The New York Times reported (October 11,2002) that
Harvey Weinstein, the Chairman of Miramax Films and
Jeffrey Katzenberg, the co-founder of Dreamworks SKG,
resolved their conflict over Gangs of New York
(Miramax) and Catch Me If You Can (Dreamworks)
over waffles at a friendly breakfast meeting. The problem
was that both films starred the same actor, Leonardo
DiCaprio, and were scheduled to open on the same day,
Christmas. Katzenberg described it as "an uncomfortable
situation" since both companies had a "big investment"
in their DiCaprio films. After "eating waffles" together
and discussing it, Weinstein canceled the scheduled
December 25th opening of Gangs of New York, conceding
an undivided DiCaprio audience to Dreamworks.
Is an arrangement that denies theaters a competing
product on the same release date a violation of the
Sherman Anti-Trust Act?
Yes, a combination by film distributors to restrain
competition among theaters by denying them access to
potentially competing films would be at odds with provision
of the Sherman Act of 1890 that states "Every contract,
combination in the form of trust or otherwise, or conspiracy,
in restraint of trade or commerce ... is declared to
The act was applied to film distribution in the 1948
Supreme Court decision, US
vs Paramount Pictures. The Court specifically
addressed practices such as "clearances," through which
distributors denied some theaters films that would divide
their potential audience during the same releasing periods
and declared those practices to be illegal. So agreements
by rival distributors to deny theaters products with
which they could compete for audience presumably violates
Two executives, Harvey Weinstein of Miramax and Jeffrey
Katzenberg of Dreamworks, met and came to an "understanding"
about restricting competition on two of their films
in October 2002, if the New York Times account is of
that meeting is accurate. Katzenberg said, according
to the Times, the understanding was "based more on economics
than breakfast food and bonding." The Times quoted Katzenberg
as saying that he and Weinstein "had many conversations
about why releasing the movies on the same day was in
none of our interests." That interest, Katzenberg further
explained, was financial: "both companies have a big
investment in Leo DiCaprio." Following this meeting,
Miramax withdrew Gangs of New York, starring
DiCaprio, from the Christmas slot which otherwise might
have allowed theaters to compete for the DiCaprio audience
going to see Dreamworks film Catch Me If You Can
(which also starred DiCaprio.) Katzenberg did not specify
what, if any, accommodation Weinstein received at the
breakfast meeting— other than "waffles."
Katzenberg's reasoning may be correct that allowing
theaters to divide the audience by showing two competing
films over Christmas week would be detrimental to the
business of both distributors. But it is hardly mitigating.
Most, if not all combinations in restraint of trade,
have the same objective: improving their chances of
making more money. The Sherman Act attempts to defeat
this incentive by specifying: "Every person who shall
make any contract or engage in any combination or conspiracy
hereby declared to be illegal shall be deemed guilty
of a felony."
The Courts in recent years have become less stringent,
however. Aside from blatant price fixing, which remains
a violation per se, the government needs to demonstrate
not only that competitors colluded, but that their that
their agreements resulted in diminished competition.
This burden might be difficult, if not impossible, to
establish since it would require first proving Leonardo
Dicaprio had enough committed fans to make a material
difference to popcorn sales.