Race, Markets, and Hollywood's Perpetual Antitrust Dilemma

79 Pages·2011·0.71 MB·English

by  H. Harvey

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Race, Markets, and Hollywood's Perpetual Antitrust Dilemma
Hosea H. Harvey*

This Article focuses on the oft-neglected intersection of racial bias and anti-competitive
markets. Applying theory to practice through historical, contextual, and empirical analysis, the
Article describes the state of Hollywood motion-picture distribution from its anti-competitive
beginnings through the industry’s role in creating an anti-competitive, racial impasse at the end
of the last century. The Article demonstrates through empirical analysis that race-based
inefficiencies have plagued the film distribution process and that such inefficiencies were caused
primarily by the anti-competitive structure of the market itself, and not merely by overt or
intentional racial-discrimination. After explaining why traditional anti-discrimination laws
would be ineffective remedies for such inefficiencies, solutions are framed through antitrust
remedies and market mechanisms.

*Assistant Professor of Law and Political Science, Temple University, Beasley
School of Law. J.D. (2000), Stanford Law School; Ph.D. (Political Science) (2005),
Stanford University.

INTRODUCTION
Some years ago, despite a strong script and a leading black entertainer behind
the project, every major Hollywood studio rebuffed production of the feature-film
Amistad-- leaving Steven Spielberg’s DreamWorks SKG studio as the only viable
option.1 It seemed that Amistad was somehow coded for “blacks only” as if its
commercial fate rested solely in the hands of African-Americans while being
automatically and uniformly rejected by the rest of the U.S. population, white
Americans in particular.

1 The executives who refused had comments ranging from “No one is interested in this” to the more
succinct “Slaves on a ship. How revolting!” See, e.g., Donna Bailey Nurse, A Tale of Two Ships
Launched in Hollywood, THE GLOBE AND MAIL (Toronto), March 27, 1998.
2 Amistad’s release was eventually widened to more than 500 theaters, but barely so.
3 Studying the real-life consequences of racial bias in these markets is not an entirely new phenomenon,
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Dogged persistence and an army of A-list industry leaders eventually found a
production home for Amistad. But once a film is produced, control over its box-office
potential and market success shift to Hollywood’s highly consolidated marketing and
distribution regimes. So what might we expect from a lavishly filmed Spielberg release
attached to well-recognized actors? If you were to imagine a marketing blitz followed
by a massive, nationwide release, you would be very wrong. Instead, Amistad was
shuttled to as few theaters as humanly possible, all things considered. The theory, as
set out above, was that consumer demand for the product was nil. Yet Amistad grossed
$14,192 per screen at 322 theaters during its first week of release in the post-
Thanksgiving season.2 By comparison, in their first weeks of release, The Truman Show
grossed $13,606, Air Force One grossed $12,709 and Armageddon generated $11,544 per
screen. Yet, because a movie like Armageddon was initially distributed to nine times as
many theaters as Amistad, its opening weekend box office grosses were significantly
higher. What might explain this seemingly inefficient result? In this Article, I argue
that racially biased market outcomes are long-standing consequences and
characteristics of industries that lack competition. So to solve these biases, competition,
market forces, and antitrust law – not traditional anti-discrimination regimes – will
provide the best remedies.
This Article examines race bias in an unfamiliar context – outside of the familiar
rubric of traditional anti-discrimination regimes. In doing so, it treads on relatively
unfamiliar ground. Law scholars have not given adequate attention to a fairly
significant problem – the fact that non-competitive markets fuel inefficient and racially
biased outcomes – not just in the labor market, but also especially in economic

2 Amistad’s release was eventually widened to more than 500 theaters, but barely so.
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outcomes relating to production, creation, and distribution of goods and services.3
When we move beyond racial-disparities in the traditional employer/employee
relationship, what becomes of racial bias in the transactional marketplace? In these
markets where we see a sort of anti-competitive racial impasse, how can we more easily
determine whether racial inequities remain, what causes them, and how the law can
eliminate them?
This Article proceeds as follows. First, I examine the broad contours of existing
race-bias scholarship. Next, I trace the development of the Hollywood production and
distribution system, with an eye toward the role that a lack of competition might play in
structuring racially stratified outcomes. Then, I turn toward the modern pre-video-on-
demand (pre-VOD) era, specifically the contextual role that race (and to a lesser extent,
gender) played in feature film distribution between the years 1991 and 2000. Through
econometric modeling of race, distribution, and outcomes data, I attempt to determine
the extent of a race-based injury being caused by non-competitive distribution market
forces.4 The data shows that race-bias is indeed a driving force of distribution decisions,
and likely rooted primarily in a lack of competition, although such decisions must also
be contextualized within a prior history of explicit racial preferences and/or racial
animus. Therefore, a review of anti-discrimination remedies shows why antitrust law

