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Antitrust Suit Against Major Movie Houses

HOUSTON (CN) - AMC and Regal are trying to shut down a new luxury movie theater by threatening to boycott studios that license first-run films to it, iPic-Gold Class Entertainment claims in an antitrust lawsuit.

iPic, of Boca Raton, Fla., started in 2006. It touts itself as a high-end alternative to traditional movie theaters. Its theaters have large reclining leather seats, pillows, blankets, reserved seating, fine dining, alcoholic drinks, seat-side wait service and free popcorn.

The company opened a theater two weeks ago in Houston's posh River Oaks District.

It has 12 theaters, with a total of 89 screens, in eight states and is building another in the Dallas suburb of Frisco to open next year.

"The new Houston theater has been hugely popular among members of the public. In its first week of opening, some 12,000 individuals signed up as iPic members," iPic says in its lawsuit in Harris County Court.

On its website, iPic is selling tickets to a Wednesday night showing of "The Peanuts Movie" in Houston for $16 or $28: the higher price is for a reclining leather seat. These are "non-member" prices. iPic offers ticket discounts and other perks to people who buy memberships. Its "Sapphire" membership costs $15 a year.

iPic sued Regal Entertainment Group, AMC Entertainment Holdings, AMC Entertainment Holdings Inc.; AMC Entertainment Inc. and American-Multi-Cinema Inc. on Tuesday.

iPic says it's competing for different customers than those who attend the "megaplexes" operated by AMC and Regal; that it's opening of other theaters has not reduced the ticket sales of nearby megaplexes, but increased the total number of moviegoers; and it's in Hollywood studios' interest to license first-run films to all theaters.

AMC and Regal don't see it that way.

Regal owns a Houston megaplex theater 1.4 miles away from iPic's, called the Edwards Greenway Grand Palace 24. It has 24 screens.

"On July 10, 2014, Regal called every major studio with the same message: if the studio licenses a film to play at iPic, Regal will refuse to play that film at its Greenway theater," the complaint states.

iPic claims AMC and Regal are acting in "lockstep" to stifle competition. The same day Regal threatened to boycott studios' new films at its Greenway theater, iPic says, AMC made the same threat about iPic's planned Frisco theater.

iPic calls AMC, Regal and Cinemark the "Big Three" in the lawsuit. It says they "control 60 percent of the revenue from movie ticket sales in the United States," and "control 60 percent of the screens and 69 percent of the box office revenue" in Houston.

Cinemark is not a defendant in the lawsuit.

Because the Big Three have a grip on the market, iPic says, studios listen to them and cave to their demands.

"Regal's threat has been effective. Three major studios - Universal, Sony and Fox - changed course and told iPic that they will be allocating films, and they have refused to explain their decision," the complaint states.

When a studio allocates first-run films, it licenses them to certain studios in a market. "'First-run' means the initial showing of a film in a movie theater, until exhibitors stop showing it," the exhaustively researched complaint says.

Thanks to Regal's boycott, iPic says, it could not show Fox's summer blockbuster "The Martian" and nine other films at its theaters this year.

"The result is catastrophic for iPic, its business model depends on licensing first-run films," the lawsuit states.

AMC used the same tactics in 2013 to run out of business a theater that planned to show new movies dubbed in Spanish, catering to Houston's large Hispanic population, Viva Cinema claimed in a federal antitrust lawsuit in April this year.

iPic cites Viva's downfall in its lawsuit: "There is every reason to believe AMC will follow through on its threats to boycott films licensed to iPic in Frisco. Indeed, AMC previously enforced similar boycotts against Viva Cinema and successfully drove it out of business."

iPic says the Big Three are not scaring only movie studios from doing business with it.

In Newport, Calif., Regal persuaded a mall manager not to let iPic open a theater there, by claiming iPic wouldn't be able to license first-run films, iPic claims.

"The mall bowed to the pressure and took a lower-value management deal for a new Regal theater instead," the lawsuit states.

In Seattle, iPic was negotiating with a developer to build a new iPic near a Cinemark theater, but Cinemark told the developer iPic wouldn't be able to license first-run films. "As a result, the Seattle development was abandoned," iPic claims.

iPic's attorney Paul Yetter with Yetter Coleman in Houston was in depositions Wednesday morning, unavailable to explain why Cinemark was not named as a defendant and why the antitrust case was not filed in Federal Court, as most antitrust cases are.

iPic seeks damages for three violations of the Texas Antitrust Act and a restraining order to stop AMC and Regal from blocking its licensing of first-run movies.

AMC Entertainment spokesman Ryan Noonan did not immediately return a phone message seeking comment, nor did Regal Entertainment's vice president of communications Richard Grover.

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