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Section 6 of the Clayton Act, 15 U.S.C.S. § 17, declares that human labor is not a commodity or article of commerce, and immunizes from antitrust liability labor organizations and their members lawfully carrying out their legitimate objectives. Section 20 of the Clayton Act, 29 U.S.C.S. § 52, prohibits injunctions against specified employee activities, such as strikes and boycotts, that are undertaken in the employees' self-interest and that occur in the course of disputes concerning terms or conditions of employment, and states that none of the specified acts can be held to be a violation of any law of the United States.
Respondent Actors’ Equity Association was a union representing most of the stage actors and actresses in the United States. Respondent has entered into collective-bargaining agreements with virtually all major theatrical producers throughout the country, fixing minimum (scale) wages and other conditions of employment for those represented by the union. Because of abuses by theatrical agents who, as independent contractors, negotiated employment contracts for actors and actresses with producers, particularly abuses as to the extraction of high commissions tending to undermine collectively bargained rates of compensation, the union in 1928 unilaterally established a licensing system for the regulation of agents, prohibiting union members from using an agent who has not obtained a license from the union. The essential elements of the licensing system have remained unchanged. To obtain a license, an agent must agree to comply with union regulations which, inter alia, prohibited agent commissions on scale portions of wages received by an actor or an actress from a producer, limited commissions on wages in excess of scale pay, and required payment to the union of franchise fees. Petitioners, agents who refused to obtain union licenses, instituted the present action, contending that the union's regulations violated §§ 1 and 2 of the Sherman Act. After trial, the District Court dismissed the complaint, finding that the union's agency franchise system was protected from liability by the antitrust exemptions of unions and their members arising under the Clayton Act and the Norris-LaGuardia Act. The Court of Appeals affirmed, determining that the central feature of the union's franchising system -- the exaction of an agreement by agents as to their commissions -- was immune from antitrust challenge. The court suggested that if the exactions of franchise fees exceeded the union's costs in administering its license system, they could not legally be collected; but despite the lack of any cost evidence at trial, the court concluded that the fees were sufficiently low that a remand on the point would not serve any useful purpose.
The Court held that the system of regulation imposed by the respondent union upon the theatrical agents, with the exception of the exaction of franchise fees, came within the statutory labor exemption from the federal antitrust laws available to labor unions acting in their self-interest and not in combination with "nonlabor groups", or in combination with parties to a "labor dispute," since a finding that there was no combination between the union and the theatrical producers to create or maintain the system was amply supported by the record. Moreover, the agents had to be considered a "labor group" and their controversy with the union a "labor dispute" as defined in 13 of the Norris-LaGuardia Act (29 USCS 113) insofar as the regulations embodied a direct frontal attack upon a problem though to threaten the maintenance of the union's basic wage structure. The Court further held that the union's regulations were clearly designed to promote the union's self-interest. However, the Court held that the franchise fees levied upon theatrical agents, by the union were not a permissible component of the exempt regulatory system, since the union was able to suggest only in the most general terms that the fees were related to the basic purposes of the regulations. If the union did not impose the franchise fees upon the agents, there was no reason to believe that any of its legitimate interests would be affected given their option of raising members' dues to offset the loss of a general revenue source.