3 Studying the real-life consequences of racial bias in these markets is not an entirely new phenomenon,
but is still a largely undeveloped field. Ian Ayres is among leaders in the field and has made many
important contributions. Prior to his widely cited car audit experiment, few legal scholars had broached
the subject. See, e.g., Ian Ayres & Peter Siegelman, Race and Gender Discrimination in Bargaining for a
New Car, 85 AM. ECON. REV. 304 (1995). See also IAN AYRES, PERVASIVE PREJUDICE?
UNCONVENTIONAL EVIDENCE OF RACE AND GENDER DISCRIMINATION (2001).
4 As the Article explains later, the data gathered herein includes a series of gender-related variables.
Although gender (standing alone) is not fully discussed here, except in contrast to race, the discussion of
how gender differs from race in this framework will be the subject of a subsequent article.
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and market-forces provide a more robust analytical framework for the problem.5
Finally, I offer tentative conclusions, next steps, and discuss areas of uncertainty.
The difficulty in connecting antitrust injury and racial outcomes in this Article is
underscored by a frank scholarly admission: “there seems to be a widespread, implicit
belief (at least among white males) that race and gender discrimination is not a serious
problem” in markets defined by products, not workers.6 Accordingly, legal scholars
have engaged in few studies of the role that race plays in structuring modern
marketplace interactions between seller and buyer and the overall racially polarized
structure of market movements within industries.7 This lack of credible information,
particularly regarding the role of race in structuring decisions about what to sell, and to
whom, is troubling if one cares about remedying modern commercial racial bias.
Therefore, the goals of this Article are twofold – (1) to move further toward engaging
market-wide and antitrust scholarship with the empirical analysis of discrimination and
(2) to highlight an underdeveloped area of legal study – solving the harms resulting
from markets where race plays an important, but difficult to identify role in shaping
market outcomes.

5 My concerns in this Article focus on identifying harms in a market that is not operating at maximum
efficiency. In a different article, one might solve for problems of bias in markets where such bias is
indeed efficient – at least with respect to profit maximization.
6 AYRES, supra note ** at 3.
7 See, e.g., Ian Ayres et. al., supra note ** (noting “almost no one has tested whether consumers’ taste for
discrimination might be directed at a seller’s race itself (or the race of a seller’s employees). This failure
to test is unjustified.”)
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I. BIAS AND THE SCHOLARLY PATH NOT TAKEN
More than forty-five years after President Johnson signed the Civil Rights Act of
19648 in an effort to forthrightly reduce bias in the United States, the commercial
marketplace and large organizations have improved with respect to overall levels of
racial bias. But marketplace dealings with respect to race are still far from perfect.
Certainly the Civil Rights Act of 1964, its progeny, and sisters at the state and local level
were necessary to combat a legacy of de jure and de facto inequality.9 These anti-
discrimination remedies substantially eroded discrimination in public and private life –
by penalizing employers, governments, and individuals who discriminated. Although
much work remains to be done, overt manifestations of racial prejudice have declined
to the point where old-fashioned intentional discrimination is harder to find, despite
our awareness that racial inequalities remain.10 In place of the old prejudice, new and
more difficult to reach racial problems are challenging our assumptions about how law
can fully eradicate bias in the United States – particularly in commerce. In more recent
times, questions of how racial bias should be mitigated have moved beyond political
and formal integration to more intractable questions about how racial minorities are
incorporated into the cultural and economic fabric of American life. These more
intractable questions are difficult to answer because research pointing in the direction of
answers is scarce. Further, well-intentioned actors who are unintentionally biased or

