Full opinion text
. ORDER GRANTING MOTION FOR PARTIAL SUMMARY JUDGMENT KENYON, District Judge. This suit involves an antitrust challenge to a practice in the licensing of motion pictures known as “split of product agreements” or “splits.” Under these arrangements, which have existed from time to time in various areas throughout the country, the members of the split meet to divide among themselves the upcoming films to be released. Each participating movie theater owner (“exhibitor”) receives, with respect to the film or films allocated to it, what is referred to as a “first right of negotiation” or a “first opportunity to negotiate” with the distributor for the film. The party challenging this practice, Buena Vista Distribution Co., Inc., the principle domestic distributor of films produced by Walt Disney Productions, was originally named as a defendant in this action by plaintiff General Cinema Corp., which is a motion picture exhibitor operating one of the largest chains of theaters in the country. In August, 1978, General Cinema filed suit against Buena Vista, contending that an alleged imposition of minimum film rentals based on a per capita charge for each customer constituted unlawful price-fixing under Section 1 of the Sherman Act, 15 U.S.C. § 1. In September, 1978, Buena Vista answered and filed a counterclaim against General Cinema asserting that the latter’s participation in split agreements also constituted unlawful price-fixing under Section 1 of the Act. Buena Vista seeks injunctive and declaratory relief, as well as treble damages for the splits involving General Cinema which have occurred during and after the four-year statute of limitations period prior to the date of the suit. On May 19,1980, Judge Lawrence Lydick of this court granted Buena Vista’s motion for judgment on the pleadings as to General Cinema’s entire complaint for lack of antitrust standing. General Cinema Corp. v. Buena Vista Distribution Co., No. 78-3284 (C.D.Cal. June 25, 1980). That part of the case is now on appeal in the Ninth Circuit. Id., appeal docketed, No. 80-5851 (9th Cir. Oct. 22, 1981). On the same day, Judge Lydick denied Buena Vista’s further motion for partial summary judgment on its counterclaim. A little less than a year later, Buena Vista renewed its motion for partial summary judgment as to liability based upon a more extensive record and the Supreme Court’s intervening decision in Catalano, Inc. v. Target Sales, Inc., 446 U.S. 643, 100 S.Ct. 1925, 64 L.Ed.2d 580 (1980), in which the Supreme Court reversed a decision by the Ninth Circuit which had held an alleged price-fixing agreement to be subject to the antitrust rule of reason and thus not illegal per se under Section 1 of the Sherman Act. Section 1 proscribes “Every contract, combination ... or conspiracy, in restraint of trade.” However, the Supreme Court has long interpreted the Act to prohibit only those restraints of trade which are “unreasonable.” Two methods or “rules” of antitrust analysis have developed. Under “the prevailing standard of analysis,” the “rule of reason,” the courts weigh the pro- and anticompetitive effects of a challenged restraint to determine if it is “unreasonable.” Continental T.V., Inc. v. GTE Sylvania Inc., 433 U.S. 36, 49-50, 97 S.Ct. 2549, 2557, 53 L.Ed.2d 568 (1977). Certain practices, however, have been held unreasonable per se, and therefore illegal under the “per se rule,” because they facially appea[r] to be one[s] that would always or almost always tend to restrict competition” and have no “redeeming competitive virtues and ... the search for those values is ... almost sure to be in vain.” Broadcast Music, Inc. v. Columbia Broadcasting System, Inc., 441 U.S. 1, 13, 19-20, 99 S.Ct. 1551, 1559, 1562, 60 L.Ed.2d 1 (1979). Once a court has identified “plainly anticompetitive” conduct to be governed by the per se rule, it is foreclosed from undertaking an inquiry into the reasonableness of such conduct. Id. at 8-9, 78 S.Ct. at 519-20. “Price-fixing” is the legal label given to one category of restraints on competition that has long been recognized as within the per se rule of illegality. Id. As the Supreme Court has said, Under the Sherman Act a combination formed for the purpose and with the effect of raising, depressing, fixing, pegging, or stabilizing the price of a commodity in interstate or foreign commerce is illegal per se. Catalano, Inc. v. Target Sales, Inc., supra, 446 U.S. at 647, 100 S.Ct. at 1927; United States v. Socony-Vacuum Oil Co., 310 U.S. 150, 223, 60 S.Ct. 811, 844, 84 L.Ed. 1129 (1940). Buena Vista argues that the split agreements it is challenging should uniformly be declared illegal per se as “price-fixing” because the purpose and effect of all such agreements is to reduce price competition and the terms of licenses paid to distributors for films, and because splits have no redeeming competitive virtues. Pursuant to requests for admission under Fed.R. Civ.P. 36, General Cinema has admitted participating in many splits across the country during the period from September, 1974, until April 1, 1977, when the United States Department of Justice issued a press release stating its intention to challenge splits agreements as per se violations of the Sherman Act. Buena Vista on the present motion seeks a partial summary judgment that all splits in which General Cinema has participated are illegal as a matter of law. It asserts that under the Sherman Act, the licensing of films properly occurs only under competitive conditions, which could take one of the following forms: 1) “competitive bidding,” a formal process by which bids are submitted; 2) “competitive negotiations,” which do not involve actual bids, but offers made by competing exhibitors are treated as firm like bids; or 3) a residual category of negotiations with exhibitors in a competitive environment, without any conspiratorial or practical restraint on the willingness of exhibitors to come forward to negotiate for pictures in which they are interested, or on the distributor’s ability to induce offers by approaching selected exhibitors. General Cinema responds that Buena Vista’s motion for partial summary judgment should be denied because splits are properly evaluated under the rule of reason, not the per se rule applicable to price-fixing. It contends that splits provide only a “minimal” restraint, if any, on price competition, and that they have significant benefits for distributors (and exhibitors) which require analysis under the rule of reason. General Cinema additionally claims that Buena Vista’s “acquiescence,” “consent” and “participation” in splits further establishes that the per se rule is inapplicable, and furthermore that the legality of splits can only be determined on a ease-by-case basis at trial. Buena Vista’s renewed motion was first argued on March 30, 1981. By order of April 3, 1981, the court submitted a series of questions to the litigants. Both submitted two sets of briefs in response, along with extensive evidentiary exhibits. Meanwhile, the court granted leave for two film industry groups to participate as amici curiae, the National Association of Theatre Owners (“NATO”) in support of the exhibitor General Cinema, and eight distributors of motion pictures on behalf of Buena Vista. General Cinema filed its own motion for summary judgment which was denied by the court at a hearing on June 8, 1981. After that date, the parties submitted various additional filings. By