WME Sues WGA For “Unlawful Group Boycott” In Violation of Antitrust Laws; WGA Says Suit Has “No Merit” – Update

UPDATED with more detail, WGA and WME statements: WME has filed an antitrust lawsuit against the WGA East and WGA West, accusing them of a “wanton abuse of union authority in violation of antitrust law” in their ongoing battle against Hollywood’s talent agencies. The lawsuit, filed Monday in U.S. District Court in Los Angeles, accuses the two unions of engaging in an “unlawful group boycott,” as prohibited by the Sherman Antitrust Act.

“We took today’s step with careful consideration,” WME said in a statement. “The WGA negotiating committee has made it clear both through its legal action and unwillingness to negotiate that it was never interested in making a reasonable deal. We are now left to seek a legal remedy for this dispute. While we wish we were not in this position, we will not capitulate to a leadership group that limits the choices and opportunities available to our clients, and has made repeated attempts to undermine our business.”

The legal wrangling comes against the backdrop of the WGA’s 10-week standoff with the Association of Talent Agents over a new franchise agreement. Those talks broke off on April 12, after which the guild ordered its members to fire all their agents who refuse to sign its new Agency Code of Conduct, which bans packaging fees and agency affiliations with corporately related production entities. At last count, the guild said that more than 7,000 of its members have terminated their agents. The guild, which last week declared the negotiations at an impasse, is also suing the Big 4 talent agencies for conflicts of interest and breach of fiduciary duty.

“WGA leadership has engaged in an unprecedented abuse of union authority that has pushed their guilds beyond the protection of the labor exemptions,” the suit states (read it here). “Their tactics are unlawful, and WGA’s outright bans on agency packaging and content affiliates do not serve any legitimate union interest.”

The WGA said there is “no merit” to the lawsuit.

“History repeats itself,” the guild said in a statement. “In 1975, the William Morris Agency sued the guild for antitrust violations in response to the WGA’s campaign to prohibit packaging fees. A federal judge made an initial ruling in the WGA’s favor. There is no merit to WME’s lawsuit, and the guild will not be bullied into a bad deal.”

According to the suit, the WGA’s leadership “has orchestrated a series of anticompetitive agreements to prevent WME (and other talent agencies) from representing writers if the agencies do not stop their long-accepted, industry-standard practice of ‘packaging’ talent to studios in exchange for packaging fees, and do not stop affiliating with companies that produce or distribute content. WME has not agreed to these illegal conditions set forth in WGA’s so-called Code of Conduct and thus WGA has organized an unlawful group boycott to prevent WME from continuing to represent WGA member-writers. To date, approximately 1,300 writers (television and film) and showrunners have fired WME as their talent agency because of WGA’s boycott.”

The lawsuit states that “the group boycott, which stifles this competition, as well as competition in the market to represent writers, is a classic, per se violation of the antitrust laws.”

It also claims that the WGA “has coerced certain talent agencies to join its illegal boycott under the threat of losing their writer-representation businesses,” and “has tried, and continues to try, to coerce Hollywood studios to refuse to deal with agents who will not sign the Code of Conduct by, among other things, threatening the studios with objectively bad faith litigation.”

“To effectuate its boycott, WGA leaders have coerced their member-writers and showrunners into agreeing to refuse to deal with WME and other talent agencies who will not agree to stop packaging or affiliating with content companies by threatening these individuals with expulsion and other union discipline that would imperil their ability to work,” the suit states.

“Finally, WGA is inducing certain unlicensed managers and lawyers into joining the conspiracy by telling them that they should perform the work of boycotted talent agents even though it is illegal for them to do so. In particular, California (and New York) statutory law limits unlicensed managers or lawyers—as opposed to licensed agents—from procuring film and television employment for writers and other talent. But WGA has wrongly told unlicensed managers and lawyers that pursuant to a ‘limited delegation of WGA’s bargaining authority’ they can and should procure employment for writers.”

“WGA’s absolute bans on agency packaging and content affiliates are thus grossly over-restrictive, unnecessary to redress any legitimate union concern, and intrude upon commercial activities in markets that WGA has no authority to regulate,” the suit states. “Moreover, WGA’s actions will not only harm the economic interests of its own writer-members, including the showrunners who work as producers, but they will also harm the economic interests of talent represented by other entertainment guilds (e.g., actors and directors) who want to benefit from packaging and agency content affiliates.”

“What WGA West president David Goodman has aptly conceded to be a WGA ‘power grab’ by its leadership in order to ‘conquer’ the most successful talent agencies like WME is also a whiplash-inducing about-face of seismic proportion,” the suit says. “Up until April 12, 2019, WGA had expressly permitted packaging for more than forty years. For a generation, WGA utilized narrowly-tailored agent regulations to prevent any harm to union members from actual—not potential—conflicts of interest.

