Antitrust and Pricing in the Motion Picture Industry

Abstract

Since the 1970s, at any given movie theater, one price has been charged for all movies, seven days a week, throughout the year. This Article studies the economic and legal causes that led to the formation of this peculiar phenomenon of uniform pricing for differentiated goods. The Article studies the history of the motion picture industry's pricing systems in their legal, economic, and technological contexts. It shows that, despite intensive antitrust scrutiny and litigation, forces with considerable market power have almost always shaped the industry's pricing systems. Uniform pricing, it is argued, is a consequence of the industry's history, structure, and governing legal rules. In particular, the Article argues that the uniform pricing regime has been maintained by the same forces that have always controlled the market. The Article explores the justifications for the uniform pricing regime and concludes that the vertical restraints that perpetuate this regime are the industry's response to the broad 1948 Paramount prohibitions on vertical restraints. The enforcement of uniform pricing is generally less observable than the enforcement of other forms of vertical restraints and has never been challenged by the government or private parties. More generally, the Article illustrates how inefficient pricing systems may form, evolve, and survive in the shadow of antitrust law, even in a high-profile industry such as the motion picture industry.

Keywords: Antitrust, Pricing, Motion Picture Industry, Behavioral Law & Economics

JEL Classification: D00, D4, K21, L11, L12, L13, L15, L41, L42