DOJ to 'Terminate' Paramount Consent Decrees

A new Terminator sequel is in the works. But this one is being produced by the Justice Department.

In a move that could change the video and movie distribution landscape, the Justice Department is planning to eliminate the Paramount consent decrees. Those decrees date from the 1940s and prevent studios from owning their own theaters and from block booking (forcing theaters to accept several films from the same studio in a block) and some other practices, which will still be subject to antitrust laws, just not the decrees.

"[T]he Antitrust Division will be asking the court to terminate the Paramount consent decrees, except for a two-year sunset period on the bans on block booking and circuit dealing," antitrust chief Makan Delrahim told the American Bar Association in a speech Monday (Nov. 18). "The sunset period will allow the defendants and movie theatres a period of transition to adjust to any licensing proposals that seek to change the theatre-by-theatre and film-by-film licensing structure currently mandated by the decrees."

Delrahim made it clear the move was to meet a changing content distribution environment.

"Antitrust enforcers were not cast to decide in perpetuity what’s in and what’s out with respect to innovation in an industry," he said. "With new streaming businesses and new business models, it is our hope that the termination of the Paramount decrees clears the way for consumer-friendly innovation."

It could be a potential boon, or even game changer, for video streaming and competition to traditional movie distribution.

When the decrees go away, a Netflix or Amazon could buy theaters and potentially give their subs the option for an in-theater experience for some of their streamed fare, perhaps as a subscription series for high-profile Amazon or Netflix originals as an add-on to the basic sub fee, or on an ad hoc basis for an additional per-screening fee.

Open Markets saw that prospect as a potential for more anticompetitive conduct by edge player giants.

"The Justice Department’s decision to lift the 1948 rules governing America's movie and theater markets gives giant corporations like Amazon and Netflix license to buy up theater chains and use them to choke rival studios off from the market," said OM executive director Barry Lynn. "The original 'Paramount' consent decree for decades ensured an open and competitive market for films and documentaries, in ways that promoted the vibrancy of American arts and American democracy. The DOJ's decision, coming atop its approval of Disney's purchase of Fox, has created a market structure that serves only the biggest of the big and will stifle creativity, entrepreneurship, and free expression.

"This decision also proves that Assistant Attorney General for Antitrust Makan Delrahim grossly misled the American people when he said he would engage in principle-based enforcement of America's antimonopoly laws, including a tougher opposition to vertical integration by dominant platforms and network monopolies," it said.

But in his speech, Delrahim said this did not mean open season for anticompetitive conduct.

"To be clear, terminating the Paramount decrees does not mean that the practices addressed in them are now considered per se lawful under the antitrust laws," he said. "They are not insulated from antitrust scrutiny. Rather, consistent with modern antitrust law, the Division will review the vertical practices initially prohibited by the Paramount decrees using the rule of reason. If credible evidence shows a practice harms consumer welfare, antitrust enforcers remain ready to act."

That is the same argument the FCC made for eliminating the net neutrality rules, which was that anticompetitive conduct would still be subject to DOJ and Federal Trade Commission enforcement. 

John Eggerton

Contributing editor John Eggerton has been an editor and/or writer on media regulation, legislation and policy for over four decades, including covering the FCC, FTC, Congress, the major media trade associations, and the federal courts. In addition to Multichannel News and Broadcasting + Cable, his work has appeared in Radio World, TV Technology, TV Fax, This Week in Consumer Electronics, Variety and the Encyclopedia Britannica.