Antitrust Law Daily Wrap Up, TOP STORY—C.D. Cal.: Top talent agencies win dismissal of antitrust claims, (Apr 21, 2016)

By Jeffrey May, J.D.

A small boutique talent agency failed to sufficiently plead the existence of an antitrust conspiracy among Hollywood’s largest talent agencies, the federal district court in Los Angeles has decided. Because the complaining agency’s third amended complaint did not cure deficiencies as to its Sherman Act § 1 claim in each of its previous pleadings, the conspiracy claim was dismissed with prejudice (Lenhoff Enterprises, Inc. v. United Talent Agency, April 20, 2016, O’Connell, B.).

Plaintiff Lenhoff Enterprises, Inc. contended that Hollywood's “Big 4 Agencies”—United Talent Agency, Inc. (UTA), International Creative Management Partners, LLC (ICM), William Morris Endeavor Entertainment (WME), and Creative Artists Agency (CAA)—have been able to capture 94 percent of the scripted series packaging market through a series of anticompetitive agreements. The large agencies were supposedly able to gain dominance as a result of an agreement among them to allow Association of Talent Agents (ATA) restrictions on third-party investments in talent agencies to expire.

Lenhoff also alleged that these “Uber Agencies” conspired to exclusively co-package with each other. The defendants allegedly lured talent away from smaller firms by eliminating the standard 10 percent commission and offering to package the individual in future deals with studios, networks, and producers. The Big 4 agencies purportedly split packaging fees with each other, but they did not split with any other firms.

In addition, the defendants allegedly conspired to coerce studios, networks, and producers to refuse deals with small agencies. The large agencies allegedly threatened to withhold talent as a consequence of noncompliance.

The plaintiff failed to allege sufficient facts regarding the purported conspiracies between the defendants UTA and ICM and the other Big 4 agencies, according to the court. The only alleged conspiracy of which the plaintiff provided names of participating individuals was the alleged agreement to eliminate the restrictions on outside investment in talent agencies, in the court’s view.

Representatives of the leading agencies served on the ATA “Strategic Planning Committee,” which was purportedly created with the specific goal and intent of eliminating the restrictions on outside investment. However, allegations that the large firms’ executives had the opportunity to conspire at the meetings failed to sufficiently plead a conspiracy claim. Further, the fact that ATA’s restrictions expired to the ultimate benefit of the Big 4 agencies did not demonstrate that the defendants conspired to bring about their demise.

As for a conspiracy among the Big 4 agencies to exclude other talent agencies from participating in co-packaging agreements, there was evidence that the Big 4 agencies co-packaged with smaller agencies on at least twelve occasions. With respect to the boycott claims, the plaintiff failed to sufficiently plead a conspiracy based on the alleged coercion, according to the court. The third amended complaint did not include a reference to a specific time or place such agreements took place, and the plaintiff failed to plead a specific instance of a threat against a studio, network, or producer.

Tying arrangements. The plaintiff also alleged three tying agreements in which the defendants “coerc[ed]” or “cajol[ed]” a studio, network, or producer to accept tied talent along with the coveted talent. It was contended that UTA coerced “AMC Network to renew their extremely low rated series ‘Halt And Catch Fire’ . . . in order to get a different and higher rated series, ‘Better Call Saul,’ or ICM cajol[ed] ABC to renew the ratings[-]challenged ‘Private Practice’ series in order to keep their package of ‘Grey’s Anatomy’ going.” The court decided that these practices were not alleged to “harm existing competitors or create barriers to entry of new competitors in the market for the tied product.”

This is Case No. 2:15-cv-01086.

Attorneys: Philip J. Kaplan (Law Office of Philip J. Kaplan) for Lenhoff Enterprises, Inc. Bryan J. Freedman (Freedman and Taitelman LLP) for United Talent Agency, Inc. Michael B. Garfinkel (Perkins Coie LLP) for International Creative Management Partners LLC.

Companies: Lenhoff Enterprises, Inc.; United Talent Agency, Inc.; International Creative Management Partners LLC

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