Who said competition law is always about the same old markets?
Last November the Italian Competition Authority dealt with something other than pharmaceutical or telecommunication, as it found that 8 major model agencies set up a price-cartel. The investigation had been opened upon submission of a leniency application by the renowned agency IMG and led to a cumulative fine of 4.5 million euro. The other agencies found liable were Brave, D’management, Elite Model, Management, Enjoy, Major Model Management, Next Italy, Why Not and Women Models.
Nice to notice, for once the Italians were not the first to break the law. Just one month earlier, the Autoritè de la Concurrence found 37 model agencies liable for having colluded to fix prices over a period of 10 years. And the saga is not over. The Consumer Market Authority is likely to reach a similar outcome soon in the UK, where agencies are facing the same allegations as those charged to their colleagues in Italy and France.
Needless to say, the fashion companies which dealt with these agencies will now be able to bring an action for damages before civil courts.
The relevant market: top-models not included
The cartel affected the market for the supply of agency services for models. However, top models like Cara Delevingne or Kate Moss have not, even indirectly, harmed the competition. Indeed, supermodels’ contracts are agreed on a time-by-time basis by the parties and therefore they were not included in relevant market.
Between 2007 and 2015 the agencies agreed on fixing several price components which significantly influenced the final price charged by each agency:
- a minimum flat rate to apply to the fees paid by the clients to the models (models’ fees);
- the commission paid by the clients to the agencies, in the amount of 20% of the models’ fee (commission);
- additional prices for the economic exploitation of images on the internet, social networks and for e-commerce purpose (“online rights”);
- additional prices for fitting, dress rehearsal, extra-time, call-time, cancellation fee (“additional performances”);
- prices for editorial shooting.
Agencies also agreed on fixing contractual terms different from prices, like:
- deadlines for payment;
- conducts to adopt against borrowers;
- terms for the transfer of a model from an agency to another.
Each time a client asked a quotation to an agency, the agency involved the other ones and the trade association in the pricing task. The aim of the involvement – which occurred by means of meetings or emails – was to agree on a common position in order to keep the price above a certain threshold.
The role of the trade association
The association of model agencies played a role in the cartel, as a vehicle of collusion between competitors. Indeed, it arranged meetings to develop a common commercial strategy and it represented agencies in the business relationship with the clients. The decisions in the trade association were adopted by majority, having each of the members an equal weight in the association.
Actions for damages
The Italian Competition Authority found out that a number of top fashion companies had been harmed by the cartel. Firms like Prada, Versace, Dolce & Gabbana and many others were consulted by the Authority during the investigation and provided useful information. All the fashion companies harmed by the practice will now be able to bring an action for damages before civil courts.