Price fixing

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Model agencies collude to fix rates

Regulators find leading model agencies guilty of price fixing.

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Model agency image

Model agencies across Europe, along with their professional associations, have come under scrutiny for the way they have rigged the market in their favour – according to national regulators.

In December 2016, the UK’s competition regulator, the Competition and Markets Authority (CMA), concluded that 5 of the UK’s leading model agencies had colluded over the setting of their fees. This followed a 21-month investigation into price fixing in the modelling industry. The CMA argued that there had been an infringement of Chapter I of the Competition Act 1998 (or of Article 101 of the Treaty on the Functioning of the European Union). Chapter I prohibition covers ‘anti-competitive agreements and concerted practices …. which have as their object the… restriction or distortion of competition within the UK.’

Minimum pricing

The individual UK agencies involved were Storm, Models 1, FM Models, Premier and Viva. The professional body representing model agencies, the Association of Model Agents (AMA) was also implicated in the fixing of agency fees. The CMA found that the practice of fixing minimum prices for modelling fees was widespread, and involved the regular exchange of information between agents and the AMA, with the intent of reducing competition between the agencies, to the detriment of clients (including magazines, retailers, manufacturers and photographers.) The CMA concluded that the agencies, and the AMA, were in regular contact through emails, where the AMA ‘encouraged agencies to reject the fees being offered by specific customers and negotiate a higher fee’ and colluded to set prices rather than compete.

UK, French and Italian agencies fined

As a result of the investigation, the CMA imposed fines totalling £1.5m (around 1.77m euros), with Storm, Models 1 and FM models receiving the heaviest fines (of £491,000, £395,000 and £251,000 respectively).

This follows similar action by the French and Italian regulators against agencies in France and Italy. In France, the regulator (the French Competition Authority) fined 37 modelling agencies, along with SYNAM (Syndicat National des Agences de Mannequins - the French modelling agencies’ union), a total of 2.4m euros (around £2m) for price fixing. SYNAM had routinely set the minimum rate to hire models for fashion shows and publicity campaigns. The largest fines, totalling 4.5m euros (£3.8m), were imposed by the Italian Competition Authority on 8 agencies and the agencies’ union, ASSEM (Associazione Servizi Moda.)

The national regulators clearly felt that, with modelling services, the operation of the free market is stifled, with model’s pay rates set by a price fixing arrangement, rather than through the interaction of independent agencies and their clients.

Agencies appeal

Since the various rulings, the agencies and their associations have sought to defend their pricing activities. In the UK, the agencies involved have launched an appeal, with John Horner, Managing Director of Models 1 , pointing out that ‘the CMA has failed to understand our complex industry’ (as reported in The Guardian (16/12/16). Furthermore, there is a belief within the industry that the co-ordination of modelling fees is a necessary counter-weight to the powerful clients who have the potential to force down fees through their individual buying power, and through possible collusive activities designed to push down modelling rates.

In many respects, the market for modelling services exhibits some of the features found in the so-called bilateral labour market monopoly case. In the simple bilateral model a union may emerge to organise and represent workers, and thereby gain some monopoly power, in an industry where there are a few, large, buyers of labour - each with some monopsony power.

Of course, while they may have considerable market power, the clients are not pure monopsonists, and must compete for the services of models. Also, agencies cannot be seen as a simple union for models, but rather as an association representing the interests of the agents, rather than the models. While the agencies do represent models, the association represents the agents and only indirectly represent the models. However, if the bilateral monopoly-monopsony model is applied, the actual rate set would be somewhere between the high rate preferred by the models and their union, and the low rate preferred by the clients.

The modelling agencies would certainly claim that, without the organisation of labour across the industry, clients would be completely free set rates below the ‘competitive’ rate which would prevail if there were a large number of smaller clients, none of whom had any power to fix rates.

Hence, despite the dominance in the UK of 5 large agencies, the vast majority of them are small operators representing ‘new faces’ and ‘jobbing’ models undertaking ‘niche’ work, with average earnings typically between £10,000 and £30,000 per year – certainly nothing approaching the earning power of the elite models. In addition, the role of agencies extends beyond influencing rates of pay to finding models work, helping prepare portfolios, and giving advice to models.

Comment

Of course, regulators are not objecting to models joining agencies, or agencies organising models, and setting a rate card, but that agencies should compete with each other in their dealings with clients, rather than collude. Certainly, from the evidence collected it is clear that market forces were prevented from setting an efficient price which, according to the CMA and other national regulators, prevented competition, distorted the operation of the market, and was to the detriment of the industry and the economy.

See: Competition Network


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