Theatre Enterprises, Inc. v. Paramount Film Distributing Corp.
346 US 537, 1954 U.S. LEXIS 2752, 98 L. Ed. 2d 273 (1954)
Premium Feature
Subscribe to Lexplug to listen to the Case Podcast.
Rule of Law:
Proof of parallel business behavior, or 'conscious parallelism,' is admissible as circumstantial evidence of an illegal conspiracy, but it does not, by itself, conclusively establish an agreement in violation of the Sherman Antitrust Act.
Facts:
- Theatre Enterprises, Inc. owned and operated the Crest Theatre, a modern suburban movie theater located approximately six miles from downtown Baltimore.
- Before and after the theatre's opening in 1949, Theatre Enterprises repeatedly approached each respondent, a group of major motion picture distributors, to obtain licenses for first-run films.
- Each distributor individually declined Theatre Enterprises' requests.
- All distributors adhered to an established, uniform policy of restricting first-run film exhibitions to eight theaters located in downtown Baltimore.
- The distributors provided similar, independent business justifications for their refusals, citing the Crest's suburban location, smaller drawing area, and the superior promotional opportunities and revenue potential of the downtown theaters.
Procedural Posture:
- Theatre Enterprises, Inc. sued Paramount Film Distributing Corp. and other distributors in federal district court (the trial court of first instance).
- The case was tried before a jury, which returned a general verdict for the respondents (distributors).
- The trial court entered a judgment based on the jury's verdict.
- Theatre Enterprises, Inc., as appellant, appealed to the U.S. Court of Appeals for the Fourth Circuit.
- The Court of Appeals affirmed the judgment of the district court.
- The U.S. Supreme Court granted petitioner's writ of certiorari to review the appellate court's decision.
Premium Content
Subscribe to Lexplug to view the complete brief
You're viewing a preview with Rule of Law, Facts, and Procedural Posture
Issue:
Does evidence that business competitors engaged in consciously parallel behavior, without more, conclusively establish the existence of an illegal agreement or conspiracy in restraint of trade under the Sherman Act?
Opinions:
Majority - Mr. Justice Clark
No. Proof of parallel business behavior among competitors is not sufficient, on its own, to conclusively establish an illegal agreement under the Sherman Act. The court reasoned that while 'conscious parallelism' is admissible circumstantial evidence from which a fact-finder may infer an agreement, it does not replace the requirement of proving an actual conspiracy. The Sherman Act is not violated if a business's action, though similar to that of its competitors, stems from independent business judgment rather than a tacit or express agreement. In this case, the distributors presented evidence of legitimate, individual business reasons for refusing to grant the Crest Theatre first-run licenses, which created a factual issue for the jury to resolve. The jury was entitled to find that the distributors' uniform conduct was the result of independent decisions motivated by a desire for maximum revenue, rather than a conspiracy.
Dissenting - Mr. Justice Black
Yes. While not a full opinion, Justice Black indicated he would reverse. He believed the trial judge's jury instructions regarding the plaintiff's burden of proof diminished the value of the prior Paramount decrees as prima facie evidence. In his view, the instructions deprived the petitioner of a significant benefit that Section 5 of the Clayton Act was intended to provide to private antitrust plaintiffs.
Analysis:
This landmark decision establishes the 'conscious parallelism' doctrine in antitrust law. It clarifies that merely uniform conduct by competitors is not a per se violation of the Sherman Act. The ruling prevents the condemnation of rational, independent business decisions that happen to align with those of competitors. Consequently, plaintiffs in future antitrust cases based on circumstantial evidence must present more than just parallel conduct; they need to introduce additional evidence, known as 'plus factors,' that tends to exclude the possibility of independent action and supports an inference of an actual conspiratorial agreement. This case sets a higher evidentiary bar for plaintiffs alleging collusion based on parallel behavior.
