At the end of September 2016, the French Antimonopoly Service («ASF») fined 35 modeling agencies accused of maintaining and fixing prices for their services. Individual fines vary (from 1 to 600 thousand euros) — their total amount was 2.381 million euros. Among the guilty agencies are such well-known brands as Premium Models (Ford Models Europe before the renaming), IMG and Marilyn Agency, which, by the way, received the largest fine.
The ASF's decision is an entertaining story spanning almost 100 pages about the inner workings of the French modeling industry. The circumstances that led to the imposition of the fine involve nothing less than a cartel conspiracy aimed at maintaining the prices of modeling agencies.
The price coordination was carried out within the professional association of modeling agencies, SYNAM (Syndicat National des Agences de Mannequins). Every year, immediately after the mandatory negotiations on the minimum wage for models, SYNAM sent its members a tariff grid based on (i) the type of services (photo shoots, catwalks, commercials, etc.) and (ii) the model's reputation. The association was ambiguous about the «official» status of this tariff grid, but according to a representative of one of the agencies, all agencies received the same commissions set by SYNAM.
This practice continued for at least 10 years, from 2000 to 2010. During this period, at least 37 agencies representing almost the entire French market participated in SYNAM meetings where uniform prices were discussed. According to the ASF, this led to a restriction of competition in the French market by equalizing prices and reducing incentives for competition.
A similar investigation is ongoing in the UK
A similar investigation is currently underway in the UK, where the Competition and Market Authority has suspected agencies such as FM Models, Models 1, Premier, Storm and Viva of sharing confidential information and agreeing pricing approaches. Interestingly, the alleged violations were also committed within the framework of a professional association — the Association of Model Agents. In particular, the association's members were regularly notified (AMA Alerts), which strongly recommended modeling agencies to reject prices offered by specific buyers and negotiate higher prices.
The investigation was initiated almost 1.5 years ago and is still ongoing. It is worth expecting that the issued decision will also become a curious guide in the labyrinths of the London modeling industry.
The same investigation may well begin in Russia as well
Russian antitrust law contains similar provisions prohibiting competitors from concluding agreements aimed at restricting competition, including setting or maintaining prices (Article 11 of the Federal Law «On Protection of Competition»).
In the Russian practice of applying antitrust legislation, as in the examples above, collusion also often takes place on the carpets of professional associations. While modeling agencies in Russia have not yet been held accountable, there are numerous precedents in other markets. One notable case involves a collusion in the pangasius (a fish from Vietnam) market, where members of the Association of Production and Trade Enterprises in the Fish Market were accused but managed to prove their innocence. On the other hand, there are cases against members of the Association of Alcohol Market Operators, who have been held accountable for coordinating the alcohol market.
What makes the cases of cartel collusion in Russia interesting?
Firstly, in the investigation of cartel collusion cases, indirect evidence is widely used as proof of such collusion. This is because in most cases, the conspirators do not leave any written evidence, and the existence of such an agreement can only be established based on the facts. For example, in one case, participants in electronic auctions were held accountable based on their atypical behavior before and after the auctions, and the fact that all actions were performed from the same IP address.
Secondly, «turnover fines» are provided as an administrative sanction, the amount of which depends on the violator's revenue: from 1% to 15% of the revenue from the sale of goods (services) in the relevant market, but not less than 100,000 rubles. For large companies, these fines can be significant. At one time, Russian Railways was fined 2 billion rubles, and individual oil companies were fined more than 3 billion rubles.
Thirdly, in addition to administrative sanctions, participants in a cartel conspiracy may also suffer from so-called «private antitrust lawsuits». This refers to a situation where direct consumers of services file private lawsuits against cartel participants immediately after an antitrust investigation, demanding compensation for damages. In the case of price maintenance, the amount of losses will be measured by the difference between the «cartel» and the fair market price of the goods, multiplied by the number of goods purchased by the victims. It is easy to imagine that the amount of losses can be very high, especially if the market collusion has been ongoing for several years. While such claims are not common in Russia, there are precedents. The Federal Antimonopoly Service of Russia has been promoting this practice through its guidance (see FAS Russia Presidium Guidance No. 6 dated 2016).
