Was the Antitrust Action that Broke Up the Movie Studios Good for the Movies? Evidence from the Stock Market

The Paramount antitrust litigation was a series of eight actions brought by the Department of Justice (DOJ) beginning in 1938 and ending in 1949 against the major motion picture studios. In the early cases the DOJ succeeded in changing industry contracts, but it took a decade of litigation to accomplish what the DOJ wanted, which was to break up the studios and force them to sell their theater chains. We use stock market evidence to evaluate the impact of events in the Paramount litigation on firm value. By the stock market's assessment, the Supreme Court decision was the major event. But the impact of this and other decisions on integrated and nonintegrated defendants, and on a nondefendant, does not support the view that the courts dismantled a successful monopoly; indeed, the contrary may be true. Copyright 2004, Oxford University Press.