U.S. Supreme Court decides Paramount antitrust case - May 03, 1948 - HISTORY.com

On this day in 1948, the U.S. Supreme Court issues a decision in U.S. v. Paramount Pictures, et al., the government’s long-running antitrust lawsuit against Paramount Pictures and seven other major Hollywood movie studios.

The forerunner of the case was a 1928 antitrust lawsuit brought by the Federal Trade Commission against the Famous Players-Lasky Corporation (the forerunner to Paramount) and nine other major film studios. Declared guilty of violating antitrust law in 1930, the studios were nonetheless able to resume functioning as normal after concluding a controversial deal with the government of President Franklin D. Roosevelt during the Great Depression, under the auspices of the National Industrial Recovery Act. In July 1938, the government reversed its stance toward Hollywood and filed its lawsuit against seven major studios: Paramount, Universal, MGM, Twentieth Century-Fox, Warner Bros., Columbia and RKO.

The government’s case accused the studios of violating the Sherman Antitrust Act in their total control over movie distribution and exhibition. At the time, the seven studios controlled almost all the country’s movie theaters, either through ownership of their own theater chains or through a process known as “block booking,” in which independent theater owners signed contracts with the studios that required them to show a given number (or “block”) of films. In their antitrust case, the government was demanding that the studios end block booking and get rid of either their distribution arms or theaters.

The case first went to trial in federal court in New York in June 1940, but was called off after two weeks when the government and studio attorneys worked out a compromise deal in which the studios would retain their movie theaters but limit block booking. Dissatisfaction with this so-called consent decree led to the formation of the Society of Independent Motion Picture Producers (SIMPP) by some of the leading independent movie producers of the day, including Charlie Chaplin, Walt Disney, Samuel Goldwyn, David O. Selznick, Mary Pickford and Orson Welles. The efforts by independent producers helped get the government’s antitrust case back into court in the fall of 1945. After a New York District Court handed down a guilty ruling (the terms of which nonetheless failed to satisfy the government and the independent producers), both sides submitted appeals that would eventually take the case all the way to the U.S. Supreme Court.

The trial proceeded quickly once it reached the Supreme Court in February 1948. On May 3, the court issued its ruling, which affirmed the earlier verdicts and declared the studios guilty of violating antitrust law. By the terms of the verdict, the studios were made to sign consent decrees that would end the practice of block booking by requiring that all films be sold on an individual basis. They were also required to divest themselves of their own theater chains. With this decision, independent producers could finally begin to compete with the major studios for audiences and actors, marking the beginning of the end for the Hollywood studio system.