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 be illegal."

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 the law.

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.