Question

The Montana Movie Theatre Company (Montana) operates movie theatres in 15 different towns throughout western Montana, including in Missoula, a city of 60,000 people with a major state university. In Missoula, Montana owns and operates five movie theatres with a total of 38 screens. Montana operates the only theatre in Missoula and the theatres within a 30-mile radius around Missoula. Montana charges $6 for matinee movie times and $8.50 for evening movies. These prices are about 10% higher than the prices charged around most of the rest of the state. There are no discount ticket prices of any type for senior citizens, students, or any other group. Most movie theatres around the rest of the state offer some, if not all, special individual or group discounts.

Several other movie theatre companies have sought to build movie theatres in Missoula over the last 10 years. Each of these efforts has failed. In addition, Montana has actively lobbied city authorities to keep out any other movie theatre companies.

1. What are the business and the associated legal issues with Montana’s operations?

2. Is there a possible case of monopoly here under federal law? Why or why not?

3. During discovery in a lawsuit situation, what, if any, accounting records should you request if you were engaged by the lawyer for Montana to defend Montana in a monopoly-related lawsuit? If you were engaged by a competitor of Montana to sue Montana in a monopoly-related lawsuit?

4. What other information would you need as a forensic accountant involved in this type of situation defending Montana in a monopoly-related lawsuit? Suing Montana in a monopoly-related lawsuit?

5. What are the services that a forensic accountant, as an expert witness, might be asked to provide in a dispute involving the above scenario defending Montana? Or suing Montana?

Answer 1

1. The Federal Trade Commission Act bans, "unfair methods of competition" and "unfair or deceptive acts or practices". The Montana's operation is covered under Sherman Act under Federal antitrust law. The act outlaws any attempted monopolization that are unreasonable. Fixing of higher prices, lobbying city authorities, arrangements to keep other companies out from a specific area, dividing markets are considered to be illegal under respective law. The penalties extend upto $100 million along with 10yrs in prison.

2. Yes, there is a possible cause of monopoly here. Monopolization under antitrust laws is defined as , "conduct by a single firm that unreasonably restrains competition by creating or maintaining monopoly power." Montana did not had legitimate business justification for behaving in a way that prevents other firms from succeeding in the marketplace. Montana's action would not have been an act of monopolization if it would have been competing on the merits in a way that benefits consumers through greater effeciency , unique set of products or services, innovation or business acumen. Thus, the act of Montana's operation was clear on attemptig monopoly by illegal means.

3. Defend Montana

a) proof of lobbying (it is legal as Montana only influenced the authorities to change decisions)

b) any contract or arrangement letter with any companies or authorities

c) Books of account stating sales and all , along with invoices.

d) All commercial invoices to proove everything was in line of respective business without any overage.

Sue Montana

a) Sales Invoices of all the cities including Missoula and asking for justification for higher prices

b) arrangement with city authorities

c) Donation receipts

d) books of accounts containing balance sheet and profit and loss.

4. In defending Montana, as an forensic accountant , I will ask for financial documents and data for past few years even more than before so as to analyze and interpret that the company has been providing its' services well and maintaining it's status in all over the state.

The access to its' soft copy may also be demanded as well to inquire and identify any issues which were not in line with business.

However, to sue Montana, I may ask for soft copies to verify any type of suspense account if created, the financial datas for assisting in defining the financial framework of the case.

COnducting interviews to aid in the planning and execution of case data collection,

Perform background research on the people and entites relevant to the matter,

Going through expert's report, auditors report on internal audit of organisation ,

To assist in any hearings, conferences and settlement negotiations.