Notwithstanding  United States v. Paramount Pictures (1948) 334 U.S. 131, which applied a per se test to circuit-dealing contracts in movie theaters, this decision holds that the rule of reason test applies to a non-monopoly claim of circuit-dealing contracts under the Cartwright Act.  Paramount Pictures dealt with a unique market structure which has since vanished from the motion picture industry.  Also, since Paramount Pictures, the US Supreme Court has generally held that vertical restraints are to be analyzed under the rule of reason.  Circuit-dealing contracts are contracts for exhibition of first-run movies by more than one theater under common ownership.  While circuit-dealing may tilt competition in favor of larger theater chains and inhibit competition by smaller theaters or new entrants, those anti-competitive effects are not inevitable nor do they necessarily outweigh pro-competitive effects of those contracts.  In applying the rule of reason analysis, the decision first holds that the geographic product market must include more than the “clearance” area in which distributors would license just one theater to run a first run film.  The market must be defined in light of the ultimate consumers–movie goers–who could and did travel outside the clearance area to view first run films.  Plaintiffs’ evidence also failed to show injury to competition from the circuit-dealing contracts.  The contracts did not limit the number of film licenses within the clearance area since only one license per film would be issued within that area regardless of circuit-dealing.  Nor did plaintiff show that consumers were denied a choice of theaters for first-run films since it did not introduce evidence that consumers could not travel outside the clearance area to see those films.  There was no evidence that the circuit-dealing contracts restricted entry into the market.  After plaintiff closed its business, another entity took over and ran the same theater.  Since there was no evidence to show that the circuit-dealing contracts caused plaintiff’s demise, there was no support for plaintiff’s theory that the contracts had the anti-competitive effect of denying consumers a unique “art film theater.”