8 Pub. L. No. 88-352, 78 Stat. 241; 42 U.S.C. Sec. 2000a to 2000h-6.
9 See, e.g., JOHN HOPE FRANKLIN AND A. A. MOSS, FROM SLAVERY TO FREEDOM: A HISTORY OF NEGRO
AMERICANS (New York: A.A. Knopf, 1988).
10 Among many examples, African-Americans and Latinos, on average, spend at least $3,000 more than
white citizens on locating and buying a house. See JOHN YINGER, CLOSED DOORS, OPPORTUNITIES
LOST: THE CONTINUING COSTS OF HOUSING DISCRIMINATION (New York: Russell Sage Foundation,
1995).
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even unaware that the bias occurs oftentimes cause many racially-biased outcomes in a
variety of industries. 11
The contemporary study of discrimination and racial bias has most frequently
been tied to two basic explanations for the existence of discrimination in the United
States – tensions between groups based on fears of resource constraints and aversions to
members of groups based upon one’s views of the group’s overall characteristics. Legal
scholars have also engaged discrimination at the macro-level, but viewed the role of
race as primarily filtered through the context of various legal regimes and structures.12
These well-developed research programs have proven that facially neutral formal
decision rules or organizational structures still often yield a racially biased impact in
various institutional settings. This is especially true in the criminal justice system,
where racial discrimination has been more than widely scrutinized.13 The deleterious
impact of ignoring racially impacting schemes has also been demonstrated in other
areas such as voting rights.14
The general trend – no matter the theoretical framework – is that law and social
science at least still can agree that racial bias has not been eliminated completely. Racial
bias now takes more complicated and nuanced forms, despite the effective formal

11 John Dovidio and Samuel Gaertner, Aversive Racism, in 36 ADVANCES IN EXPERIMENTAL SOCIAL
PSYCHOLOGY 1 (Mark P. Zanna ed.) (San Diego, CA: Academic Press, 2004).
12 See, e.g., Dorothy Roberts, KILLING THE BLACK BODY: RACE, REPRODUCTION, AND THE MEANING OF
LIBERTY (New York: Pantheon Books, 1997) (describing the link between prejudice against African-
American women and the role of race in setting social welfare policies that affect African-Americans).
13 See Michelle Alexander, THE NEW JIM CROW: MASS INCARCERATION IN THE AGE OF
COLORBLINDNESS (New York: New Press, 2010). See also Randall Kennedy, RACE, CRIME AND THE
LAW (New York: Pantheon Books, 1997).
14 See Lani Guinier, THE TYRANNY OF THE MAJORITY (New York: Free Press, 1994) (arguing that
traditional winner-take-all voting systems disadvantage both minority citizens as well as progressives
who support diverse policy choices and candidates).
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power of the law’s prohibitions against discrimination.15 Legal scholars are now further
integrating insights from social psychology into the study of anti-discrimination law
and the research programs resulting from this inquiry are clearly promising.16 Scholars
from other fields have joined the debate and are questioning the appropriate social
science form of inquiry.17 Yet though cross-disciplinary scholarship has provided useful
insights, theories of discrimination in transactional markets still focus on a familiar
debate. This debate, between animus and cognitive theories of market behavior, almost
exclusively focuses on legal regimes governing the traditional employer/employee
relationship. Therefore, in this Article, I focus instead on the ways that an anti-
competitive market can create and maintain racially biased commercial outcomes.
Given the impressive array of existing work, in any attempt to frame problems
involving racial bias within the constraints of existing legal regimes, one might
normally wrestle with some core questions, such as the role that constitutional law or
Title VII might play in providing a “solution”, whether discrimination is “animus” or
“statistically” based, and so-on. Then, one might walk through the Title VII burden-
shifting framework and map such framework onto the problem.
This Article does not attempt this for a number of reasons detailed later in
Section IV, but which bear mention here. First, as the racial bias studied here is related
to a product, not a person, the Title VII regime is simply not a useful framework with
which to frame the problem. Second, as the article is not (directly) concerned with

