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From Antitrust Law Daily, August 17, 2016

Theater operator AMC unable to shake antitrust claims over film restrictions

By Jeffrey May, J.D.

Claims that AMC Entertainment Holding, Inc. violated the antitrust laws by threatening Hollywood studios not to supply a small Houston theater with first-run Spanish language films during their initial three-week run were not dismissed for failure to allege a relevant market. The federal district court in Houston has ruled that Viva Cinema, the operator of "an eight-screen movie/dinner theater with a Latin flair," adequately alleged that first-run Spanish language films constituted a proper submarket. Viva also adequately alleged a relevant geographic market that included an "overlap zone" of areas that drew movie goers to Viva’s theater and a nearby AMC outlet (Viva Cinema Theaters and Entertainment LLC v. AMC Entertainment Holding, Inc., August 16, 2016, Bennett, A.).

According to Viva, AMC—the country’s second-largest theater operator—threatened major Hollywood studios that it would not show any first run film if a distributor licensed that first run film in Spanish to Viva during its initial run. AMC allegedly made these threats even though it infrequently showed some films in Spanish or with Spanish subtitles. After Disney released "Planes" to Viva during the film’s initial opening, AMC purportedly made good on its threat and did not show the film at its Houston location closest to Viva. With the exception of "Planes," over a six-month period, Viva was allegedly unable to license any first-run Spanish language film during any film’s initial three-week run.

Product market. Viva put forward two proposed product markets: (1) first-run films and (2) first-run Spanish language films. The court accepted Viva’s alleged submarket limited to first-run Spanish language films, despite AMC’s challenge. AMC suggested that because there was a substantial overlap of persons who could see both Spanish language films as well as films in English, first-run Spanish language films was not an appropriate submarket. Viva conceded that a large portion of its customer base was not Spanish speaking only; however, that concession did not preclude "substantial overlap in targeted customers" for the relevant market designation, according to the court. Moreover, in light of the allegation that seven percent of Houston’s population spoke only Spanish, the court was not convinced that a submarket could be based on seven percent of a city’s population that could not observe a movie without dubbing or subtitles.

Geographic market. "Viva went to great lengths to set out two proposed geographic markets," according to the court. The first proposed geographic market was the City of Houston. The second proposed market was a section of the city comprised of an overlap zone. This area was defined as the Viva zone and the AMC zone. Viva offered sufficient detail of the overlap zone, including the Viva zone, which was equivalent to an area of Houston that had a high percentage of residents who only spoke Spanish, and the nearby AMC zone, to meet its initial burden of alleging a geographic market.

The case is No. 4:15-cv-01015.

Attorneys: Michael A. Hawash (Hawash Meade Gaston Neese & Cicack LLP) for Viva Cinemas Theaters and Entertainment LLC. Darryl Wade Anderson (Norton Rose Fulbright LLP) for American Multi-Cinema, Inc.

Companies: Viva Cinemas Theaters and Entertainment LLC; AMC Entertainment Holdings, Inc.; AMC Entertainment Inc.; American Multi-Cinema, Inc.

MainStory: TopStory Antitrust TexasNews

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