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DPChallenge Forums >> Business of Photography >> kickbacks vs. revenue sharing
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02/11/2008 11:04:00 PM · #1
KICKBACKS...Are these things widely used while people just look the other way? Are there any legal repercussions? Anyone have any experience with this (sports leagues, schools, etc)?

I have talked to some people on a YMCA board about trying this year’s sports pictures. In previous years, the director just called a local photographer and asked him if he did team/individual pictures. He did them for a few years, couldn’t fit them in one year, and the director called a newer local photographer. So it is pretty informal. I got into team pictures and approached a board member about doing this year’s pictures. He talked to the director, who told about how things were done in the past and mentioned that one of the guys gave 10% of his gross or net sales (not sure) back to the Y.

I don’t mind donating back to the community, but if I propose 10%, the other guy doesn’t, and I am chosen to take the pictures...can something go awry (legally)? I was talking to my wife about it and she is adamant that it is illegal, and doesn’t want me to mention it in my proposal to the director. But now that he has brought it up, is it expected of me to propose such a deal? I am sure as an afterthought there is no issue, but to make it a stipulation for providing business...does that get a little hairy???

I have read a few threads around here about it with sports leagues and schools...so are kickbacks as bad as I think they are...or is it no big deal and I'm looking over my shoulder for nothing?

Thanks!
-drew

Edit to add: This specific example has been resolved and is generally considered revenue-sharing (or similar term). So please read through the thread to see the outcome. Other relevant questions, comments, and discussion are still welcome. And original thread title was changed from "kickbacks?" to current title.

Message edited by author 2008-02-12 18:09:47.
02/11/2008 11:08:13 PM · #2
I suggest you do the right thing, even if the other guy doesn't. Though rarely prosecuted, it's a crime for either side to make such an arrangement, either bribery or extortion.
02/11/2008 11:10:21 PM · #3
That's not a kickback, you'd be proposing a contract. One of the requirements of a contract is consideration (ie everyone gains value). They let you be the official photog for an event/season, in exchange for 10% of the profits/revenue.
02/11/2008 11:13:11 PM · #4
To play devils advocate for a moment.. Is it really a kickback since it is going to an organization and not directly befitting the director?
02/11/2008 11:21:26 PM · #5
But wouldn't a contractual agreement that gives 10% back to the organization still be considered as having an advantage over a competator's contract that didn't offer 10%? Which would effectivly force the competition to "pony up" to level the playing field.
02/11/2008 11:25:05 PM · #6
You have to ask yourself would you get the contract if you did not agree to the 10% clause. If you say no, they would reward another photographer the contract that is willing to include the 10% clause then it is, as ' . substr('//www.dpchallenge.com/images/user_icon/user_id/1031.gif', strrpos('//www.dpchallenge.com/images/user_icon/user_id/1031.gif', '/') + 1) . ' GeneralE stated, bribery at least and maybe extortion.
02/11/2008 11:25:44 PM · #7
whats the difference if he give 10% back or prices 10% lower that his normal rate?... ooh! i just got it.. I bet the Director has to meet fund raising benchmarks.. and the 10% would count towards it.. and may even have incentives tied to it...

Message edited by author 2008-02-11 23:26:26.
02/11/2008 11:27:50 PM · #8
Whenever I do a shoot that is for a non-profit organisation or a small local group, I quote for the shoot and also offer 10% of my profit back to the organisation in the form of a dontaion. Once the shoot is finished and orders are picked up I work out the 10% and write out a cheque and note with a Please accept this donation towards your club.
02/11/2008 11:32:55 PM · #9
I am not a lawyer. Below is my personal opinion. Though I am quite sure it is correct, reliance upon it is at your own risk.

This isn't a kickback.

If you are paying the 10% to the YMCA, in exchange for the YMCA giving you the right to be the teams photographer, then that is perfectly legal. The YMCA is providing a service to you, and you would be offering them a fee in exchange for that service. Fees as a percentage of revenue or profits are not at all uncommon in business, nor are they illegal. For example, malls frequently charge tenants a percentage of gross sales as part of their rent. Likewise, it's legal for the YMCA to charge you a licensing fee in exchange for access as the official photographer for their sports league. Concessionaires at sports stadiums pay a percentage of revenue to the stadium owners (cities, in some cases) in exchange for exclusive rights to sell their goods in the stadium.

The difference between this and an illegal kickback is the recipient of the payment. Had the proposal been that you give the 10% to the Director of the Y, then that would be illegal, since it would be a payment to the director entice him to make a decision in his own personal interest rather than the interests of the Y. In that case, you would be paying (and the Director soliciting) a bribe. Since the payment is going to the Y directly in payment for a service, it is not a bribe or kickback at all, but rather a perfectly legal business contract proposal.

