In a move that threatens to lay bare long-standing exclusive relationships between exhibitors and distributors in ‘competitive zones,’ Quebec independent exhibitor Les Cinemas Guzzo has filed an official complaint with the Competition Bureau of Industry Canada against Cineplex Odeon and Famous Players as well as distributors DreamWorks skg and Motion International.

The complaint claims that Cineplex and Famous are using ‘illegal tactics’ to limit the distribution of u.s. films by strong-arming distributors, thus monopolizing the West Island market of Montreal where Guzzo opened a new 10-screen complex July 10, the Cinema Des Sources in Dollard des Ormeaux.

Guzzo claims that DreamWorks and its Quebec subdistributor Motion International refused to supply the new theater with the films Small Soldiers and Saving Private Ryan by choosing to open them at a Famous theater in the same area.

‘The two major exhibitors have colluded to divide the market of suppliers,’ alleges Vincenzo Guzzo, executive vp of Cinema Guzzo. ‘Paramount, Buena Vista, mgm, and English Warner Bros. films play Famous Players theaters in competitive zones. Universal, Fox, Columbia, French Warner Bros. films play Cineplex Odeon,’ he says.

‘It’s the only way to control them, by having control over the product.’

But Guzzo’s charges have been met with a chorus of dismissals and criticisms from both exhibitors and distributors alike as well as threats of retaliatory legal action.

‘We have a big concern with the allegations Vince Guzzo has made, so we’ve engaged our lawyers to act on our behalf and we may press charges, perhaps libel or something like that,’ says Ken Prue, vp marketing at Cineplex Odeon Canada. ‘We don’t think his summation of the situation is accurate or reasonable.’

Famous has also consulted its legal counsel on the matter. ‘We will respond to the Industry Canada complaint through our lawyers,’ says Dennis Kucherawy, vp corporate public relations at Famous. ‘We believe his theater in Dollard is competition for us and we have the right to compete for product, but we have done nothing wrong, and far from illegal as he has said.’

Guzzo says that if his complaint with Industry Canada is successful, the ruling could have a huge effect on the Canadian exhibition business.

‘If I win this, it could mean a total transformation of the movie industry in Canada,’ he says. ‘I’m so confident about winning that it’s ridiculous. My next action will be a $40-million lawsuit against Cineplex and Famous for damages for every theater I could not open because of their attitudes in restricting monopoly areas,’ claims Guzzo.

‘The paying customer doesn’t realize that there is a big problem with monopolies in the movie industry to the point that a lot of smaller exhibitors are being discouraged from getting into the business or expanding.’

In a Quebec court, Guzzo filed two unsuccessful attempts to secure an injunction forcing Motion to supply his new cinema with DreamWorks films. ‘I’m not saying give me the product and don’t give it to anyone else,’ says Guzzo. ‘I’m saying give it to me and whoever the hell else you want.’

At Playback press time, the new cinema had only secured one film for its opening, Warner Bros.’ Lethal Weapon.

Guzzo’s new multiplex is roughly five kilometers down the highway from an eight-screen Famous theater as well a six-screen Cineplex theater in Pointe Claire. Guzzo says that even though his new theater features larger seats and better sound and screen than his competitors, he still can’t get product.

‘I’m giving comfort and quality because that’s what’s lacking in some of these markets that I’m going into,’ says Guzzo, who plans to build two 16-screen theaters in Laval and the South Shore of Montreal.

‘That’s what they’re scared about and the only way they can compete is by limiting the product, by basically blackmailing the distributors.’

Question of relationships

Kucherawy points out that while film distributors may play their motion pictures wherever they wish, Famous has established some relationships with studios and distributors in its 78 years of operation.

‘You have the traditional allegiances that have built up in business partnerships where certain distributors and studios decide to play certain exhibitors. That’s a decision made of free will,’ says Kucherawy. ‘It’s not one where the duopoly got together and said you can have this and we can have that. It’s a question of relationships that develop for whatever reasons.’

Cineplex’s Prue also suggests that Guzzo’s actions may be linked to a failed partnership between Cineplex and Guzzo Cinemas on some theater ventures.

‘We partnered in some theater ventures with him and the partnership went awry. Neither party probably got what they wanted and sometimes partnership dissolution can end in acrimony, and that’s probably the background of this,’ suggests Prue.

Guzzo’s version of the partnership alleges that the company founded by his father paid Cineplex $300,000 a year for the last 14 years and that Cineplex in turn helped Cinema Guzzo get first-run product. Guzzo says the money was paid so that his theaters could have access to first-run product that would traditionally be bound for Cineplex or Famous theaters, but that he stopped paying the money this year.

