Public Comments and Response of the United States

DEPARTMENT OF JUSTICE

Antitrust Division

Public Comments and Response of the United States

United States of America, State of New York and State of Illinois v.

Sony Corporation of America, LTM Holdings, Inc. d/b/a Loews Theatres,

Cineplex Odeon Corporation, and J.E. Seagram Corp.

Notice is hereby given pursuant to the Antitrust Procedures and

Penalties Act, 15 U.S.C. Sec. 16(b)-(h), that Public Comments and the

Response of the United States have been filed with the United States

District Court for the Southern District of New York in United States

of America, State of New York and State of Illinois v. Sony Corporation

of America, LTM Holdings, Inc. d/b/a Loews Theatres, Cineplex Odeon

Corporation, and J.E. Seagram Corp., Case No. 98-CIV-2716.

On April 16, 1998, plaintiffs United States, State of New York and

State of Illinois filed a Complaint seeking to enjoin a proposed merger

of LTM Holdings, Inc. (``Loews'') and Cineplex are the two largest

exhibitors of first-run films in Manhattan and the City of Chicago. The

Complaint alleged that the proposed merger would substantially lessen

competition and tend to create a monopoly in the theatrical exhibition

of first-run films in both of these markets in violation of Section 7

of the Clayton Act, 15 U.S.C. 18.

Public comment was invited within the statutory 60-day comment

period. Such comments, and the responses thereto, are hereby published

in the Federal Register and filed with the Court. Copies of the

Complaint, Stipulation, proposed Final Judgment, Competitive Impact

Statement, Public Comments and the Response of the United States are

available for inspection in Room 215 of the Antitrust Division,

Department of Justice, 325 7th Street, N.W., Washington, D.C. 20530

(telephone: 202-514-2581) and at the office of the Clerk of the United

States District Court for the Southern District of New York, 500 Pearl

Street, New York, NY 10007.

Copies of any of these materials may be obtained upon request and

payment of a copying fee.

Constance K. Robinson,

Director of Operations, Antitrust Division

Response of the United States to Public Comments

Pursuant to the requirements of the Antitrust Procedures and

Penalties Act, 15 U.S.C. Sec. 16(b)-(h) (the ``Tunney

[[Page 58781]]

Act''), the United States responds to the public comments received

regarding the proposed Final Judgment in this case.

I. Background

Plaintiffs the United States, the State of New York, and the State

of Illinois filed a civil antitrust Complaint on April 16, 1998,

alleging that a proposed merger of LTM Holdings, Inc. (``Loews'') and

Cineplex Odeon Corp. (``Cineplex'') would violate Section 7 of the

Clayton Act, 15 U.S.C. Sec. 18.

At the same time the Complaint was filed, plaintiffs also filed a

proposed settlement that would permit Loews to complete its merger with

Cineplex, but would require divestitures that would preserve

competition in the two markets where the transaction would otherwise

raise significant competitive concerns: Manhattan and Chicago.

The settlement consists of a Stipulation and a proposed Final

Judgment. The proposed Final Judgment orders Loews and Cineplex to

divest 14 theatres in Manhattan and 11 theatres in the Chicago area to

an acquirer or acquirers acceptable to the United States. Unless the

United States grants a time extension, the divestitures must be

completed within one-hundred and eighty calendar days after the filing

of the Complaint or five days after notice of the entry of the Final

Judgment by the Court, whichever is later. The proposed Final Judgment

also requires that, until the divestitures have been accomplished, the

defendants must maintain and operate the theatres to be divested as

active competitors, maintain the management, staffing, sales, and

marketing of the theatres, and maintain the theatres in operable

condition at current capacity configurations. Further, the proposed

Final Judgment requires defendants to give the United States prior

notice regarding any future motion picture theatre acquisitions in

Manhattan or Cook County, Illinois.

A Competitive Impact Statement (``CIS''), explaining the bases for

both the Complaint and the proposed Final Judgment, was filed on April

17, 1998, and subsequently published for comment, along with the

Stipulation and proposed Final Judgment, in the Federal Register on May

6, 1998 (63 FR 25071 through 25080), as required by the Tunney Act.

Notice was also published in the New York Times and the Washington

Post, as required by the Tunney Act. The CIS explains in detail the

proposed merger, the provisions of the proposed Final Judgment, and the

nature and purpose of this proceeding.