~Terry
02/11/2008 11:33:29 PM · #10
Originally posted by Monique64:

Whenever I do a shoot that is for a non-profit organisation or a small local group, I quote for the shoot and also offer 10% of my profit back to the organisation in the form of a dontaion. Once the shoot is finished and orders are picked up I work out the 10% and write out a cheque and note with a Please accept this donation towards your club.

Thats ok if you choose to give 10% to the organization in form of a donation but it is illegal for an organization to demand a photograph to give 10% or he/she will not get the contract. At least thats the way I understand it.
02/11/2008 11:34:29 PM · #11
Originally posted by SDW:

Originally posted by Monique64:

Whenever I do a shoot that is for a non-profit organisation or a small local group, I quote for the shoot and also offer 10% of my profit back to the organisation in the form of a dontaion. Once the shoot is finished and orders are picked up I work out the 10% and write out a cheque and note with a Please accept this donation towards your club.

Thats ok if you choose to give 10% to the organization in form of a donation but it is illegal for an organization to demand a photograph to give 10% or he/she will not get the contract. At least thats the way I understand it.


I agree totally.
02/11/2008 11:35:25 PM · #12
Originally posted by SDW:

You have to ask yourself would you get the contract if you did not agree to the 10% clause. If you say no, they would reward another photographer the contract that is willing to include the 10% clause then it is, as ' . substr('//www.dpchallenge.com/images/user_icon/user_id/1031.gif', strrpos('//www.dpchallenge.com/images/user_icon/user_id/1031.gif', '/') + 1) . ' GeneralE stated, bribery at least and maybe extortion.


Really? Malls charge a percentage of sales to their tenants as part of their rent all the time. This is written into their leases. If I want to rent a space in the mall and refuse to pay that percentage, the mall can rent the space to someone else. Does that make it extortion?

~Terry
02/11/2008 11:37:00 PM · #13
Originally posted by drewbixcube:

so are kickbacks as bad as I think they are...or is it no big deal and I'm looking over my shoulder for nothing?


Yes IMO they are as bad as you think and on the other hand they appear to be common from what I read :shrug:
02/11/2008 11:39:42 PM · #14
Originally posted by ClubJuggle:

Originally posted by SDW:

You have to ask yourself would you get the contract if you did not agree to the 10% clause. If you say no, they would reward another photographer the contract that is willing to include the 10% clause then it is, as ' . substr('//www.dpchallenge.com/images/user_icon/user_id/1031.gif', strrpos('//www.dpchallenge.com/images/user_icon/user_id/1031.gif', '/') + 1) . ' GeneralE stated, bribery at least and maybe extortion.


Really? Malls charge a percentage of sales to their tenants as part of their rent all the time. This is written into their leases. If I want to rent a space in the mall and refuse to pay that percentage, the mall can rent the space to someone else. Does that make it extortion?

~Terry

That correct malls do charge stores not only rent but "occupancy" which is a percentage of the stores sales for the month. I had to deal with that for 10 years, 12 months out of each year while reconciling my P/L statement each month. But the mall was not an non-profit entity such as the Y.
02/11/2008 11:40:19 PM · #15
Originally posted by ClubJuggle:


Really? Malls charge a percentage of sales to their tenants as part of their rent all the time. This is written into their leases. If I want to rent a space in the mall and refuse to pay that percentage, the mall can rent the space to someone else. Does that make it extortion?


only if they send someone to break your legs :)

typically they'd just evict for breach of contract.
02/11/2008 11:47:23 PM · #16
First, (I am not a lawyer) That being said, a kickback would be if you gave the director 10% to choose you. If the director is acting in the Y’s best interest and asking you to pay a fee to be selected then guess what… pay the fee.

This is simply a business arrangement. Where you want to be careful will be in situations where someone who is suppose to be acting in the organization’s best interest and instead is acting in their own.

Take for example a situation where a city counsel needs to select a road contractor to widen a stretch of road.

Use this as an example:
They get 3 bids, 1 from each of the 3 contractors who are trying to get the job.

Bid 1 from contractor A says: We will widen the road for $20M and we will pay the city back $3M in 5 years.

Bid 2 from contractor B says: We will widen the road for $18M and we will cover all repairs over the next 5 years.

Bid 3 from contractor C says: We will widen the road for $21M and we will cover all repairs over the next 5 years. (then contractor C gives each city counsel member $10,000 and tells them they will receive an additional $30,000 if they are selected for the job).

Guess which one is a kickback?

To finish my point: Take 3 photographers that are saying they will do a job at the Y like the one you describe.

Photographer 1 says: I will pay the Y 10% of what I make on my gross.

Photographer 2 says: I will pay the Y 13% of what I make on my gross.

Photographer 3 says: I will pay the Y 5% of what I make on my gross. (then tells the director of the Y that he will give him an additional $100 if photographer 3 is selected).

