A Hollywood union’s recent amendments to its union rules has sparked federal antitrust lawsuits by talent agencies. The Writers Guild of America (WGA), a labor union and the exclusive collective bargaining representative for writers in the entertainment industry, recently instituted new rules that prohibit its members from dealing with talent agencies that do not adopt the WGA’s new “Code of Conduct.” The WGA’s new Code prohibits its members from dealing with talent agencies that employ “packaging” arrangements, whereby agents forego individual commissions from their clients in lieu of “packaging fees” from production companies for providing pools of talent (writers, actors, directors, etc.). The Code also prohibits WGA’s members from affiliating with “any entity that produces or distributes content.” If WGA members continue to deal with talent agencies that have not adopted the Code, the members face sanctions, up to and including expulsion from the union.

WHAT HAPPENED:

• Three of the “Big Four” talent agencies—Creative Artists Agency, LLC, United Talent Agency, LLC, and William Morris Endeavor Entertainment, LLC—individually brought suit alleging that WGA’s new rules effectuate an illegal group boycott in violation of Section 1 of the Sherman Act.

• The talent agencies allege that WGA has orchestrated a group boycott by requiring its members to refuse to deal with any agency that employs “packaging fees” and has furthered this conspiracy by coercing certain “showrunners” (e., independent contractors, producers of television content and other employers in the television industry) to refuse to deal with plaintiff-agencies. Allegedly, more than 7,000 writers in television and film have fired their agents pursuant to the Code.

• The Guild brought federal antitrust counterclaims against the agencies alleging that the “packaging fee” model was instituted by the talent agencies themselves and constitutes a price-fixing conspiracy aimed at reducing competition in the talent agency market and violates California’s Unfair Competition Law. The Guild also counterclaimed that the packaging fees constitute unlawful “kickbacks” in violation of the federal Labor-Management Relations Act, and using the proceeds from those fees to fund the agencies’ enterprises and in-house production companies constitutes a “racketeering enterprise” in violation of Racketeer Influenced and Corrupt Organizations Act (RICO).

• On September 27, 2019, the plaintiffs filed a consolidated complaint in the US District Court for the Central District of California. William Morris Endeavor Entm’t, LLC, et al., v. Writers Guild of America, West, Inc., et al., No. 19-cv-05465 (C.D. Cal. Sept. 27, 2019).

WHAT THIS MEANS:

• Although federal antitrust laws provide an exemption for labor union activity, the federal labor exemption does not immunize otherwise anticompetitive conduct that is not part of bona fide labor negotiations.

• Antitrust scrutiny in the labor market has been increasing ever since the Department of Justice announced its efforts to prosecute “no poach” agreements criminally, see here, here and here. Most recently, the DOJ held a public workshop regarding antitrust issues in labor markets.

Parties engaging in labor negotiations should be on high alert for any practices that might raise antitrust scrutiny, particularly those that are outside the parameters of traditional labor negotiations, like negotiations of wages and benefits packages.