Monday, September 15, 2003

An oligopoly with style Here's an interesting price-fixing case, from a story in the Wall Street Journal; (August 3, 2003, "Top Modeling Agencies Face Price-Fixing Inquiry"): The Justice Department is investigating allegations of criminal price-fixing and collusion among the top modeling agencies…Many of the world's leading agencies, including Ford Models, Inc., Wilhelmina Model Agency, Inc., Next Model Management, Inc., and Elite Model Management Corp., have already been named in a civil antitrust suit filed by former models last year in a New York federal court. Allegedly, executives from the top modeling agencies, through their trade association (Model Managers Association, recently disbanded) met secretly (at ritzy Manhattan restaurants) to set commission rates. They also allegedly demanded kickbacks in excess of their agent fees from the models. One model who will be called as a witness "was told of the meetings by an agency executive, and she was surprised because the firms' managers were always feuding." Friendly enemies, indeed. The class action suit alleges that "the firms, acting together, have managed to keep commissions high for more than 40 years and prevented the entry of new, lower-priced rivals." Clearly, the big agencies are in an oligonomy position, abetted by a trade group. They gain in both directions. They are the main supplier of the best models so they have a powerful oligopoly position in relation to the ad agencies and clothing manufacturers. On the other side, they are about the only way for models to get bookings, an oligopsony. Conspiracy, price-fixing, and illegal kickbacks are the frosting on the cake. 8:53:49 PM

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