In another case of a smaller exhibitor calling foul against one of the country's top theater circuits, Portland, Ore.-based Wallace Theaters and its Hollywood Theaters subsidiary have filed suit again
(The Hollywood Reporter) -- In another case of a smaller exhibitor calling foul against one of the country's top theater circuits, Portland, Ore.-based Wallace Theaters and its Hollywood Theaters subsidiary have filed suit against Carmike Cinemas for antitrust violations regarding Carmike's theaters in Longview, Texas, and Boseman, Mont.
Two lawsuits, filed simultaneously in Texas and Montana, claim that Carmike, the nation's fourth-largest theater chain, is using its circuit power to force studios to grant clearances to the chain's theaters, a process whereby, at Carmike's request, studios give film prints to Carmike and not to the rival theater chain with which it competes in a given area.
According to the claim, because 68% of Carmike's theaters are located in monopoly zones -- zones where they are the only game in town -- Carmike wields significant power over the studios who will be deprived of access to the film-going public if Carmike doesn't play their films. Wallace alleges that Carmike uses its monopoly power to convince distributors to play its theaters in both Longview and Boseman and not at Wallace's theaters.
In Longview, Hollywood has operated a widescreen multiplex, the Hollywood Movies 9, since 1999, while Carmike operates the Carmike Cinemas 10. Hollywood is currently building the North Longview Stadium 14 Cinema, a 14-screen, stadium-style theater, located 1.8 miles from the Carmike 10 and set to be completed by 2006.
According to Scott Wallace, president of Wallace Theaters, a clearance policy was in effect with Hollywood's older theater and Carmike's old theater, which because of their similar configurations was reasonable. However, Wallace says it has received word via Carmike's lawyers that Carmike will not play day-and-date with Wallace's new state-of-the art theater.
"The public doesn't get the benefit of the brand new facility," Wallace said. "Across America, theaters are playing day-and-date, whether they are across the street or a mile apart. We want the same opportunity that the other circuits receive in other markets in similar circumstances."
In Bozeman, Wallace has operated the Wallace Gallatin Cinemas 11 since 2003. The only other multi-screen movie theater is a nonstadium-style theater owned by Carmike called the Campus Square 8. Since the Wallace Gallatin theater was built, Wallace says in its suit that Carmike "has engaged in anticompetitive practice of entering into contracts, combinations and conspiracies with various film distributors with the purpose and effect of excluding other exhibitors from obtaining films on a day-and-date basis in zones in which Carmike faces competition."
Wallace argues, "Fox, Warners and Universal have each told us they will play day-and-date in Longview and we will get a print in Boseman, provided they get an okay from Carmike."
Fox, Warners and Universal all declined comment.
According to one distributor familiar with the set up in Longview, "If Carmike still requests the clearance, I would probably honor it. I would also be willing to play day-and-date, but I don't think it's a crazy clearance. We play them both, but I don't just give one theater product because they have a better theater."
The practice of clearances and the issue of larger theater circuits wielding their power has become a hot topic as of late. Earlier this month the owners of the Palm Desert, Calif., indie theater Cinemas Palme d'Or filed a complaint against large regional player Century Theatres for using its "circuit-wide clout" to sway distributors to book at their theater rather than the smaller indie house.
The practice of clearances is not illegal; however, every theater is supposed to be booked independently of each other under the consent agreements that resulted from antitrust investigations in the 1940s.
According to Wallace's attorney, Thomas Boeder of Seattle-based Perkins Coie, with theatrical exhibition windows getting smaller, distributors need as many screens as possible.
"I think it is beyond argument that distributors need to maximize their number of runs," Boeder said. "What we are seeing with a strong exhibitor like Carmike is they are willing to play day-and-date with themselves, and they will play day-and-date when the other theaters close to them are part of a favored group. The only time they don't play day-and-date is when they have a smaller competitor like Wallace or a poor independent. The reason is that it amounts to the old-fashioned exercise of circuit power, which is an antitrust violation."
Carmike declined comment on the suit.