order of September 24, 1981, the court submitted a further list of questions to which the parties responded orally at a hearing on September 28, 1981, with the additional submission of lists of relevant citations to the record. After carefully reviewing and analyzing the entire record connected with Buena Vista’s motion for partial summary judgment, the court concludes that it should be granted. The court’s reasons are set forth in this opinion, which shall also serve as its findings of fact and conclusions of law pursuant to Fed.R.Civ.P. 52. The opinion is divided into five parts. First, the court addresses the standards for granting a motion for summary judgment in antitrust cases. In the next two parts, the asserted anticompetitive and procompetitive effects of splits are analyzed under the relevant caselaw. Part IV addresses General Cinema’s contention that distributor participation or consent in splits is material to their legality. Part V concerns General Cinema’s contention that a trial must be held in order to determine the legality of splits on a case-by-case basis. I. SUMMARY JUDGMENT IN ANTITRUST CASES Fed.R.Civ.P. 56(c) states, in relevant part, that “The judgment sought shall be rendered forthwith if the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any, show that there is no genuine issue as to any material fact and that the moving party is entitled to a judgment as a matter of law.” It is well-established that the burden is upon the party seeking the judgment to demonstrate the absence of any genuine issue of material fact and that it is entitled to judgment as a matter of law. In examining the record, the court is required to draw all inferences in the light most favorable to the party opposing the motion. Ron Tonkin Gran Turismo v. Fiat Distributors, Inc., 637 F.2d 1376, 1381 (9th Cir. 1981). However, under Fed.R.Civ.P. 56(e), once the moving party has met its burden of going forward by presenting evidence which, taken by itself, would establish the right to a directed verdict at trial, the motion must be granted unless the opposing party introduces “significant probative evidence tending to support his or her theory.” Thi-Hawaii, Inc. v. First Commerce Financial Corp., 627 F.2d 991, 993-94 (9th Cir. 1980). Rule 56(e) directs that a party opposing a motion for summary judgment “may not rest upon the mere allegations or denials of his pleading, but his response, by affidavits or as otherwise provided in this rule, must set forth specific facts showing that there is a genuine issue for trial.” If the opposing party does not so respond, the Rule states that “summary judgment, if appropriate, shall be entered against him.” The Ninth Circuit has “often noted that summary judgment is not particularly favored in antitrust litigation.” Fiat Distributors, supra, 637 F.2d at 1381. In a frequently cited passage, the Supreme Court in Poller v. Columbia Broadcasting System, Inc., 368 U.S. 464, 473, 82 S.Ct. 486, 491, 7 L.Ed.2d 458 (1962), stated: “We believe that summary procedures should be used sparingly in complex antitrust litigation where motive and intent play leading roles, the proof is largely in the hands of the alleged conspirators, and hostile witnesses thicken the plot.” The Ninth Circuit has indicated, however, that this passage from Poller is not ..to be used as a “magic wand waived indiscriminately” by those opposing summary judgment motions in antitrust actions. Thi-Hawaii, supra, 627 F.2d at 994. The Federal Rules make absolutely no distinction between antitrust and other cases, and use of summary judgment may save a great deal of trial time that might otherwise be consumed by an unnecessary and exhaustive rule of reason inquiry. II P. Areeda & D. Turner, Antitrust Law ¶ 316b (1978); Fiat Distributors, supra, at 1381. This court believes that partial summary judgment is warranted in this case, as the concerns expressed in Poller are considerably less applicable here for three reasons. First, the Court in Poller expressly directed its cautionary comment to cases where motive and intent are critical and the evidence of such is largely controlled by the party bringing the summary judgment motion. Here, the focus is -on the objective impact of splits on competition, with relatively little emphasis on subjective motivations. Virtually all of the evidence which General Cinema has used to oppose the motion — i.e., the asserted procompetitive benefits of splits and Buena Vista’s alleged consent and participation — has been readily available to it. It has been the moving party Buena Vista, by contrast, which has had to make extensive use of discovery to develop the evidence critical to meeting its burden of proof on the motion, including evidence as to how and why splits operate. Buena Vista’s extensive and essentially unrebutted proof of purpose to suppress competition and to affect terms for licenses is taken entirely from statements by present or former General Cinema employees. Because General Cinema itself is in possession of any evidence relating to motive and intent, there is appropriately far less concern, as compared with Poller, about General Cinema’s need for cross-examination of hostile witnesses at trial. Second, the issue of liability in this case turns largely on controlling issues of law. The key facts regarding the nature of splits are not genuinely in dispute. See Part II, infra. General Cinema, to be sure, has raised a number of factual issues, particularly with respect to possible financial benefits or conveniences to be derived from reducing competition, and the distributors’ asserted consent and participation in splits. But to withstand a motion for summary judgment it is simply not enough to refer to disputed factual issues. The factual issues must be material, that is, ones which may affect the outcome of the litigation because they are relevant to a viable legal theory. Fiat Distributors, supra, 637 F.2d at 1381. Many of the factual issues raised by General Cinema may be material to the extent of damages, but the court believes they are not material to the exclusive concern of the present motion, the issue of liability. See Parts II-V, infra. Third, the caselaw supports the granting of partial summary judgment where the per se rule applies. The Supreme Court in White Motor Co. v. United States, 372 U.S. 253, 83 S.Ct. 696, 9 L.Ed.2d 738 (1963), stated that summary judgments “have a place in the antitrust field, as elsewhere,” especially where, as here, the law is “well-developed” and motive and intent are less important than documentary evidence. Id. at 259, 83 S.Ct. at 699. In such cases, whether to apply the per se rule can be determined without trial. Id. Conspiracies involving restraints on price competition are one such well-developed area of the law. The Court in White Motor reversed that part of the district court’s order which pertained to a vertical territorial (nonprice) restriction, stating that “we know too little of the actual impact of both that restriction and the one respecting customers to reach a conclusion on the bare bones of the documentary evidence before us.” Id. at 261, 83 S.Ct. at 701. But the defendant in that ease did not even challenge the price-fixing part of the injunction issued by the district court on summary judgment since, as the Supreme Court noted, “Price-fixing arrangements, both vertical and horizontal, have been held to be per se violations of the antitrust laws; and a