Justice Department ramps up its investigation of theater chains

In the latest step in an ongoing probe of the three largest movie theater chains, AMC Entertainment responded today to a demand for documents relating to a Department of Justice inquiry. The investigation concerns the practice of clearances, in which the major theater chains are alleged to have used their largesse to stymie smaller and independent theater owners from screening studio blockbusters. In addition to AMC, which has 5,128 screens to its name, mostly in North America, the investigation is also looking at the practices of industry giants Regal Entertainment Group (7,334 screens) and Cinemark (4,498 screens).

Clearances, or exclusive deals between the distributors and theater owners, are as old as motion pictures themselves—and not on their face illegal. The issue here is whether the big chains’ demands for exclusivity violated antitrust laws that exist to guarantee a fair and competitive economic marketplace. If a theater chain agreed to exhibit a movie—or threatened not to—on the condition that a smaller chain be barred from releasing it, that could constitute a breach, according to the law.

One related case made news earlier this year when the Houston-based Viva Cinema filed suit on April 20 against AMC Entertainment. Viva claimed that the megachain coerced distributors into not licensing their films, thus resulting in the indie theater’s closure after only seven months. Viva, a specialty chain for the Spanish-speaking market in Texas, also asserted that AMC showed Spanish films while in competition with Viva, but not after the smaller chain went out of business.

In response to the lawsuit by Viva, an AMC spokesperson said in a statement, “Allocated film zones are a long standing, well known and legal practice within the movie exhibition industry, and are determined on a case by case, zone by zone basis by individual studios, without consideration of the size of the exhibition companies. Viva Cinema clearly, and we assume knowingly, entered into an allocated film zone by opening a first-run location in close proximity to AMC.”

On Monday, AMC was the first of the big three chains to reveal in a regulatory filing that the Justice Department has requested company documents as it pursues the potential anticompetitive conduct. In a statement, AMC said, “We do not believe the company has violated federal or state antitrust laws and are cooperating with the relevant governmental authorities. However, we cannot predict the ultimate scope, duration or outcome of these investigations.”

Stay tuned for more on the case and what it might mean for how we go to the movies. The Department of Justice expects its investigation to last from six months to a year.