The parties have stipulated that the proposed Final Judgment may be

entered after compliance with the Tunney Act. The United States and the

defendants have now, with the exception of publishing the comments and

this response in the Federal Register, completed the procedures the

Tunney Act requires before the proposed Final Judgment can be

entered.\1\

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\1\ The United States will publish the comments and this

response promptly in the Federal Register. It will provide the Court

with a certificate of compliance with the requirements of the Tunney

Act and file a motion for entry of the Final Judgment once

publication takes place.

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The United States received three comments, copies of which are

attached hereto. One comment, from a resident of Manhattan, suggests

that the United States should have required additional theatres be

divested in Manhattan. (See Tab A.)

The second comment, from a labor organization, opposes the

settlement on the grounds that the United States should also have

required divestitures in the Washington, D.C. area. This commenter also

raises a concern about vertical integration as a result of the merger,

noting that Sony Pictures and Universal Studios will have a significant

ownership interest in the merged company. (See Tab B.)

The third comment, from the New York City Human Rights Commission,

takes no position on the merits of the settlement but rather places on

the record the agency's belief that many of the Cineplex Odeon theatres

being divested in Manhattan are not adequately accessible to disabled

individuals and should be brought into compliance with applicable laws

before being sold. (See Tab C.)

This response addresses the antitrust issues that are raised in the

public comments.\2\

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\2\ Because the New York City Civil Rights Commission does not

raise any antitrust issues in its comment, we will not respond

except to state that the United States does not believe that the

approval process should be delayed. The fact that the Commission's

comment is of record should help to assure that the theatres to be

divested are brought into compliance with applicable laws, either by

the present owner or by a new owner. We understand that the

Commission's investigation is ongoing.

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II. Response to Comments

A. The Proposed Divestitures Solve the Anticompetitive Problems Alleged

in the Complaint

The Complaint alleges that Loews and Cineplex are the two largest

exhibitors of first-run films in Manhattan and the City of Chicago.

They compete against each other both to attract movie-goers and to

secure first-run films from distributors.

The Complaint further alleges that movie-goers do not want to

travel far from their homes to attend movies, particularly in urban

areas. Thus, geographic markets for first-run movies are generally

local. From the standpoint of distributors, it is vitally important

that their newly released movies be released in Manhattan and Chicago.

In addition to the large populations in these markets, both cities are

home to influential critics whose review of a movie can substantially

affect the movie's performance nationwide. The Complaint also alleges

that entry into the market for first-run film exhibition in New York

and Chicago is particularly difficult, time-consuming and expensive,

making new entry unlikely to significantly reduce the market strength

of the combined firm.

As previously stated, the proposed Final Judgment requires

substantial divestiture of theatres in both the New York and Chicago

markets. In Manhattan, Loews and Cineplex together account for about

67% of the box office revenues for theatres showing first-run movies.

Under the proposed Final Judgment, Loews and Cineplex have agreed to

divest all but one of the Cineplex first-run theatres being acquired

through the merger. Given that one Cineplex theatre is not being

divested (the Coronet, which has two screens and had about $1.5 million

in box office revenue last year), defendants have agreed to divest the

Loews 34th Street Showplace (which has 3 screens and had over $2

million in box office revenue last year). Thus, defendants have agreed

to divestiture that for all practical purposes restore the status quo

ante. They have agreed to divest 13 Cineplex theatres and one Loews

theatre in Manhattan.

In the city of Chicago, Cineplex and Loews together account for

about 77% of the box office revenues for theatres showing first-run

movies. Without the divestitures, the merger would have resulted in the

leading firm (Cineplex) adding 5 first-run Loews theatres with 26

screens representing about $13 million in box office revenue in 1997.

Under the settlement, Loews and Cineplex will divest 9 theatres with 37

screens in the city, including all of the downtown first-run Cineplex

theatres except the McClurg Court. The theatres they are selling

represent slightly over $13 million in box office revenue in 1997. In

addition to the theatres in the city, defendants have agreed to divest

two suburban theatres close to the city limits: The Old Orchard Quad in

Skokie, just north of the city limits, and the River Run in Lansing,

just south of the city limits. These theatres represent 12 additional

screens and almost $5 million in 1997 box office revenues. In

[[Page 58782]]

total, defendants have agreed to divest 11 theatres in Chicago and its

immediate vicinity, including 8 Cineplex theatres and 3 Loews theatres.

The United States received no public comments questioning the

adequacy of the divestitures in Chicago. The United States received

only one comment from an individual questioning the adequacy of the

divestitures in Manhattan.

