Recent from talks
FTC v. Motion Picture Advertising Service Co.
Knowledge base stats:
Talk channels stats:
Members stats:
FTC v. Motion Picture Advertising Service Co.
FTC v. Motion Picture Advertising Service Co., 344 U.S. 392 (1953), (the MPAS case) was a 1953 decision of the United States Supreme Court in which the Court held that, where exclusive output contracts used by one company "and the three other major companies have foreclosed to competitors 75 percent of all available outlets for this business throughout the United States" the practice is "a device which has sewed up a market so tightly for the benefit of a few [that it] falls within the prohibitions of the Sherman Act, and is therefore an 'unfair method of competition' " under § 5 of the FTC Act. In so ruling, the Court extended the analysis under § 3 of the Clayton Act of requirements contracts that it made in the Standard Stations case to output contracts brought under the Sherman or FTC Acts.
The FTC brought an administrative proceeding against Motion Picture Advertising Service, asserting that its extensive exclusive dealing arrangements (of duration of from one to five years) with motion picture theaters foreclosed others from dealing with those theaters, and was therefore an unfair method of competition in violation of § 5 of the FTC Act. (The FTC could not have brought the case under § 3 of the Clayton Act, as the Standard Stations case had been brought, because of the narrow and specific language of the Clayton Act.)
MPAS's business is to enter into contracts with sellers of goods and services to produce short advertising motion picture films (so-called trailer ads) which depict and describe commodities offered for sale by these companies and then screen the films in the theaters with which it has contracts. (MPAS pays the theaters to make their customers watch the advertisements.) MPAS and three other companies in the same business (against which the FTC also brought proceedings) together had exclusive arrangements for advertising films with approximately three-fourths of the total number of theaters in the United States which display advertising films for compensation.
The FTC found that MPAS's exclusive contracts limited the outlets for films of competitors and forced some competitors out of business because of their inability to obtain outlets for their advertising films. The FTC then entered a cease and desist order prohibiting MPAS from entering into or continuing in effect any such contract that grants an exclusive privilege for more than a year.
MPAS appealed to the United States Court of Appeals for the Fifth Circuit, which reversed the FTC's order. It said that "we . . . have decided the case on its merits" and held that the challenged practice "was not unfair or unreasonable, but was rendered desirable and necessary by good-business acumen and ordinarily prudent management."
In a 7–2 decision written for the Court by Justice Douglas, the judgment of the Fifth Circuit was reversed and the order of the FTC was reinstated.
The Court began by pointing to Congress's intent to leave the concept of unfair competition "flexible" and "to be defined [by the FTC] with particularity by the myriad of cases from the field of business," and thus to let the FTC " supplement and bolster" the antitrust laws. Here, the FTC found that MPAS's "exclusive contracts unreasonably restrain competition and tend to monopoly." The market, as seen by the FTC, supported by substantial evidence, was highly constrained:
This is not a situation where, by the nature of the market, there is room for newcomers, irrespective of the existing restrictive practices. The number of outlets for the films is quite limited. And, due to the exclusive contracts, respondent and the three other major companies have foreclosed to competitors 75 percent of all available outlets for this business throughout the United States. It is, we think, plain from the Commission's findings that a device which has sewed up a market so tightly for the benefit of a few falls within the prohibitions of the Sherman Act, and is therefore an "unfair method of competition" within the meaning of § 5.
Hub AI
FTC v. Motion Picture Advertising Service Co. AI simulator
(@FTC v. Motion Picture Advertising Service Co._simulator)
FTC v. Motion Picture Advertising Service Co.
FTC v. Motion Picture Advertising Service Co., 344 U.S. 392 (1953), (the MPAS case) was a 1953 decision of the United States Supreme Court in which the Court held that, where exclusive output contracts used by one company "and the three other major companies have foreclosed to competitors 75 percent of all available outlets for this business throughout the United States" the practice is "a device which has sewed up a market so tightly for the benefit of a few [that it] falls within the prohibitions of the Sherman Act, and is therefore an 'unfair method of competition' " under § 5 of the FTC Act. In so ruling, the Court extended the analysis under § 3 of the Clayton Act of requirements contracts that it made in the Standard Stations case to output contracts brought under the Sherman or FTC Acts.
The FTC brought an administrative proceeding against Motion Picture Advertising Service, asserting that its extensive exclusive dealing arrangements (of duration of from one to five years) with motion picture theaters foreclosed others from dealing with those theaters, and was therefore an unfair method of competition in violation of § 5 of the FTC Act. (The FTC could not have brought the case under § 3 of the Clayton Act, as the Standard Stations case had been brought, because of the narrow and specific language of the Clayton Act.)
MPAS's business is to enter into contracts with sellers of goods and services to produce short advertising motion picture films (so-called trailer ads) which depict and describe commodities offered for sale by these companies and then screen the films in the theaters with which it has contracts. (MPAS pays the theaters to make their customers watch the advertisements.) MPAS and three other companies in the same business (against which the FTC also brought proceedings) together had exclusive arrangements for advertising films with approximately three-fourths of the total number of theaters in the United States which display advertising films for compensation.
The FTC found that MPAS's exclusive contracts limited the outlets for films of competitors and forced some competitors out of business because of their inability to obtain outlets for their advertising films. The FTC then entered a cease and desist order prohibiting MPAS from entering into or continuing in effect any such contract that grants an exclusive privilege for more than a year.
MPAS appealed to the United States Court of Appeals for the Fifth Circuit, which reversed the FTC's order. It said that "we . . . have decided the case on its merits" and held that the challenged practice "was not unfair or unreasonable, but was rendered desirable and necessary by good-business acumen and ordinarily prudent management."
In a 7–2 decision written for the Court by Justice Douglas, the judgment of the Fifth Circuit was reversed and the order of the FTC was reinstated.
The Court began by pointing to Congress's intent to leave the concept of unfair competition "flexible" and "to be defined [by the FTC] with particularity by the myriad of cases from the field of business," and thus to let the FTC " supplement and bolster" the antitrust laws. Here, the FTC found that MPAS's "exclusive contracts unreasonably restrain competition and tend to monopoly." The market, as seen by the FTC, supported by substantial evidence, was highly constrained:
This is not a situation where, by the nature of the market, there is room for newcomers, irrespective of the existing restrictive practices. The number of outlets for the films is quite limited. And, due to the exclusive contracts, respondent and the three other major companies have foreclosed to competitors 75 percent of all available outlets for this business throughout the United States. It is, we think, plain from the Commission's findings that a device which has sewed up a market so tightly for the benefit of a few falls within the prohibitions of the Sherman Act, and is therefore an "unfair method of competition" within the meaning of § 5.