United States v. Griffith

In 1934 four companies that operated movie theaters (collectively, the theater companies) (defendants) in Oklahoma, Texas, and New Mexico had theaters in 37 towns. Fifty-one percent of the towns were closed towns, meaning they had no theaters that competed with those owned by the theater companies. In 1939 the theater companies had theaters in 85 towns, 62 percent of which were closed towns. Between 1934 and 1939, the theater companies hired a common agent and collectively entered into agreements with film distributors in closed and open towns to give the theaters operated by the theater companies exclusive first-run privileges for new films. The United States government (plaintiff) alleged that the theater companies violated §§ 1 and 2 of the Sherman Act by leveraging their monopoly power to enter into exclusive-dealing arrangements that eliminated competition among theater operators. The government argued that the theater companies used their monopoly power in the closed towns to convince the film distributors to grant exclusive first-run privileges in open towns or risk losing the theater companies’ business altogether. The district court held that the theater companies did not violate the Sherman Act, reasoning that although the theater companies did enter into the exclusive-dealing arrangements, they had no specific intent to restrain competition. The government appealed.