trial to show their nature, extent, and degree is no longer necessary.” Id. at 260, 83 S.Ct. at 700. (citations omitted). A pair of noted scholars in the antitrust field recently stated that summary judgment is appropriate “in many [antitrust] cases,” and that “courts are accustomed to granting summary judgment in favor of a plaintiff when the defendant’s conduct falls unambiguously within a rule of per se illegality.” II P. Areeda & D. Turner, supra, ¶ 316a. See, e.g., Denver Rockets v. All-Pro Management, Inc., 325 F.Supp. 1049, 1061, 1065 (C.D.Cal.1971). The court recognizes that characterizing the challenged conduct as falling within or without that category of behavior to which the courts have applied the label “per se illegal price-fixing” will “often, but not always, be a simple matter.” Broadcast Music, Inc. v. CBS, Inc., supra, 441 U.S. at 9, 99 S.Ct. at 1557. In this case, however, the court finds, for the reasons now to be stated, no genuine issue of material fact as to the applicability of the per se rule against price-fixing to the split agreements at issue, and therefore concludes that Buena Vista is entitled as a matter of law to partial summary judgment on the issue of liability. II. ANTICOMPETITIVE NATURE OF SPLITS A. Operation and Purpose of Splits 1. Nature of “first rights of negotiation. ” Both parties agree that splits have operated a little differently from area to area across the country, especially with respect to the mechanics of allocating the first rights of negotiation among split members. In some splits, the rights are parcelled out picture-by-picture; in others, the right to negotiate for films is distributed to participating exhibitors on a company-by-company basis, so that a designated exhibitor negotiates for all of a distributor’s upcoming pictures. In still other splits, rights may be allocated to a “track” (a group of theaters in various areas of a market), either on a picture-by-picture or a company-by-company basis. After carefully reviewing the record, however, the court has come to the conclusion that all splits by definition have at least one critical anticompetitive characteristic in common — an agreement or understanding by exhibitors participating in the split to refrain from competing against the split designee while its right or opportunity to negotiate continues. At the September 28,1981, hearing, counsel for General Cinema confirmed that such an agreement not to compete is characteristic of all splits. The court in its order of September 24, 1981, posed the issue of whether all splits have any fundamental similarities in the context of the district court’s description of splits in Cinema-Tex Enterprises, Inc. v. Santikos Theaters, Inc., 414 F.Supp. 640, 641-43 (W.D.Tex.1975), aff’d in part and rev’d in part on other grounds, 535 F.2d 932 (5th Cir. 1976). The Cinema-Tex court found that “[i]nstead of submitting and providing a cash guarantee to the distributors for first-run films,” exhibitor members of a split would divide among themselves the opportunity to negotiate the terms of exhibition of the films “without interference from others in the split.” 414 F.Supp. at 641 n.7. Counsel for General Cinema agreed that this description of splits was accurate, stating that “a split involves the opportunity to negotiate the terms of an exhibition license with the distributor without interference from others who wish to participate in the split.” Transcript at 14. Counsel did not attempt to explain away or distinguish the stipulated definition of splits that General Cinema entered into in Wilder Enterprises, Inc. v. Allied Artists Pictures Corp., 632 F.2d 1135 (4th Cir. 1980), that a split is an “agreement whereby '. .. exhibitors agreed to refrain from competing against each other for licenses,” see Buena Vista Appendix (April 27, 1981), at 214. That splits inherently provide that participating exhibitors are not to compete against the exhibitor who has been assigned the rights of negotiation is corroborated by the briefs of the parties and the uncontradieted evidence in the record. Numerous employees or former employees of General Cinema testified in depositions that they simply would not respond at all to invitations from distributors to bid for pictures that had been assigned to other members of the split. There is also undisputed evidence that when mistakes or misunderstandings arose resulting in more than one split member negotiating for the same picture, the split would reconvene and reallocate rights of first negotiation so that the interference in the opportunity of the split designee would be eliminated. The presence in splits of agreements not to compete with the split designees is also clear from discussions of splits by the Ninth Circuit. In Syufy Enterprises v. National General Theatres, Inc., 575 F.2d 233, 234 (9th Cir. 1978), for example, the court stated that in both company and picture splits the participants agree that a member thereof shall have the right to negotiate with the distributor for one or more pictures “prior to any other members doing so.” In Twentieth Century Fox Film Corp. v. Goldwyn, 328 F.2d 190 (9th Cir.), cert. denied, 379 U.S. 880, 85 S.Ct. 143,13 L.Ed.2d 87 (1964), the court described splits as “agreements entered into ... with competitive exhibitors not to compete in the licensing of films.” Id. at 198. The court added that where splits occur, “there is either no competitive bidding or it is subject to being circumvented by fake bidding or abstention of bidders,” although this “first opportunity to negotiate” did not include an agreement that if the first negotiation failed the other exhibitors were foreclosed from negotiating for the picture or pictures. Id. at 205-06. 2. Purpose of splits. The record contains compelling evidence that splits are formed for the purposes of suppressing price competition and affecting price, one of the hallmarks of a per se illegal price-fixing arrangement. Only a few highlights of the testimony presented by both Buena Vista and General Cinema on this point will be noted here. D. Barry Reardon, for example, General Cinema’s former Vice-President in charge of all of the firm’s film buying, could hardly have been clearer when he testified in his deposition that “usually in a split the purpose of getting together is hopefully that you would be able to buy the picture at lesser terms and hopefully less of a guarantee or advance than the distributor is requesting on the particular picture.” Buena Vista Appendix (April 27, 1981), at 83. He went on to say that, “We would be interested in participating in a split in any town where there was excessive bidding and high guarantees.” Id. at 84. Former General Cinema buyer Ennis Adkins was equally frank at his deposition: Q: What was your purpose or what were you trying to accomplish, Mr. Adkins, by setting up the split, as you referred to it? A: We didn’t want to put up guarantees and we didn’t want to pay the terms brought on by bidding against one another. Q: So by splitting you were able to eliminate guarantees? A: Correct. Id. at 6-7. In addition to General Cinema’s stipulation in another action that splits are agreements whereby “exhibitors agreed to refrain from competing against each other for licenses,” counsel for General Cinema, Harry B. Swerdlow, earlier in this action stated the following with regard to the origin of split agreements: ... they say to each other, “Look, bidding is a very