Model agencies fined £1.5 million by CMA for breaking competition laws
First published by Admin on November 17, 2017 in the following categories: Investigations and tagged with cma | price fixing
CMA has released an open letter to the creative industry after certain model agencies were fined £1.5 million for anti-competitive practices
The Competition and Markets Authority (CMA) have concluded their investigations into multiple top-modelling agencies for breaching anti-competition laws.
After issuing fines totalling more than £1.5 million for the five agencies and its trade association, the CMA has produced a report of its decisions and a warning via an open letter to those in the creative sector who participate in illegal price-collusion schemes.
The CMA also intends to continue its crackdown on cartels in U.K. businesses.
Price-fixing
The conclusion comes two and a half years after investigations were first opened in March 2015. FM Models, Models 1, Premier, Storm and Viva were all found to have participated in practices prohibited by EU and U.K. competition laws.
The agencies, who have projected models like Kate Moss, Twiggy and Naomi Campbell into fame and fortune, were discovered to have been agreeing to fix prices for model work. In setting minimum prices high all around, magazines and product companies could not get cheaper prices for hiring models.
How they were doing it…
The agencies’ trade association would send emails and memos around with details of fees and terms and conditions for modelling work. They would also provide feedback on whether proposed fees were ‘appropriate’.
This became common practice in the industry; but one that was still illegal. The CMA therefore found the five agencies and the trade association in breach of Competition laws by:
“participating in a single and continuous agreement and/or concerted practice which had as its object the prevention, restriction or distortion of competition in relation to the provision of modelling services in the U.K.”
Room for further investigations
In concluding this case, the CMA will no doubt be busy investigating many other businesses across all trading sectors in the U.K. As part of their crackdown on cartels, the CMA has launched a dedicated cartels hotline as well as an advertising campaign to encourage people who have “witnessed or participated in illegal cartel activity to report it so it can take action to stamp it out.”
In September, the CMA took advantage of London Fashion Week to promote its crackdown on cartels by releasing an open letter reminding businesses of the consequences of the modelling cartel. The letter described the practices that were discovered and the punishments they distributed, and warned creative businesses that these practices are illegal.
The CMA also wrote directly to a handful of businesses in the fashion sector to remind them of anti-competition laws and the sanctions they can impose. The competition watchdog was prompted to write these letters as studies have shown that many businesses, particularly in the fashion industry, aren’t aware of, or fully understand, competition laws.
Research has shown that this figure is at more than half of all creative companies.
Sanctions against offenders
They listed some of the potential sanctions:
- Fines of up to 10% of an offender’s worldwide turnover
- Company directors can by disqualified from running a company
- Up to five years imprisonment
- Open to lawsuits
- Reputational damage
The authority also warned that a business can be held liable for even being a member of an association that has broken competition law as well.
Whilst ignorance of the law is not a defence, the CMA do not want it to be a reason for widespread breaches of competition laws. Stephen Blake, Senior Director of the Cartels and Criminal Group, recognises the value of creative companies in the U.K.
Worth £84.1 billion, the industry has a strong influence on the U.K. economy and as such, Black believes that:
“It’s also vital that businesses in the creative sector know that certain behaviour is illegal under U.K. Competition law. The consequences can be serious.”
Blake explained that the CMA was utilising the spotlight on London Fashion Week to promote its open letter for the “majority” who “want to do the right thing and there are some clear steps they can take to help ensure they do so.”