Theater chains probed over antitrust claims

Smaller rivals say they are being prevented from playing first-run movies at same time.

The Justice Department’s antitrust division has ramped up its probe into whether the nation’s largest theater chains are violating federal law by preventing smaller rivals from playing movies at the same time, two people familiar with the matter said.

Federal investigators have interviewed at least two theater owners who alleged that major chains — Regal, AMC and Cinemark — were using their market clout to prevent them getting first-run movies, said the people, who asked not to be identified because they were not authorized to comment.

The probe centers on a long-standing business practice known as “clearances,” in which theaters seek to ensure that rivals in proximity cannot play new releases at the same time.

The probe, which began last year, has accelerated in recent months. A spokesman for the Justice Department declined to comment.

The use of clearances developed after a landmark Supreme Court decision in 1948 that required studios to divest their ownership in movie theaters. Clearances were initially seen as a way to guarantee that small, independent theaters would gain access to first-run films, enabling the industry to grow rapidly.

But as the industry has increasingly consolidated — about half of all theater screens are owned by four companies — tensions between large chains and independent theater chains have escalated. Because they control so many screens, big chains have more leverage with studios in terms of where and when movies play across their circuits.

The latest flare-up occurred last fall when some independent theater chains openly complained that they were being squeezed out by larger rivals.

Veteran theater industry executive Tom Stephenson, chief executive of Look Cinemas, an upscale 11-screen theater in a suburb of Dallas, alleged that his business was threatened when AMC opened a multiplex nearby and used its leverage to keep Look Cinemas from playing new releases.

“I am pleased that a number of different government bodies are looking into this notion of whether or not clearances make any sense in today’s world,” Stephenson said.

IPic Entertainment, a Boca Raton, Fla., chain that operates 11 luxury theaters, including in Pasadena and Westwood, also contacted the Justice Department.

“Our issue is that three or four large companies are using zones and clearances to preempt competition and they’re doing it so blatantly, even before we sign a lease,” said Hamid Hashemi, chief executive of IPic.

“Several years ago, AMC was the last of the major exhibitors to join in this common practice, a delay which had put us at a competitive disadvantage,” AMC Entertainment Inc. said. “Belated claims made by others about our decision to participate in the request of clearances, while staying silent on the industry practice as a whole, only reaffirms our belief that all exhibitors should play by the same rules.”

Representatives of Regal and Cinemark were not available for comment.