CMA issues £1.5 million fine to several top model agencies
First published by Admin on June 15, 2017 in the following categories: Investigations and tagged with cma
The Competition and Markets Authority (CMA) has ended investigations into several top model agencies and trade associations for anti-competitive behaviour.
The following model agencies were fined back in December 2016:
- Storm: £491,000
- Models 1: £394,000
- Viva: £245,000
- FM Models: £251,000 (now out of business)
- Premier: £150,000
The Association of Model Agencies (AMA) was also fined £2,500.
Guilty verdict
They were found guilty of price collusion whereby agencies would liaise with each other, comparing prices and then rising prices so clients would be forced to pay higher prices.
The CMA published a non-confidential decision explaining the reasoning for their judgement. During their investigations they found that, as far back as 2001, the AMA would regularly send out memos to their members in regards to “fees and other terms and conditions being offered by a particular customer for a modelling assignment”.
This became the norm in the industry.
“Extensive and prolonged contacts between competitors”
However, the memos weren’t the only contact between the modelling agencies and the AMA. There was an “extensive and prolonged contacts between competitors” discussing fees and terms of contracts; often stating proposed fees by customers were “not appropriate” and insufficient.
The modelling agencies would respond to the emailed alerts, and in one occasion, Storm made a suggestion on how much should be charged for a photo shoot as a minimum. When fees were deemed low, model agencies would try to persuade others to reject the job too. Together, the agencies would come to a consensus that certain fees proposed by prospective customers were too low and none would accept the job.
The customers would therefore be told that their proposed fees were too low and that none of the modelling agencies would take the job on. By doing this, the modelling agencies and their trade association could raise the fees for all involved.
CMA condemns their actions
In a recent press release, the CMA condemned the actions of cartels coming together to manipulate pricing strategies in markets. This anti-competitive behaviour takes away the consumers right to look around in the market and choose a service or product at a competitive price, meaning customers are forced to pay higher prices. Mr Stephen Blake, Senior Director for Cartels, stated that anti-competitive behaviour not only “cheats customers of the benefits of competition” but also damages the wider economy.
Some of the agencies clients even involved large high street brands.
Wider platform to report suspicious activity
In response, the CMA has thus launched a campaign that gives consumers and businesses alike a wider platform to report any activity they may suspect to be a cartel or any other form of anti-competitive behaviour.
An animated YouTube video explains how an individual can help to fight cartels.
The advertising campaign [https://stopcartels.campaign.gov.uk/] provides various help lines and information for individuals to call for help and to report activity. The invitation extends to businesses whom themselves are, or have been, involved in cartel behaviour. They can apply for leniency to avoid or reduce fines, but only if they come forward before others.
If found guilty, those involved in cartels can face prison sentences as well as fines and prohibitions from running companies.
Rewards for providing information
At the bottom of the page, the advertising campaign offers up to a £100,000 reward for those who give up information on a cartel. Hopefully this will be enticing enough for those who do not have a strong enough belief in maintaining a fair and competitive market take action.