisition Co., doing business as Landmark Theatres, operates 55 theaters in 25 markets. The theaters show a variety of films and provide other amenities, such as digital projection, gourmet concession items, and in-theater sales of DVDs, books, and CDs. Regal Entertainment Group is the largest movie theater circuit in the United States, with approximately 575 theaters across the country.

The complaint states that, in 2004, Regal opened a 14-screen theater located within the Gallery Place shopping complex. In October 2015, Landmark opened its new Atlantic Plumbing theater, also located in northwest Washington, D.C. Landmark contacted each of the major film distributors, seeking to exhibit commercial films, and was informed that Regal was asserting a blanket clearance—an exclusivity agreement under which a distributor agrees not to license a film to play at the same time with any other theater in a film licensing zone—over Landmark’s Atlantic Plumbing theater.

Landmark claims that, by asserting a blank clearance, Regal was threatening to use its monopoly power in the greater Washington, D.C. area as retaliation if the distributors licensed their commercial films to Landmark. The distributors refused to license films to Landmark because they “could not afford to lose Gallery Place’s gross for the films or risk upsetting a dominant exhibitor like Regal.”

The few commercial films that have been licensed to Landmark have been generally less desirable and in-demand than the films that have licensed exclusively to Regal’s Gallery Place. The film distributors’ general refusal to offer fair competitive access to commercial films to Landmark was the result of Regal’s exclusionary demands and was unrelated to the distributor’s assessment of the quality and customer-drawing capacity of Landmark’s Atlantic Plumbing theater, according to the complaint.

The lawsuit also claims that a commercial film exhibitor needs fair competitive access to commercial films. Regal’s demands for preferential treatment in the northwest Washington, D.C. area allegedly has had the effect of denying Landmark the revenue needed to continue to operate its Atlantic Plumbing theater. Furthermore, the blanket clearances are not justified by the close proximity of Landmark’s Atlantic Plumbing theater to Regal’s Gallery Place or by the inability of the market to support more than one theater playing mainstream, commercial films, the complaint charged.

The plaintiff asserts claims for tortious interference with business relations, restraint of trade, circuit dealing, monopolization, and attempted monopolization in violation of Sections 1 and 2 of the Sherman Act. The action seeks declaratory and injunctive relief, disgorgement, treble damages, costs of suit, attorney fees, and any other just and proper relief.

The case is No. 1:16-cv-00123.

Attorneys: Barry J. Reingold, Thomas L. Boeder, and Catherine S. Simonsen (Perkins Coie LLP) for Silver Cinemas Acquisition Co.

Companies: Silver Cinemas Acquisition Co.; Regal Entertainment Group

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