destructive process. We will drive ourselves out of business and just enrich the film companies ... So we’ll divide companies’ pictures between us.” Remarks of H. B. Swerdlow, at Hearing on Nov. 2, 1979, quoted in Buena Vista Statement of Fact and Law (April 27, 1981), at 26. General Cinema makes no genuine effort to rebut these and other statements by former and current General Cinema officials and employees, but contends that they are “isolated” comments taken out of context which show only that one of the purposes of splits has been to reduce price competition. However, General Cinema’s limited efforts to show the full context of certain of the statements made serve only to make more clear the anticompetitive nature of splits. See General Cinema’s May 11, 1981, Memorandum, at 7-15. As discussed in Part III of this opinion, none of the alleged alternative purposes mentioned in the additional testimony recited is genuinely procompetitive. For example, former General Cinema Vice-President Reardon explained that there “can be” measurable benefits to distributors from the “orderly distribution” of motion pictures. But like other references to “competitive evils,” permitting “orderly distribution” to be a defense to an agreement among competitors to limit their competition is “wholly alien to a system of free enterprise.” See United States v. Socony-Vacuum Oil Co., 310 U.S. 150, 220-21, 60 S.Ct. 811, 842-43, 84 L.Ed. 1129 (1940). General Cinema also characterizes as “grossly misleading” Buena Vista’s quotation of former General Cinema film buyer Corliss Lewin’s statement that free and open competition was “self-destructive.” The lengthy addition to her remarks primarily indicates that splits help obtain “an orderly sequence” of pictures and have “enabled exhibitors to avoid commitments of lengthy film playing times,” neither of which involve the promotion of competition. General Cinema also seeks to put “in context” the admission by its President, Richard A. Smith, that the direct and natural effect of splits is to lessen the amount of film rental received by distributors. The additional quotations say little more than Smith’s observations that splits benefit all parties involved because they make the operations of theaters “a simpler, less complex matter,” as compared with bidding, which is “apt to be more chaotic.” 3. Splits as allocating “exclusive rights of negotiation.” In light of several statements by General Cinema personnel of a purpose to suppress all competition without qualification, Buena Vista asserts vigorously that splits in reality provide an “exclusive” right as opposed to merely a “first” right of negotiation. It provides significant uncontradicted evidence of conspiratorial and practical restraints on the competition by split members that go beyond the refraining from any interference during the pendency of negotiations with the split designee. This evidence includes the following: 1) when one or more split designees are rejected by distributors and there is a shortage of quality films available, the split reconvenes and reallocates rights of negotiation; 2) where there is a surplus of quality films available, a distributor which rejects the split designee finds that the other exhibitors are already booked up for the period during which it wants the picture played; and 3) members of the split agree to refrain from competing with the designees for a certain period of time (which may last beyond the point at which the split designee is definitively rejected by the distributor), or agree to refuse to deal entirely with the distributor with respect to the picture or pictures allocated to the split designee. Although this evidence leaves little doubt that splits provide incursions into competition beyond the point of rejection of the split designee, factual questions remain as to the frequency with which splits eliminate entirely the competition for licenses by participating exhibitors. Therefore, the court declines on the present record to adopt Buena Vista’s characterization of splits as providing “exclusive” rights of negotiation. The legal consequence of this is to render less applicable the market division theory for making splits illegal per se — asserted as an alternative to the price-fixing theory by the Justice Department in several documents inserted into the record — since splits arguably would not constitute illegal per se market divisions unless they eliminated all competition in a given area for specified films. See United States v. Topco Associates, Inc., 405 U.S. 596, 92 S.Ct. 1126, 31 L.Ed.2d 515 (1972); United States v. Koppers Co., Inc., 652 F.2d 290 (2d Cir. 1981). However, the court does not believe, as the legal analysis of splits in the next section shows, that proof of exclusive rights to negotiate is a prerequisite for establishing the per se illegality of splits under the price-fixing theory on which Buena Vista now relies entirely. B. Analysis of Splits under Supreme Court Caselaw General Cinema points to five distinct aspects of splits in an attempt to minimize the extent to which splits appear to restrain competition: 1) Split members do not directly fix the terms for licenses that they will offer or even agree upon a guideline for terms to be offered; 2) Some splits do not include all exhibitors in a given area; 3) Members are free to leave the split and resume competition; 4) Splits do not force distributors to license their pictures to theaters not of their choice; and 5) Splits do not preclude distributors from seeking out alternative exhibitors once negotiations have broken down with the split designee. Relying on these caveats to the fundamental agreement not to compete to establish the “extremely flexible” nature of splits and their “very minimal inhibition” oh competition, General Cinema and amicus curiae NATO urge the court to apply the rule of reason on the authority of Broadcast Music, Inc. v. Columbia Broadcasting System, Inc., 441 U.S. 1, 99 S.Ct. 1551, 60 L.Ed.2d 1 (1979) (hereinafter referred to as Broadcast Music or BMI). If proven, the five aspects of splits emphasized by General Cinema may provide some basis for diminishing a damage recovery, but the fact that splits may not always present “an absolute ban” on all competition for film licenses does not preclude their per se illegality. The court agrees with Buena Vista that splits are so “plainly anticompetitive” as to properly be declared per se illegal on this motion on the authority of National Society of Professional Engineers v. United States, 435 U.S. 679, 98 S.Ct. 1355, 55 L.Ed.2d 637 (1978) (hereinafter referred to as National Society or NSPE); Catalano, Inc. v. Target Sales, Inc., 446 U.S. 643, 100 S.Ct. 1925, 64 L.Ed.2d 580 (1980); and United States v. Socony-Vacuum Oil Co., 310 U.S. 150, 60 S.Ct. 811, 84 L.Ed. 1129 (1940). 