B. Response to Comment of Frances J. Elfenbein

Frances J. Elfenbein, a resident of Manhattan, notes that Loews

currently has under construction two large multiplex theatres in

Manhattan. The commenter states that almost as many screens are being

added through this new construction as are being divested, and

concludes that the divestiture of 14 theatres will not be sufficient to

``curb the monopolistic power'' of the company post-merger.

In response, the United States notes that the comment does not

address the sufficiency of the settlement as a remedy to the

anticompetitive effects flowing from the merger. The commenter does not

suggest that, following the required divestitures, the merger with

Cineplex will add to Loews' market share. This is in keeping with the

facts, given that Loews is divesting as much as it is acquiring through

the merger. The commenter does not articulate any other anticompetitive

consequences of the merger.

Section 7 of the Clayton Act prohibits mergers and acquisitions the

effect of which is to substantially lessen competition or tend to

create a monopoly. Section 7 does not prohibit growth through internal

expansion. Such growth generally increases consumer choice and is

procompetitive. (Parenthetically, we note that Loews' decision to

construct these new theatres predates, and was unaffected by, the

merger. Cineplex had no plans to construct new theatres in Manhattan.)

If the United States had filed suit to block the merger under

Section 7, and had prevailed, Loews would still have a high percentage

of the screens in Manhattan and would have been free to continue its

construction of new theatres. Thus, from the perspective of Manhattan

movie-goers, the settlement achieves substantially the same result as a

successful trial on the merits.

As discussed more fully below, the Court's function in analyzing

the proposed Final Judgment ``is not to determine whether the resulting

array of rights and liabilities is one that will best serve society,

but only to confirm that the resulting settlement is within the reaches

of the public interest.'' United States v. Western Elec. Co., 993 F.2d

1572, 1576 (D.C. Cir. 1993) (emphasis in original, internal quotation

and citation omitted). The United States submits that this standard is

easily met with respect to the Manhattan divestitures.

C. Response to Comment of the Hotel Employees and Restaurant Employees

International Union

The Hotel and Restaurant Employees International Union praises the

settlement as serving the interests of movie-going consumers in

Manhattan and Chicago but argues that the United States also should

have required divestitures in the Washington, D.C. area. The Union

expresses the further concern that Sony Pictures' and Universal

Studios' significant ownership interest in Loews Cineplex

Entertainment, the merged company, will harm independent exhibitors and

potentially lead to a loss of choice for consumers. For these reasons,

the Union urges the Court to reject the settlement, and replace it with

a different one.\3\

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\3\ The Union, it should be noted, offers it comments on behalf

of its members as movie-going consumers, not because it represents

employees of Loews or Cineplex.

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As noted below, the critical portion of the Union's comment in

inapposite--in essence, it suggests that the government should have

brought a different case (i.e. a case alleging a Clayton Act violation

in the Washington, D.C. geographic market). Such a criticism is not the

type contemplated in a Tunney Act proceeding. United States v.

Microsoft Corp., 56 F.3d 1448, 1459 (D.C. Cir. 1995).\4\

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\4\ The United States examined the effects of the merger on

competition in the Washington, D.C. area and in Houston. The United

States concluded that there were substantial factual and legal

reasons not to bring a case charging a violation in these geographic

areas. In addition, the United States also considered and determined

not to allege that the change in ownership structure will result in

vertical foreclosre. In any event, the divestitutres in Manhattan

and Chicago will assure that competiting distributors have outlets

for their movies in the markets of concern. Moreover, any future

violation by Sony Pictures or Universal Studios of the Paramount

decrees is not an issue before the Court in this proceeding. These

decrees prevent distributors bound by the decrees from improperly

favoring affiliated circuits. The 1938 Paramount litigation involved

a conspiracy among the eight leading motion picture distributors

who, among other things, used their market power to fix admission

prices for the exhibition of first-run motion pictures in local

theatres. The Paramount decrees which grew out of the litigation

generally require that movies be licensed on a nondiscriminatory

theatre-by-theatre basis. Both Sony Pictures (as a successor to

Columbia Pictures) and Universal Studios are bound by the Paramount

decrees. See United States v. Loew's Inc., 1950-51 Trade Cas. (CCH)

Sec. 62,573 at pp. 63,681-82 (S.D.N.Y. 1050).

