•  There is more to the analysis of the vertical integration phenomenon than measuring whether distribution and exhibition activities are carried out by the same group through different subsidiaries. The major distribution companies (particularly the US majors) can in practice either have direct links (subsidiaries or a majority share) or indirect links with the major exhibitors. In order to define the level of vertical integration, it is often necessary first to determine the degree of independence of the different companies. In several EU countries, the Warner, UCI and MGM groups state that the links between the distribution and exhibition companies which they control are weak. This is even the case for several directly integrated groups, like UGC, whose distribution branch is more interested in optimising the profits of that activity than in supplying the cinemas owned or programmed by the group. A discussion of the degree of autonomy of the different levels of activity is therefore vital to our understanding of such a sensitive sector.

In our analysis, we have taken into account the financial links between the exhibition and distribution arms, but have also tried as far as it is possible to give weight to the cases where the companies consider themselves to be independent.

• In every EU country, with the exception of the Netherlands, distributors are also involved in exhibition. This can be judged by looking at Table 15 and Figure 15.

• In Portugal, vertical integration is at its strongest, as two players control 60% of the distribution market and 65% of cinema admissions. Lusomundo essentially controls all channels of the Portuguese film industry.

• The United Kingdom also has a very integrated market, with over 70% of exhibition controlled by firms who are also involved in distribution.

• The influence of distributors is strongest in exhibition in Ireland, Denmark and France, with, respectively, 47%, 48.5 % and 33.5% of total admissions. However, while in France (UGC - Pathé - Gaumont) and Ireland this integration has been achieved by national players, elsewhere it is the province of the subsidiaries of US-based groups.

• Although very precise data on Greece is not available, it is known that distributors control an important part of the exhibition sector in that country.

• Vertical integration is much less pronounced in other markets: the distributors' market share of exhibition does not exceed 13% in Spain and Belgium, and is 6% in Germany. In the Netherlands, there is no vertical integration.

 
 "Indirect" vertical integration: "alignments"
 
In order to have an accurate picture of the sector, it is important to take into account programming agreements, which have the effect of "indirectly" establishing the mechanisms of integration as well as constituting vertical restraints on the operation of the market.
 
In numerous countries, the extent of vertical integration is effectively doubled by more or less formal exclusivity agreements between distributors and exhibitors, commonly known as "alignments". The UK market is one arena for exclusivity agreements between the US majors, film suppliers and the circuits. In Spain, some distribution patterns in small towns have the characteristics of exclusive agreements, whereas in Greece, distributors are increasingly hiring cinemas, in order to control directly the release of their films. But these practices are rarer where multiplexes are involved, as these cinemas have to have an "all product" programming policy because of the number of screens and the need for a multiplicity of suppliers to fill them.
Even if the cinemas directly owned by the distributors are not restricted to showing "own" films, the access of independent films to screens might seem to be hampered by the extent of vertical integration. However, despite the strong trends towards vertical integration within the market, the operators who responded to this part of the qualitative study showed that this was rarely the case: vertical integration does play a part in limiting access to the films which are extremely profitable, where a distribution subsidiary of a group can give preferential treatment to its sister companies, but in the majority of cases, the difficulty of access of cinemas to films was attributed to distributors' lack of interest in the less profitable screens, or to too few prints being put into circulation.
 

 Regulation
 
Table 16 shows legislation and regulation in the various EU countries which deal with programming practices which could be considered anti-competitive.

• For a distributor, exclusive programming, involving granting exclusive rights to films to one exhibitor at the local level, is not the subject of any specific regulation in most EU countries but it is covered by the provisions of general competition law. In France, by contrast, the Fair Trading Act 1984 specifically covers this type of practice.

• The practice of "block-booking", granting to cinema operators a profitable film on the condition that they also take other films with less commercial potential, is not specifically forbidden by regulations except in France, Spain (where a tribunal defending competition exists) and Ireland. Nevertheless, the application of the law in these cases is far from straightforward.

• In France, the resolution of any conflict concerning practices seen as abuses of market power by one party is speedily referred to the Mediator. In countries where corporate structures are well-defined, mediation is guaranteed by competition authorities. Elsewhere, as a general rule, the only source of redress is through the usual legal channels. Whatever redress is available, the efficacy of it is questionable, as exclusive practices continue in every country, and taking legal action remains both expensive and difficult for an independent exhibitor.