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Modelling Cartel

Modelling Cartel: The Competition and Markets Authority Decision (“CMA”)

On 16 December 2016, the CMA released the non-confidential version of its decision on illegal price fixing arrangements between leading UK modelling agencies FM Models, Models One, Premier, Storm and Viva (the “Decision”) in the period of April 2013 to March 2015 (the “Cartel Period”).

Businesses that purchased modelling services during the Cartel Period from these agencies are entitled to recover compensation. Even businesses that purchased modelling services from other agencies may also be entitled to compensation as the cartel is likely to have caused higher prices to be charged across the UK modelling market.

The purpose of this note is to provide you with some information about the Decision and help you understand whether you may have a claim.

Effect of the Decision

Once the CMA has ruled that a company has infringed competition law, the ruling becomes binding on the courts. Therefore, there is no need to prove the existence of the cartel or the liability of the infringing parties all of whom are jointly and severally liable for any loss suffered as a result of the cartel. The only disputed issue is likely to be the quantum of the claim (i.e. how much compensation is owed).

Valuing the claim
We can help you make a preliminary assessment of the value of your claim to determine whether it is something which is worthwhile pursuing.

The three main elements in assessing the potential claim value are: the value of relevant commerce; the extent of the overcharge; and the extent of any pass-on.

  • Value of relevant commerce - this is the amount you have spent on relevant modelling services during the Cartel Period.
  • The overcharge – this is the extent to which prices were higher than they otherwise would have been had there not been a cartel. The CMA found that the object of the modelling cartel was to co-ordinate pricing behaviour with the intention of resisting downward pressure on prices. Therefore, there is a clear link between the cartel’s activities and the price you paid for modelling services. The extent of the overcharge may ultimately be a question for expert economic evidence but, for early stage valuations, the usual approach is to apply an overcharge proxy of 16% for national cartels.
  • Pass-on - The most common defence to competition damages claims is to argue that the Claimant did not bear the totality of the overcharge due to it having been passed on through the Claimant’s pricing of its own products. Therefore, it is important to identify at an early stage the relationship, if any, between the input cost of the cartelised product and how you price your own products.