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II. The Legal Standard Governing the Court's Public Interest

Determination

Once the United States moves for entry of the proposed Final

Judgment, the Tunney Act directs the Court to determine whether entry

of the proposed Final Judgment ``is in the public interest.'' 15 U.S.C.

Sec. 16(e). In making that determination, ``the court's function is not

to determine whether the resulting array of rights and liabilities is

one that will best serve society, but only to confirm that the

resulting settlement is within the reaches of the public interest.''

United States v. Western Elec. Co., 993 F.2d 1572, 1576 (D.C. Cir.)

cert. denied, 510 U.S. 984 (1993) (emphasis in original, internal

quotation and citation omitted).\5\ The Court should evaluate the

relief set forth in the proposed Final Judgment and should enter the

Judgment if it falls within the government's ``rather broad discretion

to settle with the defendant within the reaches of the public

interest.'' United States v. Microsoft Corp., 56 F.3d 1448, (D.C. Cir.

1995); accord United States v. Associated Milk Producers, Inc., 534

F.2d 113. 117-18 (8th Cir.) cert. denied, 429 U.S. 940 (1976). The

Court is not ``to make de novo determination of facts and issues.''

Western Elec., 993 F.2d at 1577. Rather, ``[t]he balancing of competing

social and political interests affected by a proposed antitrust decree

must be left, in the first instance, to the discretion of the Attorney

General.'' Id. (internal quotation and citation omitted throughout). In

particular, the Court must defer to the United States' assessment of

likely competitive consequences, which it may reject ``only if it has

exceptional confidence that adverse antitrust consequences will

result--perhaps akin to the confidence that would justify a court in

overturning the predictive judgments of an administrative agency.''

Id.\6\

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\5\ The Western Electric decision concerned a consensual

modification of an existing antitrust decree. The Court of Appeals

assumed that the Tunney Act was applicable.

\6\ The Tunney Act does not give a Court authority to impose

different terms upon the parties. See, e.q., United States v.

American Tel. & Tel. Co., 552 F. Supp. 131, 153 n.95 (D.D.C. 1982),

aff'd sub nom. Maryland v. United States, 460 U.S. 1001 (1983)

(Mem); accord, H.R. Rep. No. 1463, 93rd Cong., 2d Sess. 8 (1974). Of

course the Court can condition the entry of a decree to the parties'

agreement to a different bargain, but if the parties do not agree to

such terms, the Court's only choices are to enter the decree the

parties proposed or to leave the parties to litigate.

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The Court may not reject a decree simply ``because a third party

claims it could be better treated.'' Microsoft, 56 F.3d at 1461 n.9.

The Tunney Act does not empower the Court to reject the remedies in the

proposed Final

[[Page 58783]]

Judgment based on the belief that ``other remedies were preferable.''

Id. at 1460. As Judge Green has observed:

If courts acting under the Tunney Act disapproved proposed

consent decrees merely because they did not contain the exact relief

which the courts would have imposed after a finding of liability,

defendants would have no incentive to consent to judgment and this

element of compromise would be destroyed. The consent decree would

thus as a practical matter be eliminated as an antitrust enforcement

tool, despite Congress' directive that it be preserved.

United States v. American Tel. & Tel. Co., 552 F. Supp. 131, 151

(D.D.C. 1982), aff'd sub nom. Maryland v. United States, 460 U.S. 1001

(1983) (Mem.).

Moreover, the entry of a governmental antitrust decree forecloses

no private party from seeking and obtaining appropriate antitrust

remedies. Defendants will remain liable for any illegal acts, and any

private party may challenge such conduct if and when appropriate. The

single issue before the Court here is whether entry of this particular

proposed Final Judgment, agreed to by the parties as settlement of this

case, is in the public interest.

As pointed out above, the Tunney Act does not contemplate judicial

reevaluation of the wisdom of the government's determination of which

violations to allege in the Complaint. The government's decision not to

bring a particular case on the facts and law before it at a particular

time, like any other decision not to prosecute, ``involves a

complicated balancing of a number of factors which are peculiarly

within [the government's] expertise.'' Heckler v. Chaney, 470 U.S. 821,

831 (1985). Thus, the Court should not look beyond the Complaint ``to

evaluate claims that the government did not make and to inquire as to

why they were not made.'' Microsoft, 56 F.3d at 1459 (emphasis in

original).