1. Absence of “direct" price-fixing. General Cinema argues that the per se rule is inappropriate because split members do not literally “fix” prices and therefore Buena Vista’s price-fixing theory is only “indirect,” not “direct.” However, the law is clear that a direct effect is not a prerequisite for application of the per se rule. In National Society, for example, there was no claim that the defendant organization had tried to fix specific fees or even a specific method of calculating them, 435 U.S. at 682, 98 S.Ct. at 1360, yet the challenged ethical rule was held illegal per se without elaborate analysis of procompetitive benefits. Id. at 692, 98 S.Ct. at 1365. In Catalano, Inc. v. Target Sales, Inc., supra, 446 U.S. at 647-48, 100 S.Ct. at 1927-28, the Court cited United States v. Socony-Vacuum Oil Co., supra, in which the Court had held that an agreement among competitors to engage in a program of buying surplus gasoline on the spot market in order to prevent prices from falling sharply was unlawful without any inquiry into the reasonableness of the program, even though there was no “direct” agreement on the actual prices to be maintained. As the So-cony Court noted, “the machinery employed by a combination for price-fixing is immaterial,” 310 U.S. at 223, 60 S.Ct. at 844, quoted at 446 U.S. at 647, 100 S.Ct. at 1927. The Catalano Court added that “we have held agreements to be unlawful per se that had substantially less direct impact on price than the agreement alleged in this case,” citing as examples National Society, supra, and Sugar Institute v. United States, 297 U.S. 553, 601-02, 56 S.Ct. 629, 80 L.Ed. 859 (1936). Numerous other authorities make clear that the per se rule against price-fixing applies even when the effect on prices is “indirect,” as the price-fixing rule is directed at all restraints on competition that affect pricing mechanisms. See, e.g., United States v. Container Corp., 393 U.S. 333, 337, 89 S.Ct. 510, 512, 21 L.Ed.2d 526 (1969); Simpson v. Union Oil Co., 377 U.S. 13, 16-22, 84 S.Ct. 1051, 1054-57, 12 L.Ed.2d 98 (1964); Plymouth Dealers’ Ass’n v. United States, 279 F.2d 128, 132 (9th Cir. 1960); L. Sullivan, Antitrust § 73, at 197-98. 2. Exclusion of some exhibitors. General Cinema argues that some competition for licenses often continues to exist notwithstanding the split agreement because the split may not include every exhibitor in the area. There is evidence in the record that splits attempted to include as members all theaters in the relevant local market that represented a competitive threat to the split. But more importantly, it has been clear since SoconyVacuum, supra, that an agreement whose purpose is to suppress competition will be held illegal regardless of the power of the conspirators to carry out their design to the fullest extent possible. L. Sullivan, supra, § 70, at 192. As the Court in Socony-Vacuum stated: It is the “contract, combination ... or conspiracy in restraint of trade or commerce” which § 1 of the [Sherman] Act strikes down, whether the concerted activity be wholly nascent or abortive on the one hand, or successful on the other Price-fixing agreements may or may not be aimed at complete elimination of price competition. The group making those arrangements may or may not have power to control the market. But the fact that the group cannot control market prices does not necessarily mean that the agreement as to prices has no utility to the members of the combination . .. Only a confusion between the nature of the offenses under those two sections [§ 1 and § 2 of the Sherman Act] ... would lead to the conclusion that power to fix prices was necessary for proof of a price-fixing conspiracy under § 1. 310 U.S. at 225-26 n.59, 60 S.Ct. at 845-46 n.59. In National Society, for example, the fact that membership in the Society subject to its ethical rules accounted for slightly less than 10 percent of all graduate engineers in the nation holding a collegiate degree in engineering did not make the anti-competitive effect of the rules on the membership any less objectionable. See 389 F.Supp. at 1195. That not all exhibitors in a given area do not participate in a split may lessen the effectiveness of the split in reducing license terms, but does not have any bearing on the legality of the split agreement. 3. Freedom to cease participation in the split. General Cinema argues that exhibitors who are members of a split remain “free” to seek to bid or negotiate for pictures of their choice. The record indicates that the enforcement of agreements not to compete by the exhibitors is relatively lax. Splits do not tend to remain in effect for long periods of time because exhibitors who are dissatisfied with the amount or quality of films allocated to them leave the split and seek films through competition. However, courts have not held strict enforcement to be a critical factor in determining the per se illegality of a price-fixing agreement. NSPE, supra, 389 F.Supp. at 1200; L. Sullivan, supra, § 82, at 226. The Supreme Court has condemned several arrangements which had lax or casual enforcement. See, e.g., United States v. Container Corp., supra, 393 U.S. at 337 & n.3, 89 S.Ct. at 512 & n.3; American Column & Lumber Co. v. United States, 257 U.S. 377, 42 S.Ct. 114, 66 L.Ed. 284 (1921). As the Court stated in Socony-Vacuum, supra, “Any combination which tampers with price structures is engaged in an unlawful activity.” 310 U.S. at 221, 60 S.Ct. at 843 (emphasis added). The court notes that all conspiracies last only so long as the individual conspirators believe their interests are served. As Buena Vista argues based upon evidence in the record, it may not make sense for split members to attempt to punish an exhibitor who engages in unauthorized competition with the split designee for a particular picture, since the sanction of exclusion from the split in the future would only enhance the competitive threat to the effectiveness of the split. Thus, the main enforcement device, according to uncontradicted testimony, is the effort to hold splits together by the power of persuasion — through explicit warnings by the split “captain” to the membership of the dangers of “ruinous competition” if the split does not continue intact. See Buena Vista Statement of Fact and Law (April 27, 1981), at 17-20. Under these circumstances, surely the court must remain concerned with the anticompetitive purpose and effect generated by split members to the extent that they do participate in the split. 4. Freedom to license to theaters of choice. General Cinema asserts that splits under no circumstances preclude distributors from licensing their pictures to theaters of their choice. A distributor, of course, has the final decision regarding the exhibitor to which it will license each picture; members of a split cannot absolutely guarantee to the designee that the distributor will be willing to license to it. Buena Vista disputes General Cinema’s claim with evidence that splits do not always permit distributors to license to the theater of their choice. In any case, General Cinema’s assertion has little to do with the intensification of price competition. Indeed, the method by which General Cinema claims the result is achieved — trades among the split participants to satisfy the needs and desires of the distributors — adds to rather than lessens the anticompetitive nature of splits. By these trades exhibitors refrain from competing with each other rather than permitting the licensing process to be opened up to competition once a distributor makes clear that it is not interested in licensing to the split designee. Thus, whether “reallocation works out” may be relevant to the extent of harm done to a distributor in damages, but has no relevance to whether or not the per se rule should be applied. 