Antitrust Law Daily Wrap Up, ANTITRUST NEWS: Regal theatre chain alleged to have limited competitive access to first run motion picture films, (Jul 15, 2015)

By Linda O’Brien, J.D., LL.M.

A major film theater operator has engaged in anticompetitive conduct by coercing 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 of New York City (Cinema Village CInemart, Inc. v. Regal Entertainment Group, July 14, 2015).

Regal Entertainment Group operates motion picture theaters at various locations and is the largest and most geographically diverse theater circuit in the United States. Cinema Village Cinemart is an independent theater operator in Forest Hills, New York.

Consumers, distributors, and exhibitors consider first run films a unique product that is not reasonably interchangeable with other films or other forms of entertainment, Cinema Village alleged. First run films command higher ticket prices and are in greater demand for exhibition in theaters than other films. Even if the price of first run film increased, most consumers would still see first run films rather than other films. Most film distributors have adopted a “wide release” strategy to try to maximize revenue by showing a film on as many screens and in as many theaters as possible, the complaint claimed.

The complaint alleges that, since 2011, Regal began to receive exclusive licenses for the vast majority of first run films. Under these agreements, a film distributor agrees not to license a film to run at any other theater within a certain geographic area or “zone.” Regal used its immense buying power, due to the large number of its theaters, to coerce film distributors to enter into these agreements. Regal allegedly has informed film distributors that, if it is not granted an exclusive license, Regal will retaliate by reducing the number of screens in noncompetitive zones. Since distributors cannot afford to lose access to screens for first run films that cost millions of dollars to produce and market, they allegedly have acceded to Regal’s demands.

As a result of these exclusive agreements and Regal’s threats to distributors, Cinema has been unable to obtain licenses for virtually all first run films from all major film distributors, the lawsuit charged. Although Cinema has repeatedly requested film licenses from major film distributors, often offering favorable financial terms, distributors have refused to entertain the offers.

The complaint also alleges that, although Regal operates a stadium-style, multi-screen theater in Forest Hills, Regal and Cinema are not in substantial competition with each other, since Cinema does not have stadium-style seating, charges substantially less for tickets, and has added a café adjacent to the theater. Despite cosmetic differences, Cinema is comparable to Regal due to its ability to deliver top ticket revenues on first run films.

Regal’s monopoly over first run films allegedly has resulted in higher admission and concession prices paid by consumers and has reduced the number of theaters in the relevant market. Although Cinema has not been driven out of business yet, consumers have only one choice for seeing first run films, the complaint charges.

The plaintiff asserts claims for tortious interference with prospective economic advantage, and violations of Section 1 of the Sherman Act and New York’s Donnelly Act. The action seeks injunctive relief, compensatory, punitive, and treble damages, interest, costs of suit, attorneys’ fees, and any other just and proper relief.

The case is No. 1:15-cv-05488.

Attorneys: Maxwell M. Blecher and Howard K. Alperin (Blecher Collins Pepperman & Joye, P.C.) and Paul F. Condzal for Cinema Village Cinemart, Inc.

Companies: Cinema Village Cinemart, Inc.; Regal Entertainment Group

News: Antitrust NewYorkNews