The government has wide discretion within the reaches of the public

interest to resolve potential litigation. E.g., Western Elec. Co., 993

F.2d at 1577; AT&T, 552 F. Supp. at 151. The Supreme Court has

recognized that a government antitrust consent decree amounts to an

agreement between the parties to settle their disputes and differences,

United States v. ITT Continental Baking Co., 420 U.S. 223, 235-38

(1975), and ``normally embodies a compromise; in exchange for the

saving of cost and elimination of risk, the parties each give up

something they might have won had they proceeded with the litigation,''

United States v. Armour & Co., 402 U.S. 673, 681 (1971). This judgment

has the virtue of bringing the public certain benefits and protection

without the uncertainty and expense of protracted litigation. Armour,

402 U.S. at 681.

III. Conclusion

After careful consideration of these comments, the United States

concludes that entry of the proposed Final Judgment will provide an

effective and appropriate remedy for the antitrust violations alleged

in the Complaint and is in the public interest. In the two important

markets where the merger would have made it more likely that ticket

prices would increase, rental fees paid to distributors would decrease,

and theatre quality would decline (New York and Chicago), the

divestitures will fully restore the status quo ante. The United States

will therefore move the Court to enter the proposed Final Judgment

after the public comments and this response have been published in the

Federal Register, at 15 U.S.C. Sec. 16(d) requires.

Dated: October 14, 1998.

Respectfully submitted,

Allen P. Grunes,

(AG 4775) U.S. Department of Justice, Antitrust Division, 1401 H

Street, N.W.; Suite 4000, Washington, D.C. 20530, (202) 307-0001,

Attorney for Plaintiff the United States.

Certificate of Service

I, Allen P. Grunes, hereby certify that on October 14, 1998, I

caused the foregoing document to be served on defendants by having a

copy mailed, first-class, postage prepaid, to:

Ira S. Sacks, Fried, Frank, Harris, Shriver & Jacobson, One New York

Plaza, New York, NY 10004, (212) 859-8000

Attorney for defendants Sony Corporation of America and LTM Holdings,

Inc.

Alan J. Weinschel, Weil, Gotshal & Manges LLP, 767 Fifth Avenue, New

York, NY 10153, (212) 310-8000

Attorney for defendant Cineplex Odeon Corporation

Kenneth R. Logan, Simpson Thacher & Bartlett, 425 Lexington Avenue, New

York, NY 10017, (212) 455-2000

Attorney for defendant J. E. Seagram Corp.

Allen P. Grunes

Department of Justice

Merger Task Force, Antitrust Division, 1401 H Street, Suite 4000,

Washington, DC 230530,

Attention: Craig W. Conrath, Chief

May 1, 1998.

Dear Mr. Conrath: The proposed final judgment of the United

States District Court in the Southern District of New York requiring

that SONY/LOEWS/CINEPLEX et al (the merged) divest themselves of 14

theaters (36 screens) in Manhattan is no cause for joy.

The court is requiring the divestiture to ensure competition,

prevent price gouging and price fixing, and to encourage fairer

distribution of first-run movies.

Give me a break.

LOEWS is currently building a 13 screen multiplex as part of the

E-Walk development at 8th avenue and 42nd street. It is also in the

process of destroying my residential neighborhood with a 15 screen

multiplex on 2nd avenue between 30th and 32nd streets.

The divestiture will close 14 theaters for a total of 36

screens. The constructions will create 28 screens. The 55 screens

that LOEWS will be left with after divesting will grow to 85 when

the new multiplexes are added. Do you really think the loss of 8

screens is going to curb the monopolistic power the merged entity

will have in the market, I don't. No wonder they were so agreeable.

Cordially,

Frances J. Elfenbein

Comments

The Hotel Employees and Restaurant Employees International Union,

which represents nearly 300,000 individuals, many of whom are avid

moviegoers, first opposed this merger in March 1998 with a letter to

antitrust officials. Shortly thereafter, we met with Justice Department

staff and we spoke to staff of several State Attorneys General,

meanwhile encouraging other interested parties to do the same. Our

opposition to this merger is grounded in our firm belief that the

merger is not in the best interests of American consumers. As we have

stated previously, we do not represent, nor have we recently

represented, workers at the merging entities, Cineplex Odeon and Loews

Theatres.

In our opinion, the proposed settlement between the U.S. Department

of Justice and the merging entities known as Loews Cineplex (hereafter

referred to as ``the company'') serves the interests of moviegoing

consumers in Manhattan and Chicago well. However, on behalf of our

moviegoing members throughout the United States, we remain concerned

that the settlement does not address very high concentration levels in

other markets. In addition, we find the inter-connectedness of leading

movie producers, distributors and exhibitors--which is greatly

increased as a result of this merger--very disturbing.