5. Competition after rejection of split designee. General Cinema asserts that distributors are “not precluded” by splits from seeking out alternative exhibitors once negotiations have broken down with the split designee. As noted above in Section A-3, the record is not clear as to the extent of the practical or conspiratorial barriers to negotiations with a second member of the split, let alone with two or more members in competition, after rejection of the split designee. But even if in some splits there was full competition after rejection of the split member holding the first right of negotiation, these splits would still present a substantial restraint on price competition under the strong authority of National Society of Professional Engineers v. United States, supra. a. National Society. In National Society the Court struck down the ethical canon of the National Society of Professional Engineers which prohibited its members from negotiating or even discussing the question of fees until after a prospective client had “selected” the engineer member for a particular project on nonprice grounds including background and reputation. 435 U.S. at 683-84, 98 S.Ct. at 1361. Although the Court referred to this provision as an “absolute ban” on competitive bidding, id. at 692, 98 S.Ct. at 1365, it is important to note that the rules did not prohibit all price competition. The simultaneous submission of bids was prohibited, but a form of serial competition could take place. The prospective clients in National Society, like the distributors here, had a choice of whether to accept or reject the contract terms negotiated with the engineer. Society members were permitted to quote prices after they had been “selected,” and the ethical rules raised no barrier to the customer’s right to withdraw his selection and approach another engineer. Id. at 684 & n.6, 98 S.Ct. at 1361 & n.6. Here, there are also no price considerations involved in the process of selecting the split member for the initial negotiation, but for a different reason. The elimination of price competition in the initial selection process occurs because all forms of competition, including those not based on price, are eliminated as far as the distributors are concerned. The competition for the initial rights of negotiation occurs solely within the confines of the split meetings. When the split designee makes an offer, the distributor has to decide, based on such factors as grossing potential of the theater, whether to accept it, without the present ability to compare offers from the other exhibitors who are participating in the split. Indeed, because of the possibilities of reallocation (eliminating simultaneous competition in the future), a refusal to deal by other members of the split, or an inability of those exhibitors to deal because of prior bookings, the distributor may face more pressure to arrive at an agreement with its initial negotiating partner than did the prospective client in National Society. If it is willing to take the risk, the distributor, like the client in National Society, may over time compare offers by rejecting the split designee and moving on to a second negotiation, or perhaps even to a period of free competition. But the Court in National Society clearly stated that this limited form of competition did not preclude the arrangement from being declared illegal on its face. The Society argued that its canons permitted price competition once an engineer had been initially selected, and therefore the provisions were only an incidental restraint of trade because they merely regulated the timing of competition, as in Chicago Board of Trade v. United States, 246 U.S. 231, 38 S.Ct. 242, 62 L.Ed. 683 (1918), where the Court upheld an exchange rule which forbade exchange members from making purchases after the close of the day’s session at any price other than the closing bid price. The Court squarely rejected this argument, stating that the Society’s claim “mistakenly treats negotiation between a single seller and a single buyer as the equivalent of competition between two or more potential sellers.” 435 U.S. at 693 n.19, 98 S.Ct. at 1366 n.19. In addition, the Court noted that the district court’s findings precluded the possibility of finding a positive effect on competition, which was the basis for upholding the exchange rule in Chicago Board of Trade under the rule of reason. Justice Blackmun’s concurring opinion also finds the opportunity for simultaneous competition to be of critical importance in language that is especially pertinent here: To secure a price estimate on a project, the client must purport to engage a single engineer, and so long as that engagement continues no other member of the Society is permitted to discuss the project with the client in order to provide comparative price information. Though § 11(c) does not fix prices directly, and though the customer retains the option of rejecting a particular engineer’s offer and beginning negotiations all over again with another engineer, the forced process of sequential search inevitably increases the cost of gathering price information and hence will dampen price competition. 435 U.S. at 700, 98 S.Ct. at 1369. Thus, in National Society the competitive evil was the elimination of concurrent price comparisons. Id. at 683-84, 692-93, 695, 98 S.Ct. at 1361, 1365-66, 1367. Splits are clearly designed to achieve the same objective in a purely commercial context, at least for as long as the split designee has a chance to successfully negotiate a license. To the extent that the suppression of price in National Society, where the Court referred to no evidence of actual purpose and effect presumably because these elements were self-evident, see 435 U.S. at 685-86, 692, 98 S.Ct. at 1362, 1365, the court notes that Sections A-2 and C of this Part of the Opinion conclusively establish such anticompetitive purpose and effect. As did the negotiations process in National Society, the “rights of first negotiation” provided by split agreements “substantially deprive” distributors of “the ability to utilize and compare prices” in licensing their pictures. See id. at 692-93, 98 S.Ct. at 1365-66. Thus, the court concludes, “the nature and necessary effect” of splits is “so plainly anticompetitive” that no “elaborate industry analysis” is required to demonstrate their anticompetitive character. Id. at 692, 98 S.Ct. at 1365. Accord, United States v. Swift & Co., 52 F.Supp. 476 (D.Colo.1943) (held per se illegal under Socony-Vacuum an agreement whereby four purchasers of fat lambs were given initial rights to negotiate for various groups of lambs; if unsuccessful, each would pass along sequentially to the others the right to negotiate until all four had exhausted their series of rights, after which the remaining lambs were opened up to competitive bidding by all). Cf. United States v. Champion International Corp., 557 F.2d 1270 (9th Cir.), cert. denied, 434 U.S. 938, 98 S.Ct. 428, 54 L.Ed.2d 298 (1977) (an “understanding” about refraining from bidding between two purchasers of timber lots held per se illegal as price-fixing or market division). b. Broadcast Music. Neither General Cinema nor amicus curiae NATO provides any persuasive basis for distinguishing National Society, relying instead on the more recent Broadcast Music decision as controlling. In that ease, plaintiff CBS challenged as per se illegal price-fixing the issuance of blanket licenses to copyrighted musical compositions by two organizations, the American Society of Composers, Authors and Publishers (AS-CAP) and Broadcast Music, Inc. (BMI). Blanket licenses give the licensees the right to perform for a set price any and all of the compositions owned by members or affiliates of ASCAP and BMI as often as the licensees desire during a stated term. The Supreme Court reversed the judgment for CBS, ruling that the legality of blanket licenses could not be determined under the per se rule even though the practice seemed to involve “price-fixing” in a literal sense. 441 U.S. at 8-9, 99 S.Ct. at 1556-57. On remand, the Second Circuit, without even employing the rule of reason analysis, upheld blanket licenses as lawful because there was no genuine restraint on competition. CBS, Inc. v. ASCAP, 620 F.2d 930 (2d Cir. 1980). The court concluded that the blanket license system could easily have been circumvented by attempting to negotiate directly with the owners of the copyrights. Since the opportunity to purchase performing rights directly is “fully available,” the Second Circuit concluded that “it is customer preference for the blanket license, and not the license itself, that causes the lack of price competition among songs.” Id. at 935. General Cinema and NATO assert that the opportunity to reject the split designee and solicit offers from other split members is “fully available,” so that splits similarly do not restrain trade at all, or in the alternative are such a minimal restraint on competition that they must be analyzed under the rule of reason. The court cannot agree, as it finds Broadcast Music to be distinguishable on two important grounds. First, there was no evidence whatsoever in Broadcast Music of an anticompetitive purpose, nor was there a facial effort by competitors to restrain competition. To the contrary, the Supreme Court found strong, perhaps even compelling, procompetitive purposes behind the system of blanket licensing. The Court noted that the system originated because those who performed copyrighted music were so numerous and widespread, and most performances so fleeting, that “as a practical matter it was impossible for the many individual copyright owners to negotiate with and license the users and to detect unauthorized uses.” 441 U.S. at 5, 99 S.Ct. at 1554. Thus, the Court suggested that blanket licensing was “reasonably necessary” to the continued existence of the commerce anticipated by congressional enactment of the Copyright Act. Id. at 19, 99 S.Ct. at 1562. Because of the “prohibitive” costs involved, “[a] middleman with a blanket license was an obvious necessity if the thousands of individual negotiations, a virtual impossibility, were to be avoided.” Id. at 20, 99 S.Ct. at 1562. The Court added that ASCAP is not “a joint sales agency offering the individual goods of many sellers,” because the blanket license is to some extent “a different product” from that which individual copyright holders could offer in competition with each other. It has certain “unique” characteristics, including resources for blanket sales and enforcement, great latitude in the choice of musical material, and the allowance of the immediate use of covered compositions without the delay of prior individual negotiations. Id. at 21-22, 99 S.Ct. at 1563. By contrast, the anticompetitive purpose of splits is manifest. Unlike the blanket license, a split can properly be referred to as a “horizontal arrangement among competitors,” see id. at 23, 99 S.Ct. at 1564, and there are no genuine, let alone compelling, procompetitive justifications for the arrangement. See Part III, infra. Second, in Broadcast Music, the Supreme Court noted that the district court had found that there was “no legal, practical, or conspiratorial impediment to CBS’s obtaining individual licenses; CBS, in short, had a real choice.” 441 U.S. at 24, 99 S.Ct. at 1564. Here, by contrast, there is no question that splits present “practical” and ‘’conspiratorial” impediments to competition among exhibitors participating in a split. Even if the distributor summarily rejects the split designee and then faces open competition for licensing the film — a scenario which clearly is not available to the distributors in all splits because of reallocations, full bookings or refusals to deal by the other members of the split — a significant diminution of price competition occurs because the split designee is no longer involved in the process. General Cinema emphasizes repeatedly the extent to which split participants attempt to satisfy the distributors’ interest in particular theaters in making their allocations. Indeed, several General Cinema witnesses readily acknowledge that reallocations of rights of negotiation occur for the purpose of matching the allocations with distributor desires. Clearly, the better the split participants do at designating exhibitors that the distributors want for particular pictures, the more effective the split is at suppressing price competition. The supposed “freedom” to reject the designee and seek other exhibitors is a small consolation to the distributor if the split designee happens to have the theater that the distributor wants from a grossing standpoint, and the split blocks all competitive pressure from participating exhibitors until and unless the designee is rejected. One cannot say, as in Broadcast Music, that competition by exhibitors is “fully available” to distributors in split situations and that distributors retain “unimpaired independence” in the licensing of films. 620 F.2d at 935-36. Broadcast Music neither expressly nor impliedly limits the application of National Society to the restrictions on competition inherent in splits. Aside from several passages cautioning courts to be careful in the use of per se rules, Broadcast Music has little relevance to the legal analysis of splits. C. Evidence of Anticompetitive Effect Buena Vista makes a strong argument that it is not necessary to consider evidence of anticompetitive effect in this case in view of the “nature and necessary effect” of splits, see NSPE, supra, at 692, 98 S.Ct. at 1365, and the evidence of purpose to affect license terms and suppress competition. Where the restraint on price competition is a very obvious one, a practice may be deemed per se illegal even without any evidence of a purpose or effect to suppress competition. See, e.g., Catalano, supra; United States v. Koppers Co., Inc., 652 F.2d 290, 296 (2d Cir. 1981). It can be argued that the anticompetitive purpose and effect are self-evident with regard to splits and that in any case the requisite effect may be presumed from the clear intent to achieve ends that are condemned by the antitrust laws. See, e.g., L. Sullivan, supra, § 71, at 194-95. However, because this litigation concerns splits all across the country and because splits have never before been held to be per se illegal price-fixing, the court believes it would be useful to analyze the evidence in the record of anticompetitive effect. See Broadcast Music, supra, 441 U.S. at 19, 99 S.Ct. at 1562 (per se inquiry must focus on effect); Gough v. Rossmoor Corp., 585 F.2d 381, 388 (9th Cir. 1978) (additions to per se rule require evidence supporting determination of pernicious effect on competition). The court’s analysis of effect is divided into three parts: 1) the effect on pricing mechanisms under relevant caselaw; 2) the admissions of effect on competition and price by current and former employees of General Cinema; and 3) the theater comparisons offered by Buena Vista for split and nonsplit situations. 1. Effect on pricing mechanisms. The law ultimately focuses on the effect of a practice on competition, not simply on the actual effect on prices. United States v. NSPE, supra, 555 F.2d at 981 n.3; Plymouth Dealers’ Ass’n v. United States, 279 F.2d at 132; L. Sullivan, supra, § 74, at 202. But cf. State of Arizona v. Maricopa County Medical Society, 643 F.2d 553, 556 (9th Cir. 1980) (inquiry into actual effect on price essential where defendant’s asserted procompetitive defense is that the challenged practice is designed to lower prices rather than to serve as a ceiling which tends to raise prices). Rather than examining the effect on price, the District of Columbia Circuit in National Society, citing Kiefer-Stewart Co. v. Seagram & Sons, 340 U.S. 211, 213, 71 S.Ct. 259, 260, 95 L.Ed. 219 (1951), stated: “What is of critical significance is that the agreement among defendant’s members to refrain from competitive bidding is an agreement to restrict the free play of market forces from determining price.” 555 F.2d at 981 n.3. The Supreme Court in NSPE noted that price is the “central nervous system of the economy,” and that an agreement that “interfere^] with the setting of price by free market forces” is “illegal on its face,” as is one that “impedes the ordinary give and take of the market place,” 435 U.S. at 692, 98 S.Ct. at 1365. Accord, Socony-Vacuum, supra, 310 U.S. at 221, 60 S.Ct. at 843 (“Any combination which tampers with price structures is engaged in an unlawful activity.”). The evidence in the record regarding the nature of splits makes obvious that split arrangements, as did the ethical rules in National Society, “bloc[k] the free flow of price information” and competitive offers, see 555 F.2d at 981, and thus interfere with the price mechanism on which our society depends as the means of properly allocating resources. 2. Testimony regarding effect. While at General Cinema, Vice-President D. Barry Reardon prepared a document for presentation to high-ranking Walt Disney Productions and Buena Vista personnel in which he estimated that the “Gain to Disney on Elimination of Splits” amounted to $1,935,000 on only six major releases. In his deposition, Reardon indicated that his purpose was to show “what an exceptional customer General Cinema has been” to the Disney organization, and also how General Cinema’s asserted termination of its participation in splits since the Justice Department press release of April, 1977, had “affected General Cinema’s film payments to Disney.” Buena Vista Appendix (April 27, 1981), at 76. Melvin R. Wintman, Exeeutive Vice-President in charge of General Cinema’s Theatre Division stated publicly: With the elimination of splitting, competition for pictures is going to become considerably more intensive. Pictures will, for a time, cost more. Unfortunately, for the small exhibitor who advocated the elimination of splits, he’s not going to be in a better position. He is now going to be bidding against everyone in the marketplace for product. Those theaters with the best grossing capacity will continue to get product, because they will be able to pay higher rentals and guarantees and, therefore, offer the highest film rentals to the distributor. Buena Vista Appendix (April 27, 1981), at 232. As with respect to the testimony regarding purpose, General Cinema provides scant rebuttal or explanation of the above statements as well as additional similar testimony by current or former General Cinema employees. Other than to rely on its theories, discussed in the next section, that all damage to Buena Vista was “voluntarily self-inflicted” and that on balance, splits may enhance rather than lessen Buena Vista’s total revenues because splits tend to steer distributors to the theaters they want, General Cinema’s only response to the effect testimony is to emphasize the “hypothetical” nature of the bid situations in Reardon’s report. That, of course, is an important point to make at trial regarding the extent of damages, but it in no way undercuts the impact of Reardon’s assertion that splits have had substantial effects not only on the terms of licenses but on the total revenues paid to Buena Vista. 3. Comparisons of split and nonsplit situations. Buena Vista has also submitted a considerable volume of information in an attempt to compare the terms received under bidding and splitting situations in comparable theaters and locations. The evidence is clear that bidding results in substantially higher percentage terms, a greater likelihood of cash guarantees and a greater number of extended engagements. The results are uniform and entirely consistent with the purpose and effect testimony discussed in previous sections. In response, General Cinema offers no evidence contradicting these results, offering instead a few reasons why the theaters selected by Buena Vista are not perfectly comparable. General Cinema readily concedes that terms are much firmer and less susceptible to subsequent adjustment in bidding rather than splitting situations, but attempts to generate two factual questions about the effect of splits on price by arguing: 1) that any damage to Buena Vista was caused by its own corporate policy of voluntarily renegotiating terms on all negotiated licenses, including splits; and 2) that splits provide economic benefits to Buena Vista (i.e., better outlets and play dates) that offset any loss of revenue resulting from the lessening of competition. These assertions by General Cinema are not material to the real issue involved, the existence of an anticompetitive effect. They have no bearing on competition, but rather appear to be part of a veiled effort to argue lack of standing because of an inadequate showing of damages and causation. As such, General Cinema’s two “standing” theories regarding effect should be rejected as a matter of law. See, e.g., Zenith Corp. v. Hazeltine Research, Inc., 395 U.S. 100, 114 n.9, 89 S.Ct. 1562, 1571 n.9, 23 L.Ed.2d 129 (1969). In any event, these contentions, even if true, would not establish the complete absence of any effect on price, let alone the absence of an interference with price competition. The second theory (of compensating advantages) makes no denial of an effect on the terms of licenses in split situations, but merely contends that there is no overall damage to Buena Vista because any effect on the terms would be compensated for by factors (including the grossing potential of theaters) that are not altered by the existence of greater or lesser amounts of competition. General Cinema in its other theory claims that the entire effect on terms is a “voluntary” one within Buena Vista’s power to avoid. The court has serious doubts whether General Cinema’s evidence generates a genuine factual issue regarding voluntariness. More importantly, General Cinema has not supported its essential premise for this argument — that but for renegotiations after a “run” is completed, the license terms in split and bidding situations would be identical. There is considerable evidence to the contrary, including evidence that when bids are received, guarantees are given far more frequently and that percentages of gross revenues offered sometimes exceed the minimum amounts suggested by Buena Vista when bids are received. 4. Prior caselaw on the anticompetitive nature of splits. General Cinema and NATO also rely on Broadcast Music for two additional reasons for declining to apply the per se rule: 1) that courts have not had “considerable experience” with splits leading to the “universal view” that they are unre