In early April Guzzo claims that Cineplex approached him asking to partner on the company’s three new theaters being built in competitive zones. ‘I said I’m not interested, they’re my theaters and I don’t want to be partners with you,’ he says.

‘That’s when it was made clear to me that if I didn’t want to become partners with them, I would have to close my doors,’ he says.

Prue adamantly disputes Guzzo’s version of events. ‘It’s some pretty serious stuff that he’s saying and we think it’s all unfounded. We can’t say much other than he’s young and impetuous and everything hasn’t fallen his way.’

Shift in power balance

The fact that Guzzo decided to finger DreamWorks as a distributor in collusion with an exhibitor may eventually prove tough to demonstrate with the Competition Bureau as DreamWorks – a relative newcomer – is generally regarded as a company with no official exhibition ties.

‘It’s funny that he’s after us because we play everyone,’ says Don Popow, head of distribution of DreamWorks Canada. ‘We’re new, we have no prior commitments, no history and no baggage. We go out there and try to get the best theater in the zone, which makes us an anomaly I suppose.’

To prove his point, Popow notes that Small Soldiers will be opening in Toronto at the Fairview Mall (Cineplex) and at the Silver City in Richmond Hill (Famous) as well as The Woodbine (Cineplex), which is in opposition to Famous’ Skyway. Down East the film will be playing at Empire Theaters in Moncton, Saint John and Dartmouth where Famous also has theaters.

In regards to Guzzo, Popow asks, ‘Now because he’s opening his theater, I’m supposed to go where I’ve already sold the picture and take it away and give it to him? That’s not going to happen, they’re too close, it’s the same zone, until that zone is changed.’

When asked if the u.s. studios are aligned with certain distributors in competitive markets, Popow says only, ‘It appears that way when I look at the paper.’

But the distribution veteran Popow also points out that the power balance between exhibitors and distributors has shifted.

‘Exhibitors are building these $25-million plexes and they need a steady flow of product. They’re far more dependent upon distributors than distributors are on exhibitors. Historically it was a whole different world where you begged to get in.’

Although Dan Lyon, vp distribution and marketing at Motion International, had an official ‘no comment’ in regards to the Guzzo situation because it was before the courts, he did point out that Motion may have booked Small Soldiers to play the Famous Players Cinema in Pointe Claire because it’s the highest-grossing English-language theater in Quebec. Lyon also said that his company had done business with Guzzo theaters in other areas.

Richard Paradis, president of the Canadian Association of Film Distributors and Exporters says his association is treating the Guzzo issue as a private contractual disagreement.

‘When you open a business you should look at your capacity to get product. If the product is locked up in agreements whose fault is it?’ asks Paradis, adding: ‘Sometimes you can only buy rca televisions at Sears and Toshiba is only at Eaton’s and not at The Bay.’

But the cafde president does say that Motion has the liberty of dealing with whomever it wants.

Officials at the Canadian Motion Picture Distributors Association who represent the interests of the u.s. studios did not respond to Playback’s requests for comment.

But Phil Carlton, president and Canadian division manager of Warner Bros. who chose to supply Guzzo with Lethal Weapon 4, says the new Guzzo theater is in an ‘open zone,’ as opposed to a ‘competitive zone.’

‘We just feel that it’s a brand new theater, it’s going to do very well, it seems to be in a zone by itself and in our business judgment we’ve decided to supply it,’ says Carlton, who adds he expects no reaction from Famous which will be running Lethal Weapon 4 in much of the country.

‘They’re our films and we’ll book them where we feel we should play them.’

Although Guzzo is being dismissed by much of the distribution and exhibition community with his allegations, there are some independent theater operators with similar experiences who have pledged support and rallied to Guzzo’s cause.

In a letter to Guzzo, Tom Hutchinson, president of Magic Lantern Theatres, writes, ‘We have had our experiences with these companies as well. We built a seven-screen cinema in Saskatoon a few years ago and were essentially forced out of business by the two majors. We were fortunate in that Cineplex bought the cinema from us; otherwise it would have been a financial disaster.’

Guzzo also received a similar letter of support from June Tarrant, president of Tarrant and Tarken Entertainment Group, which operates seven independent theaters in Ontario.

The Guzzo complaint remains before the Competition Bureau, which could take several months to render a ruling. With the impending entrance of Kansas-based exhibition chain amc to the Canadian market, the ruling could set an important precedent as amc will also have to acquire product for its theaters.