High Concentration Despite Divestitures

Upon completion of the merger, the company controls about 9% of the

overall film exhibition market in the U.S., and enjoys very high market

share in several crucial urban markets,

[[Page 58784]]

including New York and Chicago (in spite of the divestitures), the

Washington, DC metropolitan area, and Houston, Texas.

In the Maryland suburbs of Washington, DC, Loews Cineplex controls

over 49% of the screens in an already ``highly concentrated'' market.

The increase in the Herfindahl-Hirschmann Index (HHI), a measure of

market concentration, is over 1,056 points--more than 10 times the

increase that the Justice Department deems ``likely to create or

enhance market power or facilitate its exercise.'' \1\

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\1\ Department of Justice and Federal Trade Commission

Horizontal Merger Guidelines. April 2, 1992.

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In the District of Columbia proper, Cineplex Odeon already

controlled over 81% of all movie screens before the merger. And in the

Virginia suburbs of Washington, the company now controls nearly 29% of

all screens, pushing the classification of this market from

``moderately concentrated'' to ``highly concentrated,'' as per

guidelines set by the Justice Department and Federal Trade Commission.

Each of these cases is a glaring example of extreme market

concentration, and each is completely ignored in the proposed

settlement.

Vertical Integration Neglected in Settlement

The issue of vertical integration in the movie industry also

remains unmitigated by the proposed settlement. In an era of increasing

corporate control and homogeneity of entertainment products available

to the American public, this is especially troubling. For example, the

much-hyped recent Sony picture ``Godzilla'' opened on 7,000 screens, or

more than one out of every five movie screens in the U.S.

To refer to movies as mere ``entertainment products'' does not

fully account for their true social value. The industry itself would be

the first to admit that movies occupy a truly mythic place in the

American psyche. Movies have the power to inspire and educate,

entertain and inform. Is it right that control of these cultural

products should be concentrated in the hands of a few giant

corporations? We think not. Yet this merger represents another nail

driven into the coffin of cultural diversity.

This merger could create a real life Godzilla, an enormous beast

which will be virtually unstoppable if it is allowed to be born. Sony

Pictures and Universal Pictures together distributed over 30% of all

commercially released films in North America last year. Together, the

parents of these companies and their affiliates own over 86% of Loews

Cineplex's outstanding stock. Loews Cineplex will have approximately

2,700 screens in 22 states, making it the third largest exhibitor in

the nation.

In addition, issues of vertical integration impact another

criterion for determining whether a merger may be anti-competitive, in

that vertically integrated companies are in a better position to exert

market power against exhibitors through higher rental fees and stricter

payment terms.

Barriers to Entry May Worsen, Preventing New Competition

Vertical integration also could have the effect of raising the

barriers to entry that a potential competitor would face. After all,

size does matter when it comes to leveraging a favorable contract with

a distributor, or negotiating advertising rates in a local newspaper.

Anecdotal evidence in the form of conversations with independent

exhibitors indicates that small, local operations are an endangered

species that are disappearing rapidly. And in the context of such

extreme market concentration, the hope of starting up new theatre is

just a pipe dream.

Barriers to entry are indeed significant in the movie industry. The

trends in new theater construction are towards bigger multiplexes, with

20-30 screens per site, digital sound systems, and more spacious

stadium seating, meaning fewer seats per theater. All of these mean

that in order to compete, a theater must be well-stocked with capital-

intensive amenities. In addition, the trend in film distribution is

towards higher fees, as evidenced by Sony's headline-grabbing demand

for an 80% cut of first-week ``Godzilla'' receipts from exhibitors

(distributors' normal take is 60-70%).

We are attaching an e-mail letter we received in support of our

efforts to block this merger. The writer is the daughter of a recently

deceased independent exhibitor. In the letter, the writer makes the

point that behemoth multinational corporations are not as sensitive to

the needs and concerns of local markets as small independent businesses

can be. Unfortunately, the reality of diminishing competition and

consumer choice is rarely reflected in the narratives that the movie

industry thrusts upon us. This merger, if it is not significantly

altered, is a stark illustration of the fact that in life, Godzilla

often wins.