15 See David B. Oppenheimer, Negligent Discrimination, 141 U. PA. L. REV. 899, 902-15 (1993)
(reviewing studies showing that overt acts of discrimination have declined amidst social opprobrium, but
that covert levels of racial bias remain high).
16 Vol. 94 CAL L. REV. (2006) was devoted to exploring this issue. See, e.g., Anthony G. Greenwald &
Linda Hamilton Krieger, Implicit Bias: Scientific Foundations, 94 CAL. L. REV. 945 (2006) as an example
of such work.
17 See Gregory Mitchell & Philip E. Tetlock, Antidiscrimination Law and the Perils of Mindreading, 67
OHIO ST. L.J. 1023 (2006).
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employment/labor practices, it makes little sense to retread familiar ground. Finally,
with respect to issues of casting and hiring and remedies that might result from racial
discrimination, definitive and innovative solutions have been framed and the question
much more thoroughly explored than is appropriate for the top-down analysis
presented here.18
When studying racial bias at the market level, divorced from the framework of
employment discrimination and related laws, the legal harm is a vexing question that
must be addressed. In a traditional employer/employee dispute, a racially biased
outcome might occur when an individual suffers some sort of adverse job/labor action
connected to his or her race. That action is a race-based harm that can be easily
identified, but perhaps less easily proven. But, when studying racially-biased markets
and industries, how might one assess who is harmed by racially biased or stratified
outcomes? For this Article’s purposes, if we imagine a ‘film’ as a product, the ‘owners’
of that product are primarily financiers, producers, and (often) production houses and
studios. Thus, when that product suffers from some sort of racial bias in the
marketplace, those owners suffer from a legal harm that antitrust law can remedy.19 To
fully understand the scope of the market-bias and its impact, we now turn to contextual
analysis of the industry’s competitive failure over the last century.

18 See, e.g., Russell Robinson, Casting and Caste-ing: Reconciling Artistic Freedom and
Antidiscrimination Norms, 95 CAL. L. REV 1. (2007). Robinson focuses on race-bias in the casting
process, whereas this Article’s focus is on the market as a whole. Consequently, though I do not dispute
that such bias exists, it shall not be discussed at length here.
19 Though it is true, secondarily, that actors and others who helped to create the product also suffer a
harm, this Article focuses on the direct harm to those who own the product.
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II. THERE IS NO COMPETITION: HOLLYWOOD, RACE, PRODUCTION, AND DISTRIBUTION
Movie studios and their distribution arms are ideal candidates for an empirical
analysis of market-wide racial bias. In addition to their freedom from most race and
gender discrimination regulations20, there is no federal or state agency with regulatory
oversight over movie studios – separating and distinguishing them from the more
highly regulated television and radio firms.21 The only “regulator” that governs film
production and distribution is a voluntary and private industry-created group, the
Motion Picture Association of America (MPAA), which, among other things, provides
the ratings structure for virtually all major studio films released in the United States.22
Further, because of the relatively open reporting of film box-office results, one can test
theoretical and observational findings with a quantitative analysis of measurable
economic output. When market outputs are tested in this fashion, one can determine
the extent to which they are tainted by racial bias.23

20 But see, e.g., Robinson, supra note ** at 29, describing how traditional race-related claims might be
viable in certain contexts.
21 For an efficient discussion of the Federal Communications Commission’s (FCC) oversight of the radio
and television industries, see Monroe E. Price, The Market for Loyalties in the Electronic Media in A
COMMUNICATIONS CORNUCOPIA 148-49 (Roger G. Noll and Monroe E. Price eds.) (Washington, DC:
Brookings Institution Press, 1998).
22 Major studio films are defined here as films produced or distributed by Hollywood based major studios
that were released to a minimum of 500 theater screens. This 500 theater minimum accounts for the large
majority of studio-produced films in a given year. Major studios during the time period studied here, for
distribution purposes, are defined as: Disney/Miramax, MGM/Universal, 20th Century Fox, Warner
Brothers/ New Line, Paramount, and Sony/Columbia.
23 This approach is an underutilized, but highly effective method of examining discrimination. See
AYRES, supra note *** at 404-5 (“outcome tests can provide powerful evidence of when a particular kind
of decision-making bias has an unjustified disparate impact.”)
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A. Anti-Competitive Beginnings
In contrast to recent times, the motion picture industry originally developed and
thrived amidst immense government regulation.24 Thomas Edison developed the first
motion picture camera and player, and others followed in pursuit. After a significant
period of development, he and his competitors agreed to pool their patents for cameras
and projectors, creating the Motion Picture Patents Company (the MPPC). In 1910, the
MPPC created the General Film Company (GFC), in order to control the distribution
pipeline of films and to ensure that exhibitors who sought popular films also used
MPPC products. Fearing the growing dominance of the MPPC and the GFC, the lone
remaining independent distributor sued the MPPC and GFC, arguing that their
growing dominance violated federal antitrust law. The courts agreed, and ruled that
the MPPC had to dissolve.25 See Chart 2.1.

24 See James Sweet, EARLY ANTI-TRUST REGIMES AND THE RISE OF HOLLYWOOD STUDIOS, unpublished
manuscript on file with author.
25 See United States v. Motion Picture Patents Company, 225 F. 800 (E.D. Pa 1915).
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