Modelling agencies face further competition scrutiny

In August 2015, the Competition Markets Authority (CMA) launched a preliminary investigation into suspicions that three top modelling agencies – Storm Model Management, Premier Model Management, and Models 1 – had colluded to fix prices charged to retailers and brand owners (see our previous article here). The CMA conducted a series of raids on the offices at the time, and has recently taken the investigations further.

Businesses who may potentially have been affected should be aware of their options if the CMA makes any adverse findings against the agencies.

What are the latest developments?

On 25 May 2016, the CMA issued a “statement of objections” – the first formal step authorities must make in cartel investigations in which the parties concerned are made aware of the objections raised against them. The CMA alleged that from April 2013 to March 2015 modelling agencies FM Models, Models 1, Premier Model Management, Storm Model Management and Viva Model Management colluded with each other rather than engaging in fair market competition.

The CMA claims that the agencies agreed to exchange confidential and sensitive information, including future pricing information, and in some instances agreed to a common approach to pricing. It believes additionally that the Association of Model Agents (AMA) facilitated this conspiracy by circulating “AMA Alerts” to member emails, encouraging model agencies to reject the fees being offered by specific customers and to negotiate a higher fee.

These are merely provisional findings and further investigations must be conducted before the CMA can conclude that a breach of competition law has been proven. The CMA will now accept written and oral representations received in response to the statement of objections. It expects to decide whether competition law has been infringed by the end of September.

What happens if the CMA does find that there has been a breach of competition law?

If the CMA finds there has been anti-competitive behaviour, it can levy significant fines. The maximum fine for anti-competitive behaviour is 10% of annual worldwide turnover, and in extreme cases individuals can face prison sentences.

Companies and individuals who have been harmed by the anti-competitive behaviour, for example by having to pay higher prices for products, can also claim compensation from the companies if they are found liable. These are known as “follow-on claims” and are relatively easier to bring than claims brought before a breach of competition law has been found by a competition authority. However, establishing the level of any loss sustained is far from straightforward. It is therefore worth considering now whether you may have a claim, so that you can take appropriate advice and preserve any documents that you might need to rely on in the future.

If you would like to know how this, or similar cases involving competition law, could be relevant to you, please get in touch with one of our experts.