We would like to commend Justice Department staff for their

willingness to listen to our concerns, and for taking decisive action

in two markets. We strongly recommend that in cases such as this one,

antitrust officials take a pro-active role in educating consumers about

the potential effect of high market concentration on prices and

selection. Since a study of the correlation between prices/selection

and market concentration could easily be based on public information,

it would not be a breach of the confidentiality to which these

officials are pledged. Rather, it would provide consumers the tools and

information needed to fully understand the potential implications of

major corporate mergers.

As consolidation continues in this industry, we believe that the

effects of increasing market concentration will begin to take their

toll on the quality and cost of the consumer's movie going experience.

While the proposed settlement may stave off higher ticket prices and

decreased selection in two cities for the time being, we suspect that

the greater good of American moviegoers has not been fully served.

Therefore, we urge the court to reject the proposed settlement in favor

of one which would impose more extensive divestitures, especially in

the Washington, D.C.-area market, and would address the increasing

problem of vertical integration in the motion picture industry.

Subj: Re: Sony/Cineplex Odeon Merger

Date: 98-04-21 11:17:15 EDT

From: [email protected] (beverly jennison)

To: LN[email protected] (LNegstad)

Dear Mr. Negstad: It would be fine with me if you included my

letter, or any of the information from it. I'm sure that it is an

accurate reflection of what my father would have said, and I know

that he would have wanted to weigh in on this issue.

Thank you for your interest in the movie industry.

Beverly Petersen Jennison,

Silver Spring, Md.

Subj: Sony/Cineplex Odeon Merger

Date: 98-04-20 11:32:36 EDT

From: [email protected] (beverly jennison)

To: L[email protected]

Mr. Negstad: You recently sent a letter to my father, Paul

Petersen, of the Clairidge Triple Cinema in Montclair N.J. regarding

the proposed Sony/Cineplex merger. My father passed away in late

March, but because he was such a strong advocate of independent

theatre exhibitors, my mother asked that I send you a short reply to

your letter. My father worked over 50 years in the movie industry,

and for much of that time, he was an independent exhibitor. (His

other experience involved working for independents and for small

local chains.) He very much objected to the merger of large

organizations, because they essentially forced out the little

operators. In fact, as President of the National Association of

Theatre Owners (N.J.), he worked very hard to ensure

[[Page 58785]]

that distributors of pictures would recognize the independents, and

funnel top films their way. At one point in his career, he sued

several of the large distributors because they refused to exhibit in

independent theatres, seeking out the chains instead. That matter

was settled prior to the trial with the large distributors, afraid

of the antitrust noises that my father was making, settling with him

so that the independents would get access to the top films.

Unfortunately, the belief that my father had that independent

exhibitors would be more receptive to the public sentiment in their

communities is not shared by the larger chains. My father, and

others like him, felt that their businesses were a part of the

community, and that they not only had to be responsive in what they

showed, but they had to be responsible to the community for the

content of the pictures. In addition, my father and other

independents have closer ties to the community, and always tried to

provide support in the community for fundraisers, etc. The big

chains simply do not do this.

I saw in the Washington Post over the weekend that the merger

had been okayed by the Justice Department, and so I guess that it's

too late to do much else about this particular merger. However, I

felt that I should respond to your letter on my father's behalf, as

I am sure he would have if he were still alive. Good luck to you in

your endeavors.

Beverly Petersen Jennison,

13408 Bingham Court, Silver Spring, Md. 20906, [email protected], 301-

871-7949.

June 12, 1998.

Allen P. Grunes,

United States Department of Justice, Anti-Trust Division, 1401 H

Street, N.W., Suite 4000, Washington, D.C. 20530

Re: United States of America et al v. Sony Corporation et al 98 Civ.

2716

Dear Mr. Grunes: The New York City Commission on Human Rights

(``Commission'') is the principal local civil rights law enforcement

agency in New York City committed to ensuring that people with

disabilities have access to and enjoy the facilities of New York

City's movie theaters. The Commission has an interest in insuring

that all theaters in New York City--including those covered by the

above Final Judgement and Consent Decree--are accessible to disabled

persons. We submit these comments accordingly and for the record.

Under New York City's Human Rights law, owners and operators of

places of public accommodation may not ``refuse, withhold from or

deny'' to a disabled person ``any of the accommodations, advantages,

facilities or privileges thereof.'' \1\ ``Reasonable Accommodation''

to the needs of persons with disabilities is required to be made

when such accommodation ``shall not cause undue hardship in the

covered entity's business.'' (Administrative Code, Title 8, Chapter

1, Secs. 8-107.4(a), 8-107.15(a), 8-102.18).

