Interstate Circuit, Inc. v. United States

Supreme Court of the United States · 1939 · Constitutional Law

306 U.S. 208 (1939)

Updated July 20, 2026

Constitutional LawSherman ActAntitrustInterstate CommerceCopyright and AntitrustSherman Act § 1concerted actionconspiracy

Facts

Interstate Circuit and Texas Consolidated operated dominant first-run and subsequent-run motion picture theaters in Texas, and Interstate had a monopoly of first-run theaters in several major Texas cities. O'Donnell, acting for Interstate and Consolidated, sent a letter to eight film distributors demanding that as a condition of Interstate's continued purchase of films for its first-run theaters, distributors require subsequent-run theaters not to charge less than 25 cents for adult evening admission and not to show covered films as part of double features. The distributors, each knowing the proposal had been sent to all the others, substantially unanimously adopted the restrictions in four Texas cities and imposed them on subsequent-run licensees, causing some exhibitors to raise prices and abandon double bills while others lost access to the most popular films. The trial court found that the restrictions increased the income of Interstate and the distributors, diverted attendance from later-run exhibitors, and withheld the best films from low-income patrons.

Issue

Whether the distributors' substantially uniform acceptance and implementation of Interstate's demanded restrictions supported a finding of unlawful concerted action under § 1 of the Sherman Act, even without direct proof of an express agreement. Whether separate contracts between each distributor and Interstate were protected by copyright or instead constituted unreasonable restraints of interstate commerce.

Rule

An unlawful conspiracy under § 1 of the Sherman Act may be established by circumstantial evidence showing that competitors, knowing concerted action is contemplated and invited and that cooperation is essential to a plan whose necessary consequence is an unreasonable restraint of interstate commerce, adhere to and participate in that plan. Copyright ownership does not protect contracts that use copyrighted films as instruments to restrain commerce and suppress competition in order to protect a non-copyright holder's theater monopoly.

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Silver Peak Cinemas operates the only premium first-run theaters in Denver and Colorado Springs. Its manager sends one letter to seven competing film licensors, listing all seven as addressees, stating that Silver Peak will keep paying top license fees only if each licensor requires neighborhood theaters in those cities to charge at least $18 for evening tickets and forbids pairing covered films with any second feature; within weeks, all seven licensors adopt the restrictions in both cities.

If the United States sues under Sherman Act § 1, what is the strongest basis for finding an unlawful conspiracy among the licensors?

Explanation. The majority held that an unlawful conspiracy may be established when competitors accept an invitation to participate in a plan, knowing concerted action is contemplated and invited, knowing cooperation is essential, and then adhere to and participate in the scheme. Direct proof of an express prior agreement is unnecessary in those circumstances.