DOJ’s Antitrust Fashion Show - Awaiting a price-fixing investigation in the U.S. modeling industry?

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Takeaways

  • The DOJ Antitrust Division is expected to investigate potential allegations of price-fixing conduct by U.S. modeling agencies.
  • The DOJ intends to proceed criminally against modeling agencies and fashion industry trade associations engaged in wage-fixing agreements.
  • Criminal cartel enforcement, including within the fashion industry, remains a top priority for the Department of Justice.

As the United Kingdom’s Competition and Markets Authority (CMA), Italy’s Autorità Garante della Concorrenza e del Mercato and France’s Autorité de la Concurrence are wrapping up their prosecutions of Europe’s top modeling agencies for allegedly colluding on prices for modeling services in the fashion industry, the U.S. Department of Justice (DOJ) Antitrust Division is now expected to take its turn in investigating potential price-fixing conduct in the world’s most coveted fashion markets of New York and Los Angeles. Indeed, armed with what may be a potential treasure trove of price-fixing information gathered by its European counterparts, the DOJ Antitrust Division will likely be scrutinizing the events that triggered cartel investigations in London, Milan and Paris—and that recently resulted in fines of almost $10 million—for the purpose of potentially pursuing investigations into allegations of unlawful cartel conduct among U.S. fashion modeling agencies.

Party Crashing in the European Union

In December 2016, the UK’s antitrust authority fined five major British fashion modeling agencies and their trade association for allegedly colluding on prices for modeling services in the UK fashion industry between 2013 and 2015. Among other things, the CMA found that modeling agencies regularly and systematically exchanged information and discussed prices in the context of negotiations with particular customers and supposedly agreed to fix minimum prices or set a common approach to pricing. The CMA also claimed that the agencies’ trade association was heavily involved in the alleged cartel conduct by encouraging its members to resist lower prices. Totaling almost $2 million, the fines imposed by the UK’s Competition and Markets Authority followed similar penalties previously issued against European fashion modeling agencies by the Italian and French antitrust authorities earlier in the year.

In November 2016, the Italian antitrust agency charged eight of Italy’s top fashion modeling agencies along with their trade association for allegedly engaging in unlawful price-fixing in connection with fashion models’ wages, transfer costs, image rights and agency commissions over a period of eight years. In particular, according to the Italian authorities, the Italian agencies’ trade association allegedly played a crucial role in ensuring common commercial conduct and pricing among its members by requiring customers, such as major fashion maisons and industry magazines, to address all inquiries to the trade association instead of contacting each model agency directly. The penalties imposed by the Italian antitrust agency almost doubled the fines imposed by its French counterpart just a few months earlier.

Indeed, in September 2016, in the midst of Paris’s Fashion Week, France’s antitrust agency charged virtually the entire French fashion modeling market with claims of decade-long collusion with regard to prices for modeling services in the fashion industry. In particular, the French authorities alleged that almost 40 modeling agencies had engaged in price-fixing by coordinating pricing schedules, including minimum salaries for models as well as suggested commissions, to use as a point of reference in negotiations with clients. Moreover, in imposing fines of over $2.5 million, France’s antitrust agency claimed that the modeling agencies’ trade association allegedly assisted its members in unlawful price-fixing by effectively enforcing pricing guides for photo shoots, media campaigns and fashion shows with little or no room for negotiation.

While the conclusion of these cartel investigations by UK, Italian and French authorities was a major milestone for European Union antitrust agencies, it likely did not represent the end of price-fixing probes within the fashion modeling industry. Indeed, as criminal cartel enforcement remains a top priority for the Department of Justice, the DOJ Antitrust Division is expected to actively analyze the information obtained by its European counterparts and use it to identify and investigate U.S. modeling agencies and trade associations who engaged in price-fixing conduct within the United States, as well as those entities and individuals that assisted them.

DOJ’s Enforcement Efforts in the Fashion Modeling Industry

The Department of Justice’s expected renewed scrutiny on the fashion industry, however, is not without precedent. Indeed, the DOJ Antitrust Division first began investigating allegations of criminal price-fixing and collusion among the world’s top fashion modeling agencies back in the early 2000s, following a class action lawsuit brought by former models in a New York federal court. Similarly to the allegations recently pursued by the UK, Italian and French antitrust authorities, at that time the DOJ Antitrust Division was informally probing whether modeling agencies conspired to fix commissions charged to models for booking assignments, as well as fees paid by photographers, brands and fashion magazines to book models.

More recently, the DOJ Antitrust Division once again communicated its continued interest in criminal cartel enforcement within the fashion modeling industry with the October 2016 publication of the Department of Justice and Federal Trade Commission’s Antitrust Guidance for Human Resource Professionals (DOJ Guidance). Indeed, in its DOJ Guidance, the Antitrust Division emphasized that HR professionals should avoid entering into agreements regarding terms of employment with firms that compete to hire employees. Moreover, in the DOJ Guidance, the Department of Justice and the Federal Trade Commission (FTC) highlighted a previous price-fixing complaint that the FTC had filed in the mid-1990s against a fashion industry trade association representing most of the nation’s best-known fashion designers along with the organization that produced the two major fashion shows for the industry. In noting the FTC’s ongoing focus on policing price-fixing conduct within the fashion modeling industry, the DOJ Antitrust Division signaled that it would ramp up its criminal investigation and prosecution efforts within the fashion modeling industry and specifically warned that “going forward, the DOJ intends to proceed criminally against naked wage-fixing . . . agreements” and other cartel conduct affecting fees and compensation in the modeling industry.

Therefore, while several European modeling agencies hit by the recent cartel enforcement efforts have accused their respective national regulators of lacking a basic understanding of how the fashion modeling industry works, U.S. modeling agencies and their trade associations should expect the Department of Justice to closely examine and thoroughly appreciate the information obtained by its European counterparts for the purpose of potentially pursuing investigations into allegations of unlawful cartel conduct among U.S. fashion modeling agencies.

 

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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