Canadian COMPETITION LAW

April 22, 2013

In an interesting trade association related case that caught my eye today, the Competition Commission of Singapore (CCS) has announced that Singapore’s Competition Appeal Board (CAB) has largely upheld penalties against 11 modeling agencies that had engaged in illegal price-fixing activities relating to the supply of modeling services (see: CAB Dismissed Most Grounds of Appeal by Modelling Agencies).

In this case, in which the accused modeling agencies had attempted to characterize their actions as mere price guidelines issued by a trade association called the “Association of Modelling Industry Professionals”, the Competition Commission found that the AMIP was merely a “front for its individual members to coordinate on, and collectively raise, rates for modeling services in Singapore.”  According to the CCS, the associations’ member modeling agencies had fixed rates for a wide range of modeling related services, which included editorials, advertorials, fashion shows and media loading usage (which adversely impacted publishers, photographers, show organizers, fashion labels and others).

On appeal to the CAB, the modeling agencies made a number of arguments for a reduction in penalty, which were largely dismissed (reducing the original penalty of about $291,000 to about $243,000).

While a technical appeal on the amount of damages not the CCS’ earlier finding of liability, some of the points from the CAB’s decision and case that I found interesting include: the fact that the agencies’ initial discussions on modeling service rates led to the formation of the AMIP as a cover for their price-fixing activities; an initial agreement for commission rates for models that was later expanded into agreed rates for fashion shows, ushering, mingling, fitting and show casting rates, among others; recommendations by association executives for more modest rate increases to reduce the risk of a price-fixing complaint; and an attempted strategy of sending individual price increase letters (and substituting association logos with individual company logos) to avoid detection.

The CAB also described the fact that the association had attempted to reduce risk by using words like “recommended rates” and “guidelines” to characterize and describe their collective rate related activities.

This case is a reminder of the potential risks to associations that become involved in competitively sensitive aspects of their members business activities, particularly rates, markets/customers, business models and output.  This case is also something of a cautionary tale of the ease with which merely “suggested” or “voluntary” fee or tariff guidelines may drift, factually, into areas that may more easily trigger the Competition Act’s price-fixing offence (and the fact that mere labels or descriptions of anti-competitive conduct may be insufficient to avoid violating the Competition Act).

In Canada, while the Competition Bureau has on occasion expressly said that purely voluntary fees schedules may be adopted without contravening the Competition Act, the line between a purely voluntary fee tariff and a price-fixing agreement is not clear and very much a matter of fact.  Some of the key factors that have been relevant in making the distinction have included clear statements that a fee tariff or schedule is merely for “informational purposes”, making it clear that members are not obligated to follow any suggested rates, and an absence of enforcement (e.g., statements by an association that members will not be disciplined or disadvantaged for not adhering to a suggested tariff, and no enforcement in fact).

Having said that, voluntary/suggested fee guidelines have been a source of unease for the Bureau, is a very factual area and any suggested or recommended pricing by association must be managed with care so as not to attract criminal liability under Canada’s Competition Act.

In the words of one former Canadian Director of Investigation and Research: “[s]trictly speaking, it is possible to implement a suggested fee schedule which raises no issue under the [Competition Act].  However … risk arises because of the ease with which such a schedule may be used to establish or facilitate an agreement on prices or promote adherence to a specified level of fees.”

For more on Canadian competition law and trade associations and Canada’s criminal conspiracy rules see: Associations and Competition Law and Canada’s Criminal Conspiracy Law.

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