THE PRICE-FIXING TABOO
Are language service providers limited in their ability to address downward price pressures due to now irrelevant anti-trust legislation? BY STAFFORD HEMMER
In February 2011, fellow NCTA Jonathan Goldberg member posted a message to the NCTA groups list about a Hebrew-English job offer he had recently received. He was willing to investigate the option of taking on the assignment from a client who expressed dismay at the quality of the existing translation products they had been receiving. However, when Goldberg learned that the compensation for his work would be “$0.05/word – no match,” naturally the conversation was terminated. Hebrew<>English is a language pair that, according to the ATA’s 2007 Translation and Interpreting Survey of Compensation, generally commands about $0.22/word by the average ATA language service provider (LSP). Mr. Goldberg noted that, “the fact that they have had a translator until now working at that rate, irrespective of the quality of the translations, is cause for concern. Some translators should be reminded that there is no need to agree to such a low rate or even to agree to double that rate―particularly if the translation is from English and more particularly if it requires a non-Latin font.”
Despite his otherwise well-received proposed solutions―translators acting collectively to sign a “document of engagement” in which they would not agree to unreasonably low rates, or maintaining a “blacklist” of agencies that offer $0.10 or less per word―another seasoned NCTA member, Miriam Eldridge, pointed out that such pursuits “would probably run afoul of the ATA’s price-fixing taboo.” At the heart of this discussion is an issue is that dogging freelancers more than ever in recent memory: downward price pressures. The causes of these pressures are manifold: translation buyers have access to those translation sellers anywhere in the world; machine translation is supplanting the LSP in some cases; corporate in-house translation is being produced by non-native speakers, subsequently farmed out to LSPs for “post-editing” and DTP; large translation houses controlling large segments of the market. Indeed, the source of downward price pressures seem to come from even the most irrational of places: One German translator reported to fellow colleagues in the German Language Division that her client requested she charge lower rates because of the “continuing weakness of the dollar to the euro.”
So what can the LSP do to protect his or her own interests? And what is the real story behind the ATA’s so-called “price-fixing” taboo? Is it still relevant today, and does it prevent LSPs from addressing downward price pressures? In their isolation, how can freelance translators gain some sense of control over seemingly intractable market forces? The above discussion on pricing prompted NCTA member Bob Killingsworth to remind us of “the Sherman Act of 1890, which nowadays seems to be completely ignored―as far as large corporations are concerned―but would no doubt descend upon the humble translator.” Indeed, it already has―although this legislation is the first and most significant of US antitrust law, it also represents the statutory origins of the ATA’s policies against members discussing rates in ATA forums.
The “Sherman Anti-Trust Act of 1890 (15 U.S.C.A. § 1 et seq.)” arose from an industrialized United States Congress seeking to bridle the leviathan corporate entities that inspired works like Upton Sinclair’s The Jungle or Frank Norris’s The Octopus. Despite its origins in the turn of the 19th Century, the America of unbridled laissez-faire markets, in which monopolies and cartels controlled trade and supply in the interest of self-preservation, is not a place of the past. Indeed, the fruit of 30 years of deregulation and privatization beg for its enforcement now more than ever.
The first two of the three sections of the Act establish the legal framework in which Congress exercises its control of interstate commerce. Section 1 states that “every contract…or conspiracy in restraint of trade or commerce among the several states or with foreign nations is declared to be illegal.” Section 2 provides that “every person who shall monopolize, or attempt to monopolize…or conspire…to monopolize any part of the trade or commerce among the several states or foreign nations shall be deemed guilty of a felony.”
As explained by the U.S. Supreme Court in Spectrum Sports, Inc. v. McQuillan 506 U.S. 447 (1993), “the purpose of the [Sherman] Act is not to protect businesses from the working of the market; it is to protect the public from the failure of the market. The law directs itself not against conduct which is competitive, even severely so, but against conduct which unfairly tends to destroy competition itself. This focus of U.S. competition law, on protection of competition rather than competitors, is not necessarily the only possible focus or purpose of competition law. For example, it has also been said that competition law in the European Union (EU) tends to protect the competitors in the marketplace, even at the expense of market efficiencies and consumers.”
