Why are Hollywood studios permitted to collectively bargain with employees, and what are the limits of this apparent antitrust exemption?

Question

Employers are generally not allowed to coordinate in any way which limits the normal competition for employees. Further, trade associations are not generally permitted to act in ways which would limit the competition for employees among member companies FTC Guidance Letter, "Antitrust by association(s)"

However, in its contracts with the unions for Writers and other professions involved in media production, the Alliance of Motion Picture and Television Producers (AMPTP) is collectively setting key terms of employment, compensation, and benefits. Why is this permissible under Antritrust laws and are there any limits on these firms ability to limit competition for employees?

Answer 1

The National Labor Relations Act (NLRA) (together with related federal labor laws and regulations) sets the rules for what level unions are organized at in different industries, through the actions of the National Labor Relations Board (NLRB).

Most industries are organized either at the level of all of the locations of a single firm that is an employer, or at the level of a single worksite, like a particular factory or store.

But a few industries are organized at the industry level, either nationally, or for everyone in an industry in a particular region.

The main industries which are organized by industry rather than by employer or worksite are construction, live theater, music recording, and the movie industry. It is also done in professional sports.

The reason for the special treatment of these industries is that in these industries, worksites and employers are typically in existence for only a single project. A new company is formed for each new movie, and for each new Broadway or Off-Broadway union live theater production. Similarly, in the construction industry, work is bid by different combinations of firms, each of which are independent contractors rather than employees for every new project, often for a different owner each time. Due to the ephemeral nature of the firms and worksites in these industries, it is futile to try to organize collectively bargaining on a project by project basis. So, an exception to the general rule regarding the level of organization at which unions are formed has been made in these industries.

But, unions can only form collective bargaining agreements if they have employers to bargain with, and the NLRA allows suitable representatives of the employers in these industries to reach collective bargaining agreements with their counterpart unions which are exempt from anti-trust regulation for this activity.

This is considered tolerable because in unionized industries, the collective bargaining agreement, rather than the market, is used to determine the compensation of union workers in that industry. Union-management negotiations are an alternative to a market basis for determining prices and working conditions. And, generally speaking, the workers with unions acting as their agents, and the employers, with the employers' associations formed for this purpose acting as their agents, which make up all of the interested parties, consent.

This is in contrast to the usual anti-trust case where merchants are colluding to benefit themselves, while consumers are disorganized and are not in a position to bargain collectively.

Answer 2

The negotiations set a floor, not a ceiling, for pay. For instance, if the studios and SAG agree on $100/hr for a speaking role, then studios aren't allowed to pay less than $100/hr for speaking roles, and SAG members are not allowed to accept less than $100/hr for a speaking role. The studios, however, are free to pay more that $100/hr, and SAG members are free to accept it.

So the studios aren't colluding with each other; they aren't agreeing to manipulate the market in their favor. If anyone is doing so, it's SAG. So the real question is why SAG's actions aren't a violation if anti-trust legislation. And the answer to that is that the National Labor Relations Act allows unions to collectively bargain for better working conditions.