The ASF's decision is an entertaining story spanning almost 100 pages about the inner workings of the French modeling industry. The circumstances that led to the imposition of the fine involve nothing less than a cartel conspiracy aimed at maintaining the prices of modeling agencies.
The price coordination was carried out within the professional association of modeling agencies, SYNAM (Syndicat National des Agences de Mannequins). Every year, immediately after the mandatory negotiations on the minimum wage for models, SYNAM sent its members a tariff grid based on (i) the type of services (photo shoots, catwalks, commercials, etc.) and (ii) the model's reputation. The association was ambiguous about the «official» status of this tariff grid, but according to a representative of one of the agencies, all agencies received the same commissions set by SYNAM.
This practice continued for at least 10 years, from 2000 to 2010. During this period, at least 37 agencies representing almost the entire French market participated in SYNAM meetings where uniform prices were discussed. According to the ASF, this led to a restriction of competition in the French market by equalizing prices and reducing incentives for competition.
A similar investigation is ongoing in the UK
A similar investigation is currently underway in the UK, where the Competition and Market Authority has suspected agencies such as FM Models, Models 1, Premier, Storm and Viva of sharing confidential information and agreeing pricing approaches. Interestingly, the alleged violations were also committed within the framework of a professional association — the Association of Model Agents. In particular, the association's members were regularly notified (AMA Alerts), which strongly recommended modeling agencies to reject prices offered by specific buyers and negotiate higher prices.
The investigation was initiated almost 1.5 years ago and is still ongoing. It is worth expecting that the issued decision will also become a curious guide in the labyrinths of the London modeling industry.
The same investigation may well begin in Russia as well
Russian antitrust law contains similar provisions prohibiting competitors from concluding agreements aimed at restricting competition, including setting or maintaining prices (Article 11 of the Federal Law «On Protection of Competition»).
In the Russian practice of applying antitrust legislation, as in the examples above, collusion also often takes place on the carpets of professional associations. While modeling agencies in Russia have not yet been held accountable, there are numerous precedents in other markets. One notable case involves a collusion in the pangasius (a fish from Vietnam) market, where members of the Association of Production and Trade Enterprises in the Fish Market were accused but managed to prove their innocence. On the other hand, there are cases against members of the Association of Alcohol Market Operators, who have been held accountable for coordinating the alcohol market.
What makes the cases of cartel collusion in Russia interesting?
Firstly, in the investigation of cartel collusion cases, indirect evidence is widely used as proof of such collusion. This is because in most cases, the conspirators do not leave any written evidence, and the existence of such an agreement can only be established based on the facts. For example, in one case, participants in electronic auctions were held accountable based on their atypical behavior before and after the auctions, and the fact that all actions were performed from the same IP address.
Secondly, «turnover fines» are provided as an administrative sanction, the amount of which depends on the violator's revenue: from 1% to 15% of the revenue from the sale of goods (services) in the relevant market, but not less than 100,000 rubles. For large companies, these fines can be significant. At one time, Russian Railways was fined 2 billion rubles, and individual oil companies were fined more than 3 billion rubles.
Thirdly, in addition to administrative sanctions, participants in a cartel conspiracy may also suffer from so-called «private antitrust lawsuits». This refers to a situation where direct consumers of services file private lawsuits against cartel participants immediately after an antitrust investigation, demanding compensation for damages. In the case of price maintenance, the amount of losses will be measured by the difference between the «cartel» and the fair market price of the goods, multiplied by the number of goods purchased by the victims. It is easy to imagine that the amount of losses can be very high, especially if the market collusion has been ongoing for several years. While such claims are not common in Russia, there are precedents. The Federal Antimonopoly Service of Russia has been promoting this practice through its guidance (see FAS Russia Presidium Guidance No. 6 dated 2016).