The Sherman Act covers vast territory, certainly worth investigating on the myriad internet sites devoted to it. A part of the legislation that concerns us here is the issue of “price-fixing.” This refers to the setting of prices, or a schedule of prices, by competing firms. As such, it represents a “per se” violation under the Sherman Act, which prohibits any agreement that would inhibit price competition, which would otherwise be governed by so-called “natural” forces of the market forces, by raising, depressing, fixing or stabilizing prices. Under the Act, it is immaterial whether the fixed prices are set at a maximum price, a minimum price, the actual cost, or the fair market price. It is also immaterial under the law whether the fixed price is reasonable.
Before 1990, it was not uncommon for the ATA Chronicle to mention rates, and the Association itself regularly published Rate Guidelines. But in November 1989, three East Coast translation agencies (AdEx Translations International, Inc., AdEx Translations International USA and William Gray Enterprises) questioned the legality of this practice with then-ATA President Frank Patton, hired an anti-trust attorney, and filed a complaint against the ATA with the FTC. Indeed, setting prices at the Association-level would be construed as illegal. As a result of the 3 1/2-year investigation, the ATA halted the publication of its Rates Guidelines, and issued this statement in its Procedures Relating to Gathering and Publishing Information on Rates: “Members should be encouraged to take seriously the antitrust risks of rate discussions and risks of other actions that might be seen to encourage rate fixing…Members should recognize that because of antitrust laws, the subject of translation rates is one issue that simply should not be discussed among members of the ATA.”
Quo vadis, freelancer?
The scope of the Sherman Act, and legislation that extends its reach, is much greater than what has been presented here. Still, the impact of antitrust laws on “the humble translator” has been made on the ATA: The Association has managed to keep its members mum on prices in ATA forums, lest they encounter the near occasion of collusion. The frustration articulated by translators with respect to today’s market is well understood. A “document of engagement,” like an honor code for LSPs, or a blacklist to curtail the proliferation of bottom-feeder clientele, would do much to improve the environment in the virtual market where most of us make a living. Sadly, the effect of antitrust legislation means no formal action will be taken by ATA members collectively. It is difficult to imagine a “document of engagement” taking hold among LSPs or the clients they serve – as we can always be undersold. And a blacklist of low-ball clients is as likely to manifest as a discussion on prices in the next issue of ATA Chronicle.
That we can discuss our rates with each other individually is neither a per se violation of the Sherman act, nor violation of ATA policy. Indeed, many of us disclose our schedule of rates on our publicly available websites, in advertisements, in discussions with clients, so this information is already commonly accessible. Members should not be discouraged from talking with each other about rates; doing so does not imply we are instructing each other how we should charge for our work product, much less attempting to control trade and supply in the collective interest of self-preservation. Our rates are ultimately contingent on a variety of factors, and not necessarily what others are charging: the project, the language combination, subject matter, business requirements.
There may be a number of ways to respond to downward price pressures: adaptation and integration of new tools to increase productivity; client education even. In the end, a client who insists on paying $0.05/word for non-Latin languages will be able to find a “provider” based somewhere in the world that can tolerate such low rates. Perhaps ignoring bottom-feeder clients is the best form of client education in cases such as Mr. Goldberg’s. That they are dissatisfied with their current language product may be the only way for them to learn that “caveat emptor” also prevails in the world market of translation. SH
WEBSITES WITH INFORMATION ON THE ATA/FTC:
http://www.tipsfortranslators.com/ftc.asp (a link on the homepage of LSP Chantal Wolford).
This discussion on ProZ.com contains a number of links to the rate guidelines published by various governments and professional organizations outside of the USA: