Terminations of the Paramount Decrees: A Greenlight for Monopolies

In 1948, Hollywood film production was monopolized by five major and three minor studios. That same year, the Supreme Court’s decision in United States v. Paramount Pictures, Inc. produced the Paramount Consent Decrees, an antitrust standard intended to thwart the vertical integration of film studios. The standard forced the sale of movie theaters, which would often exclusively show movies produced by the studios that owned them, and took measures against block booking. Block booking was a practice used by studios who offered theaters a bundle of films, including the most desirable ones, so they had to pay for tens of movies just to show the few they wanted. It otherwise went unnoticed in the larger legal landscape–until two years ago, when it became part of the Department of Justice’s initiative to terminate outdated antitrust judgements, sometimes referred to as “horse and buggy” policies. In August 2020, during the height of the COVID-19 pandemic, New York federal court terminated the Paramount Consent decrees. The federal court’s termination of these decrees suggests the idea that they have little to no effect in regulating the current market despite the recent conglomerations of streaming services. This calls into question the purpose of terminating “legacy” antitrust judgments that seemingly have no present-day ramifications.

“Legacy” antitrust judgments are those without an indicated date of termination and those that have not been terminated by order of a court. In April of 2018, during Donald Trump’s presidency, the Department of Justice (DOJ) announced its reconsideration of many such antitrust judgments, including the Paramount Decrees. Since the Paramount Decrees were a response to problems of the 1930s and 40s, when Hollywood film studios had immense power, the DOJ deemed them worthy of reexamination. The DOJ’s Antitrust Division moved to terminate the decrees immediately, excluding a two-year sunset period regarding the block booking and circuit dealing provisions to provide movie theaters time to adjust to big movie studios’ and streaming services’ newfound power. Circuit dealing allowed studios to release their films in prime areas first for a premium in theaters they had a partnership with and trickle them down to undesirable areas for a lower price. The sunset period was implemented because movie theaters raised their concerns over the termination of the decrees, given their struggling profits due to factors like streaming services and the pandemic. 

The Paramount Decrees are rife with outdated policies. They only pertain to the original eight studios named, and are not applicable to newly powerful studios like Disney +, Netflix, or other streaming services.There was no move to update the decrees to suit modern needs, instead there was a push to terminate them altogether. However, it is often the case that judgments deemed obsolete still have a cultural impact. Amici to the case argued that though the Decrees are specific to the defendants, “the stakes of this deregulatory effort extend beyond the specific Defendants in this case.” The decrees represent the behavior and boundaries expected of studios or any other powerful film production company. Given that the Paramount Decrees still have a social purpose and are not explicitly harmful, the DOJ’s desire to go after antitrust judgments is unnecessary.  

Traditionally, Republican presidencies are correlated with looser regulations regarding antitrust, especially in the past 40 years. This sentiment was heightened under Trump. His administration “only exacerbated the systemic trends of declining competition” and “pushed its ‘aggressive’ deregulatory agenda without any assessment of its anti-competitive impact,” according to a report by the American Antitrust Institute. Given that the two-year sunset period was completed in August, the ramifications of the termination of the Paramount Decrees are now appearing in streaming services. 

Amazon, the leading tech conglomerate overtaking small businesses and big competitors alike, bought Paramount’s global distribution rights and created the Paramount+ channel on Prime Video. Amazon also acquired Metro-Goldwyn-Mayer Studios, Inc., (MGM) this past March, evading the Federal Trade Commission (FTC) despite their “asking questions” about the deal. Under the Decrees, this consolidation by Amazon would have been illegal or at least “highly suspicious,” according to the Cato Institute. Lina Khan, the FTC’s chair, gained prominence for her article criticizing Amazon’s poor relationship with antitrust and is therefore expected to disapprove of this new acquisition. According to Reuters, Amazon was called “enemy number one” of the FTC, but that does not yet mean they will face legal consequences for this deal. 

As of September, Disney hopes to buy out Comcast’s interest in Hulu and merge it with Disney+ by 2024. Additionally, HBO Max and Discovery+ will become a single streaming service in the summer of 2023, under this April’s newly merged “media giant” Warner Bros. Discovery. These overt demonstrations of vertical integration have all emerged after the ending of the Paramount Decrees under Trump despite their supposed antiquatedness. Additionally, the termination of the Decrees bodes poorly for movie theaters. Theaters may now have a lesser social impact than streaming services, but films still need them. For instance, a film’s eligibility for an Oscar requires a qualifying theatrical release. Streaming services and studios like Netflix and Disney already own theaters, and there is a fear that this could potentially reintroduce block booking now that the sunset period is over. This will hurt smaller production companies that make independent films.

The vertical integration of streaming companies immediately after the Paramount Decrees ended undermines the DOJ’s antitrust termination initiative. Despite the antiquated specifics of the decrees, like the exclusion of streaming services, part of their purpose was to set boundaries for film production companies by representing how film production companies should conduct themselves. The Paramount Decrees were a symbol of anti-monopoly sentiments.  Absent this symbol, consequences are now surfacing. Only time will tell what the future of movies looks like, but more profit-ensuring sequels are to be expected.

Edited by: Sofia Matson