The Federal Trade Commission made clear today that antitrust laws prohibiting price fixing apply to the fashion industry just as they do to other products or services. The FTC announced a settlement with the trade association representing most of the nation's best-known fashion designers and the organization which produces the two major fashion shows for the industry each year. The settlement includes provisions that would prohibit the two groups or their members from attempting to fix or reduce modeling fees as alleged by the FTC, and also would require them to take steps to educate fashion designers that price-fixing is illegal.
The FTC complaint laying out its allegations names The Council of Fashion Designers of America (CFDA) and 7th on Sixth, Inc., both based in New York City. In the complaint, the FTC detailed numerous meetings at which CFDA members allegedly discussed their desire to reduce competition among themselves for modeling services in order to reduce the fees they paid for models. In fact, the FTC alleged, although CFDA created 7th on Sixth in July 1993 for the legitimate purpose of producing centralized fashion shows twice a year in New York City, 7th on Sixth's executive director, who also held the same position at CFDA, actively scheduled meetings among designers to discuss and collectively demand from modeling agencies an agreement on modeling fees.
Twice in September 1993, CFDA and 7th on Sixth allegedly met with representatives of the major modeling agencies and threat- ened to hire models through a collectively-organized "open call" unless the modeling agencies consented to accept prices agreed to by the respondents' members. (An open call effectively would have bypassed the modeling agencies and the models they repre- sented, the complaint states.)
The modeling agencies capitulated in October 1993, the FTC alleged, and 7th on Sixth followed up on the agreement by sending a letter laying out the agreed-upon prices and other terms of compensation between fashion designers and modeling agencies. 7th on Sixth also issued a news release claiming credit for the agreement, the FTC alleged. The agreement was widely reported in the media.
The price-fixing agreement was not ancillary to the legitimate purpose of producing the centralized fashion show and thus violated antitrust laws, the FTC alleged.
The proposed consent agreement to settle the FTC charges, announced today for a public comment period before the Commission determines whether to make it final, contains provisions that would prohibit similar illegal conduct and require the respon- dents to take steps to educate their members, officers and directors that such conduct is illegal and prohibited by the settlement.
As to the conduct provisions, the settlement would prohibit CFDA and 7th on Sixth from entering into, organizing, implement- ing or continuing any agreement to:
- raise, lower or fix the price, terms or other forms or conditions of compensation for modeling or modeling agency services; or
- encourage or assist anyone to engage in the above conduct.
The settlement would not prohibit CFDA or 7th on Sixth mem- bers from employing the same models or jointly hiring models.
In addition, the proposed consent agreement would require CFDA and 7th on Sixth to send a specifically-worded letter along with the complaint and settlement to all members, officers and directors of the organizations, as well as to 16 named modeling agencies, and to designers with whom they have discussed the benefits of joining 7th on Sixth. The letter would state that CFDA and 7th on Sixth "may not negotiate on behalf of fashion designers collectively with models or modeling agencies...and may not enter into or continue any agreement...for the purpose or with the effect of affecting the prices paid for modeling or modeling agency fees."
Finally, the settlement contains various reporting requirements, including requirements that the respondents keep minutes of all meetings of their membership, boards, committees or subcommittees, noting the details and participants in any discussions of compensation for modeling or modeling agency services. These provisions would assist the FTC in monitoring the respondents' compliance with the settlement.
The Commission vote to accept the proposed consent agreement for public comment was 5-0. It will be published in the Federal Register shortly and will be subject to public comment for 60 days, after which the Commission will decide whether to make it final. Comments should be addressed to the FTC, Office of the Secretary, 6th Street and Pennsylvania Avenue, N.W., Washington, D.C. 20580.
NOTE: A consent agreement is for settlement purposes only and does not constitute an admission of a law violation. When the Commission issues a consent order on a final basis, it carries the force of law with respect to future actions. Each violation of such an order may result in a civil penalty of $10,000.
Copies of the complaint, proposed consent agreement, and an analysis of the agreement to assist the public in commenting are available from the FTC's Public Reference Branch, Room 130, same address as above.
(FTC File No. 941 0007)