Author: Jarod Bona
As an antitrust lawyer, I find it interesting to see the inner workings of different types of markets—how people and companies buy and sell things. And the entertainment industry is one of the more fascinating ones.
The entertainment industry includes an interesting mix of concentrated players at various levels of production and distribution, often vertically integrated. Streaming services like Netflix have brought on changes that the coronavirus pandemic will likely accelerate.
Indeed, the federal government is even ending the old Paramount Antitrust Consent Decree, which governed the motion-picture industry for decades. You can read about that from our attorney, Steven Madoff, who was a top-level lawyer for Paramount for years, and an expert (literally) in the entertainment and media industry.
If the entertainment market or Hollywood itself interests you, there is a federal antitrust case in the Central District of California that you should follow: William Morris Endeavor Entertainment, LLC. v. Writers Guild of America, West, Inc.
This is a lawsuit by the major Hollywood agencies against the Writers’ unions, along with a counterclaim by the Writers’ union against the agencies. Labor unions, of course, create some unique antitrust issues, which you can read about here.
On April 27, 2020, the Court granted in part and denied in part a motion to dismiss by the agencies.
What I found interesting about this case, among other items, is that it attacks a practice developed by Michael Ovitz and his Creative Artists Agency firm called “packaging.”
Before I dig into packaging, I have to recommend that you read Michael Ovitz’s autobiography: Who is Michael Ovitz? In his book, he is open about his successes and excesses. If you are building a professional services firm, like I am, you will particularly appreciate riding along as Michael Ovitz builds a talent agency that changes the way business is done in Hollywood. You hear some “inside baseball” about Hollywood and learn how to build a business from scratch, all at once. Indeed, you learn how to change an industry. Seriously, it’s a good read.
Back to “Packaging.” Instead of letting the studios take the lead in building movie or television projects and hiring the writers, actors, and directors that the agencies represented, the agencies would create their own project proposals for the studios. Not surprisingly, in doing so, they would “package” together a group of people, in different roles and positions, that they represent.
As part of the cost of this packaging service, the talent agencies would receive a fee from the studio. Before packaging, talent agencies were compensated by commissions as a percentage of their clients’ compensation.
The writer unions asserted that these packaging services harmed both writers and the guilds themselves and created conflict of interests for the agencies between their writer-clients and the production studios.
The complaint also alleged that the talent agencies price-fix the fees for these packages and exchange competitive sensitive information with each other about their packaging fee practices.
I won’t get into all the details here—my purpose is merely to whet your appetite to follow the case—but the writer guilds took certain actions that the talent agencies didn’t like, who then took their own actions, and eventually they all sued each other, leaving a California federal judge to sort it out.
As I mentioned above, the Court issued a motion to dismiss ruling, which allowed some claims, while dismissing others. I am not going to go into the details, but I will point out one interesting aspect of the ruling: The Court dismissed the federal antitrust price-fixing claims for lack of standing because the injured parties didn’t participate in the market that was competitively harmed. But the Court allowed a price-fixing claim under the same facts to go forward under the California antitrust statute—the Cartwright Act—because this statute doesn’t have the more restrictive definition of antitrust standing that the federal antitrust laws have.
For antitrust attorneys, this is particularly interesting because in most cases in which a plaintiff includes both federal and state antitrust claims, they rise and fall together. Here, the California antitrust claims (under the Cartwright Act) survived while the federal ones fell.