NEW YORK (TheStreet) -- The Justice Department's Antitrust Division is investigating the two largest U.S. movie theater chains -- Regal Entertainment Group (RGC) and AMC Entertainment Holding (AMC - Get Report) -- for "potentially anticompetitive conduct" around exclusivity deals with movie studios.
At issue is the chains' use of "clearances" -- agreements between theaters and studios that secure exclusive rights to certain movie titles in specific markets. As theater construction in the U.S. has increased, so have requests for clearances.
Spokespeople from both Regal and AMC have said the companies do not feel they have violated antitrust laws, and both are cooperating with the investigation. In its statement, Regal said "We do not believe that any DOJ or state attorney general investigation of movie clearances or any communications or cooperation involving the Company and AMC or Cinemark will produce evidence that the Company has engaged in any anticompetitive conduct in violation of Federal or state antitrust or competition laws," a sentiment echoed by AMC.
Independent theaters are hit hardest by the use of clearance deals, which effectively bar them from screening new releases for weeks after they premiere. Large theater chains can refuse to play a studio movie in certain areas unless they have exclusive rights to do so, which threatens studios' all-important ticket sales. Often, this means that new blockbuster releases can only be seen in chain locations. Taken together, AMC, Regal Entertainment Group and Cinemark Holdings own over 40% of U.S. movie screens, giving them major leverage with Hollywood studios.
The theater giants defended their business practices, saying they only seek clearance for select titles, and the practice is mostly used by the major players to get an edge over each other, rather than to crush small operators. AMC is currently spending $600 million to upgrade more than half of its 5,000 locations in the wake of its 2012 acquisition by China's Dalian Wanda Group.