Creative industries, including the intimate apparel sector, have been issued with a government warning in the run up to London Fashion Week, emphasising that illegal price fixing and information sharing will not be tolerated.
In an open letter, the Competition and Markets Authority (CMA) lists the consequences for business that break competition law, including fines of up to 10% of a business’s worldwide turnover and the suspension of company directors from running a company for up to 15 years.
In the most serious cases involving anti-competitive arrangements, individuals may be investigated for committing a criminal offence, prosecuted and sentenced to up to five years in prison and/or made to pay a fine.
The open letter derived from a recent case where five model agencies and their trade association were fined over £1.5 million for colluding instead of competing on the prices they charged for modelling services.
According to the government body, model agencies – FM Models, Models 1, Premier, Storm and Viva – “regularly and systematically” exchanged confidential and commercially sensitive information and discussed prices in the context of negotiations with particular customers.
“The message from the model agencies case is clear: the CMA takes illegal price co-ordination and information sharing seriously and will investigate businesses in all industries – including those that operate in the creative sectors – if there are reasonable grounds to suspect the law is being broken,” said Stephen Blake, senior director of Cartels and Criminal.
The CMA has also written directly to a number of other businesses in the fashion sector to warn them that this type of illegal behaviour will not be condoned.
The creative sector is an important and rapidly growing part of the UK economy – worth £84.1 billion. But research has shown that businesses in the sector have a particularly low understanding of competition law.
Over 50% of creative firms surveyed by the CMA stated that they didn’t know competition law well, if at all. This puts them at risk of not recognising if they – or others – are breaking the law.
“The creative industries are incredibly important to the UK economy. We have some of the best creative talent in the world, and we recognise the valuable contribution these individuals make,” Blake said in a statement.
“Because of this, it’s also vital that businesses in the creative sector know that certain behaviour is illegal under UK competition law. The consequences can be serious. As we approach London Fashion Week, when the spotlight is on the fashion industry, we are publishing an open letter urging businesses to be clear on the boundaries of the law. We know the majority want to do the right thing and there are some clear steps they can take to help ensure they do so.”