9:43am PT by Eriq Gardner
What WME Talent Agents Have in Common With Peloton Exercise Bikes
Competition has always been terrifically important in entertainment, but these days, one will find allegations flying left and right about so-called ringleaders in the industry pressuring others into concerted refusals to deal. Take what happened Monday.
In the morning, William Morris Endeavor filed an antitrust lawsuit against the Writers Guild of America. According to the complaint, the union has orchestrated a group boycott of WME and other talent agencies that won't agree to categorical prohibitions on packaging fees and affiliation with content companies. WME asserts that the WGA has crossed the line on legitimate union activity by coercing its members to get with the program and not retain any talent agency refusing to sign the demanded "Code of Conduct."
Then, in the afternoon, came a courtroom response from the National Music Publishers Association to antitrust claims raised by Peloton, the exercise equipment and media company, which like WME's parent, now aims to go public.
Peloton, in a cross-complaint filed in April, asserts that the NMPA has orchestrated a group boycott over a refusal to compensate all music publishers even for songs not needed. Peloton asserts that the NMPA has crossed the line on legitimate trade association activity by coercing its members to get with the program and not enter direct license deals unless Peloton accepts supracompetitive prices for song rights.
Obviously, given that talents agents aren't exercise bikes (although both operate best at high speeds), there are differences in these two situations. Nevertheless, both lawsuits are premised on Section 1 of the Sherman Antitrust Act. As such, it may be instructive to compare and contrast the actions, especially since Peloton is slightly further down the road and may signal what's ahead in the other case.
Peloton's counterclaims came after the music publishers filed their own complaint back in March alleging massive infringement of songs via the company's interactive service.
"Having no defense to its copyright infringement, Peloton resorts to the timeworn tactic of asserting a baseless antitrust counterclaim against Plaintiffs," states the NMPA in a new motion to dismiss (read in full here).
The NMPA argues the music publishers are shielded from antitrust liability by the Noerr-Pennington doctrine, which originated from some First Amendment decisions by the U.S. Supreme Court standing for the proposition that those who “petition the government for redress are generally immune from antitrust liability when defending against antitrust claims predicated on this petitioning activity.”
In other words, music publishers say they can't be sued for refusing to offer sync licenses after going to court complaining about the failure by Peloton to achieve sync licenses. It's also argued that the "discussions" between the NMPA and its music publishers members leading up to the copyright infringement suit are also shielded by the Noerr-Pennington doctrine.
Time will tell if the WGA similarly frames the WME's suit as a retaliatory measure for the writers' own suit filed in state court in April. The union may paint its discussions and petitioning over what it perceives to be fiduciary duty breaches, conflicts of interest and unfair competition by agents as what is really driving the claim of a group boycott.
So, yes, Noerr-Pennington doctrine. Now onto the less fancy antitrust defenses.
The NMPA, in its dismissal papers, argues a lack of alleged conspiratorial conduct.
"To state a conspiracy claim, the burden is on Peloton to plead facts plausibly demonstrating that the Publishers’ decision to forgo or discontinue licensing negotiations must have been the product of a horizontal agreement among the Publishers to boycott Peloton outside the scope of a joint effort to enforce their copyrights," states a memorandum written by attorneys at Paul Weiss. "Peloton has fallen far short of that burden."
The NMPA attacks vague inferences of any conspiracy and says that suspicion from the timing of a discontinuing of negotiations presents "an obvious explanation," namely that each of the publishers understood the status of talks for a comprehensive deal and reached independent decisions that the time was right to sue Peloton for infringement. That's not collusion, asserts the NMPA.
As a point of comparison, WME's complaint speaks of a conspiracy to enforce a Code of Conduct, one that includes managers and lawyers being told to perform the work of talent agents. With regard to alleged horizontal arrangements, WME points to how the top leadership at the writers guild instructed members to join the collective action. Approximately 1,300 writers and showrunners fired WME. Additionally, WME alleges that the union's leadership has been compiling a record of which members fired their agents and which members continue to work with them. WME says non-complying writers are subject to discipline and expulsion from their union.
That may be coercion. Does it add up to collusion? And do labor exemptions apply? Stay tuned.
WME's complaint may be more detailed than Peloton's on the jawboning happening, but Peloton seemingly has one advantage that WME has not.
In the dismissal motion, the NMPA argues that Peloton has failed to allege a proper relevant product market in which it is suffering anticompetitive effects. The NMPA expresses skepticism that "reproduction rights licenses to the copyrighted works controlled" is suitable as a defined market and non-substitutable. However, since music licensing has long been a focus of antitrust inquiry — for example, see the BMI and ASCAP consent decrees — this may not present such an insurmountable barrier for Peloton to proceed.
In contrast, what exactly is the relevant market being identified by WME?
The agency says there's one for "representation services" for writers, and if that doesn't work, the agency also tries a "market to produce and/or distribute television shows and films." WME asserts that the WGA has "monopoly power" over these markets as exclusive collective bargaining representatives and frames the bid to eliminate agency affiliates as "competitors" to established studios as destructive conduct.
The WGA will surely attack the premise of any clearly defined market, much less its power over such, but if a judge accepts these contentions, the dispute may head to a weighing of anticompetitive and pro-competitive effects.
Here, one finds some questionable propositions from both of the respective antitrust allegers.
Whereas Peloton contends that the pro-competitive benefits of negotiating collectively for music licenses doesn't outweigh the competitive harms, WME doesn't even think there's much to weigh on the balancing scale in the first place.
"There is no plausible pro-competitive justification for completely banning agency packaging and agency-affiliate content companies," states WME's complaint. "Instead, WGA leadership designed these prohibitions to try to drive the top agencies out of the business of representing writers."