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\1\ It shall be an unlawful discriminary practice for any

person, being the owner, lessee, proprietor, manager,

superintendent, agent or employee of any place or provider of public

accommodation because of the . . . disability . . . of any person

directly or indirectly, to refuse, withhold from or deny to such

person any of the accommodations, advantages, facilities or

privileges thereof. . . . [New York City Human Rights Law,

Administrative Code, Title 8, Chapter 1, Sec. 8-107.4(a)].

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In the past few years, the Commission has received complaints

about inaccessible movie theaters. Most of these theaters are in

Manhattan and most were owned and operated by Cineplex Odeon. In

response to these complaints, we initiated an informal survey of

Cineplex Odeon's movie theaters in Manhattan to ascertain whether

the theaters were in compliance with the local and federal laws.\2\

In November 1996, we contacted Cineplex Odeon and informed them

about the complaints.\3\

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\2\ In New York City, theaters must comply with the federal

ADAAG Standards and the Local Law 58 of the New York City Building

Code. Local Law Number 58 of 1987 was enacted to amend New York

City's Administrative Code in relation to providing facilities for

people having physical disabilities. (Administrative Code, Title 27,

Chapter 1, Sec. 27-123.1 et seq.). Incorporated into the New York

City Building Code, Local Law 58's provisions apply to buildings

constructed, altered or changed in occupancy or use since September

1, 1987. Where there are differences between ADAAG and ANSI, the

Commission will adopt the stricter of the two standards. ANSI

generally requires a greater number of wheelchair spaces and

dispersal of those spaces for all auditoriums, regardless of

capacity.

\3\ We have since been working with attorneys from the

Department of Justice (United States Attorney's Office, Southern

District of New York) in an effort to co-ordinate federal and local

law enforcement efforts regarding movie theater companies in New

York City.

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In December 1996, the New York City Council published a study

which confirmed that many of the city's existing movie theaters were

not accessible to the disabled.\4\ It was apparent to us that this

was an industry-wide issue. We subsequently contacted all the major

movie theater companies operating in New York City, including Sony

Loews.

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\4\ See Admit Some: An Examination of Movie Theater

Accessibility in New York City for Persons Who Are Disabled, a

report and survey published by the Council of the City of New York,

Committee on Consumer Affairs in co-operation with students from

Columbia University's School of International and Public Affairs/

Graduate Program in Public Policy and Administration (December

1996).

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As a result of the recent merger between Cineplex Odeon and Sony

Loews, we are aware that the newly formed corporation--Loews

Cineplex--must divest itself of most of the former Cineplex Odeon

Theaters in Manhattan. The theaters being divested are all sites for

first-run movies in Manhattan. Moviegoers, as mentioned in the

federal complaint, ``do not want to travel far from their homes to

attend a movie, particularly in urban areas.'' Moreover, moviegoers

expect to view first-run movies in top quality facilities. Disabled

moviegoers are no exception. However, we believe that these theaters

are not in full compliance with all applicable codes. The

accessibility issues include, but are not limited to, the following:

1. Inadequate number of wheelchair seats;

2. Inadequate number of companion seats;

3. Inadequate or improper wheelchair seat dispersal;

4. Barriers to access (no ramps, lifts, elevators);

5. Excessive door pressure;

6. Inaccessible or improperly designed bathrooms;

7. Inaccessible or improperly designed service counters;

8. Inaccessible or improperly designed amenities (e.g. public

telephones, drinking fountains, etc.);

9. Lack of hand rails;

10. Improperly designed ticket counters.

We understand there is a time frame during which Loews Cineplex

is to divest itself of most of the Manhattan theaters previously

owned by Cineplex Odeon. We recommend that prior to the sale of

these theaters to a third party, Loews Cineplex be required to

allocate the necessary resources to bring the theaters into full

compliance with the applicable local and federal codes and civil

rights laws. It would be an unfortunate and unintended effect of the

above consent decree if these theaters--which as a group are highly

visible first-run theaters--are not given the priority and attention

they deserve.

Very truly yours,

Randolph Wills,

Deputy Commissioner, Law Enforcement Bureau.

By:

Rockwell J. Chin,

Supervising Attorney, Law Enforcement Bureau, (212) 306-7455 (tel),

(212) 306-7514 (fax).

[FR Doc. 98-29223 Filed 10-30-98; 8:45 am]

BILLING CODE 4410-11-M