“WGA has never offered a cogent explanation for why the agency regulations permitting packaging and content affiliates that served its members so well for more than 40 years would not continue to do so now. Even so, WME tried—over-and-over in discussions with the WGA—to address any arguably bona fide WGA concern about these practices. WGA’s leadership responded—when they responded at all—with dismissiveness and derision and made no bones about their self-proclaimed objective to effectuate a “power grab” and “conquer” the major talent agencies and restrain trade in commercial markets. That is not a legitimate union interest. Indeed, being perceived as “powerful” is not a pejorative status for a talent agency— influence and clout with the studios are features and services that many writers want agents to provide.”

“Accordingly, WME has always committed—and continues to commit—to refrain from any and all behavior that would harm the interests of its clients. Indeed, WME made this commitment to WGA through the AMBA for over 40 years. But WME will not agree to WGA’s total and anticompetitive bans on agency packaging and agency-affiliate content companies because of unsupported and counter-factual allegations of harm to writers from purported conflicts of interest. The reality is that agency packaging and content affiliates provide significant benefits to writers who (used to be able to) exercise their freedom of choice to take advantage such of practices. In the words of WGA’s leadership, the boycott to enforce their unlawful bans is nothing more than a ‘power grab’ masquerading as a legitimate exercise of union authority.”

“This contention of harmful conflicts is not only false, but astounding in its implausibility after WGA expressly endorsed agency packaging for more than 40 years. From September 22, 1976 until April 12, 2019, WGA’s agent regulations were set forth in the AMBA which provided, among other things, that whenever a talent agency took a package fee, it could not additionally commission the writers who were part of the package. See AMBA, § 6(c). In other words, up until April 12, WGA did not merely fail to ban packaging as a supposedly invariable harmful conflict to writers’ interests, WGA affirmatively endorsed packaging for more than 40 years as a practice that benefitted its members by eliminating the 10% commission they would otherwise have to pay, and by facilitating the production of shows and films that might not otherwise get made.”

The suit also claims that the WGA’s leadership “has decided to misuse WGA’s power as a union to specifically target and cause injury to WME and a handful of the other most prominent talent agencies.” According to the suit, “the conduct of the WGA leadership has demonstrated that they never intended to negotiate in good faith with ATA or the talent agencies. WGA’s prohibitions on agency packaging and agency-affiliate content companies—and its group boycott to enforce them—were a fait accompli from the beginning of the negotiations because anything less than these outright bans would not have served WGA leadership’s ‘power grab’ and desire to ‘divide and conquer’ the major agencies.

“The purpose and effect of the challenged boycott is to directly impact the business market for producing and distributing TV shows and movies. Boycotting talent agencies who will not adhere to the Code of Conduct also adversely impacts the markets for the services of, e.g., directors and actors, who WGA has no authority to represent and who will no longer benefit from agency packaging or the existence of content affiliates. Indeed, WGA has affirmatively stated that its packaging ban will impact actors and directors and the businesses of the studios , as well as WGA members who work as showrunners or producers . The non-statutory labor exemption does not protect anticompetitive WGA activity that directly impacts either business markets or labor markets for the services of workers that WGA does not represent.”

The suit also claims that “There is no plausible pro-competitive justification for completely banning agency packaging and agency-affiliate content companies. Instead, WGA leadership designed these prohibitions to try to drive the top agencies out of the business of representing writers. This fact alone requires condemnation under either a quick look or full-blown rule of reason analysis.”

“The main questions for purposes of evaluating any claimed procompetitive justification are whether the challenged bans and group boycott enhance or suppress competition, and if so, whether on balance the challenged restraints are more procompetitive than anticompetitive. Here, however, the only competitive effect of the challenged restraints is to eliminate WME and other agencies who refuse to sign the Code of Conduct as competitors in the relevant markets. These restraints, on their face, thus reduce—not enhance—competition. There is also no plausible procompetitive justification for WGA’s boycott to enforce these anticompetitive rules. And even if there were, WGA could achieve any purported procompetitive objective through far less restrictive alternatives that would be virtually as effective as the absolute packaging and content affiliate bans set forth in the Code of Conduct.”

WME’s lawsuit also raises questions of law involving the WGA’s representation of non-writing producers, stating that the guild has “structured its group boycott to enforce its packaging ban in a way that requires WGA members to participate in the boycott even when they work as showrunners or producers rather than writers.”

The guild has told its members that “Some unsigned agencies have been telling clients they can still represent them as producers. This isn’t true. Because your writer and producer functions are inextricably linked, and are deemed covered writing services under the Minimum Basic Agreement, you cannot continue to be represented as a producer by an agency not signed to the Code of Conduct.”

WME’s suit, however, states that the guild “itself recognizes that it does not have the authority to do so.”

Pointing to another WGA communique, in which the guild told its members that “The guild cannot direct you to leave your agency for non-writing areas of work.”

WME’s suit says that “The anticompetitive impact of WGA’s packaging ban thus is intended to—and does—extend far beyond the labor market for writers that is WGA’s only legitimate union interest.  Indeed, one need look no further than WGA’s own membership, which includes showrunners who act as producers and hire and supervise writers, and thus are non-labor parties in this capacity.”

WME is represented by attorneys Jeffrey Kessler and David Greenspan at Winston & Strawn, who have represented unions such as the NFL Players Association.

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