How Clearance Agreements are Killing Independent Movie Theaters

clearance agreementsClearance agreements and independent movie theaters

Independent movie theaters may be losing opportunities at the hands of big theater chains, all because of deals known as clearance agreements.

The Department of Justice has begun an investigation into several theater chains in the U.S., and at the heart of the DOJ’s probe are clearance agreements. These are exclusive deals between theaters and distributors that have been around for some time, but may be squeezing small, independent theaters out of business. The concept of clearance agreements is at the center of an antitrust lawsuit against American Multi-Cinema, following claims from Viva Cinemas Theaters that AMC’s exclusivity deals put the Spanish-language theater out of business and is harming the Houston area’s Hispanic population, according to the Hollywood Reporter. However, the Houston theater’s case against AMC is just one example of a practice that could be hurting similar businesses nationwide.

The legality of these clearance agreements

Exclusivity deals themselves are not illegal, Entertainment Weekly explained. However, the way that big chains are using clearance agreements could be disrupting competitive balance and fairness in the marketplace. When a nationwide theater company asks for exclusivity or threatens not to show a film if a smaller competitor is allowed to exhibit it, it could be in breach of antitrust laws.

Smaller theaters have expressed the opinion that these exclusivity deals give national chains too much power, and limit consumer choice. A rise in theater construction has coincided with an increase in clearance requests, according to the Wall Street Journal. The increasing prevalence of these exclusivity deals has escalated attention given to these agreements and whether or not they violate existing antitrust laws.

If you own or work for a small theater that appears to be suffering due to exclusivity granted to larger chains in the area, consult an experienced entertainment attorney for more on the case against these companies and their clearances.

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Anthony R. Caruso is a business transactional attorney in New York and New Jersey with experience in structuring, negotiation and completion of legal deals involving business, entrepreneurs, athletes and performers.

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