Again, which is a kickback.

Tell your wife to stop being so stubborn, what you are talking about is a simple contract negotiation in which your payment can probably be considered a tax write off. If 10% is acceptable to you, take the job and earn some money.

IT IS NOT A KICKBACK
02/11/2008 11:51:11 PM · #17
Too bad I'm trying to lose weight. Popcorn sounds great.
02/11/2008 11:55:09 PM · #18
Originally posted by SDW:

Originally posted by ClubJuggle:

Originally posted by SDW:

You have to ask yourself would you get the contract if you did not agree to the 10% clause. If you say no, they would reward another photographer the contract that is willing to include the 10% clause then it is, as ' . substr('//www.dpchallenge.com/images/user_icon/user_id/1031.gif', strrpos('//www.dpchallenge.com/images/user_icon/user_id/1031.gif', '/') + 1) . ' GeneralE stated, bribery at least and maybe extortion.


Really? Malls charge a percentage of sales to their tenants as part of their rent all the time. This is written into their leases. If I want to rent a space in the mall and refuse to pay that percentage, the mall can rent the space to someone else. Does that make it extortion?

~Terry

That correct malls do charge stores not only rent but "occupancy" which is a percentage of the stores sales for the month. I had to deal with that for 10 years, 12 months out of each year while reconciling my P/L statement each month. But the mall was not an non-profit entity such as the Y.


That the Y is a non-profit does not change anything. A corporation is a corporation is a corporation. They still have a right to negotiate fees for services provided.

~Terry
02/11/2008 11:57:16 PM · #19
Originally posted by scarab440:

Originally posted by ClubJuggle:


Really? Malls charge a percentage of sales to their tenants as part of their rent all the time. This is written into their leases. If I want to rent a space in the mall and refuse to pay that percentage, the mall can rent the space to someone else. Does that make it extortion?


only if they send someone to break your legs :)

typically they'd just evict for breach of contract.


No you are incorrect, Malls, triple net leases and even the owners of large box retail establishments regularly contract with tenants to except a combination of rent and gross or net sales. This is typically requested in exchange for lower rent. Usually the tenant will argue that the particular facility will not have a great enough level of traffic to justify the rent requested and the owner will counter back with that provision.
02/11/2008 11:58:07 PM · #20
For those of you keeping score at home we have:

YES, NO, & MAYBE...popcorn indeed.

There are some interesting points being brought up (personal donation after the fact, contractual agreements, etc). I can't wait to hear from someone that has similar stipulations in existing contracts or situations.
02/12/2008 12:00:38 AM · #21
Originally posted by drewbixcube:

For those of you keeping score at home we have:

YES, NO, & MAYBE...popcorn indeed.

There are some interesting points being brought up (personal donation after the fact, contractual agreements, etc). I can't wait to hear from someone that has similar stipulations in existing contracts or situations.


The answer to your question is...
No it is not a kickback.
Take the job and move on.
Tell your wife to stop interfering with you making money.
02/12/2008 12:11:46 AM · #22
DONATION, contracts. The act by which the owner of a thing, voluntarily transfers the title and possession of the same, from himself to another person, without any consideration; a gift. (q.v.)

CONSIDERATION, contracts. A compensation which is paid, or all inconvenience suffered by the, party from whom it proceeds. Or it is the reason which moves the contracting party to enter into the contract.
02/12/2008 12:15:01 AM · #23
Originally posted by SDW:

DONATION, contracts. The act by which the owner of a thing, voluntarily transfers the title and possession of the same, from himself to another person, without any consideration; a gift. (q.v.)

CONSIDERATION, contracts. A compensation which is paid, or all inconvenience suffered by the, party from whom it proceeds. Or it is the reason which moves the contracting party to enter into the contract.


So the question, then, is not one of legality, but of language. The business proposal should state that the 10% would be offered "in consideration for" rather than "as a donation in exchange for". That, and Drew would list it on his tax return as a business expense rather than a charitable donation.

~Terry
02/12/2008 12:23:37 AM · #24
That is the way I see it. The contract needs to stat it is not a donation but a 10% FEE. The reason, one is taxable and the other is not.

02/12/2008 08:12:42 AM · #25
It's a sales commission, revenue sharing, etc.
They're supplying the customers and in many cases delivering the product to the end client, so they're working for their money.

The issue is a little more shady with schools since they are a gov't organizaion. The one photog I know that does schools here pays his, umm, commission, to the school sorta under the table so it can be used at the local school. If it was offically in the contract then it would be paid back into the school district's general fund. Some school get around this by having the PTA or yearbook staff oversee the photos and get the money as a donation.

And yes, donating things to the school to get the contract is normal all over the nation. You have to decide what it's worth to you. A photography I studied under donated a golf cart to the football program at one school (above and beyond any other monies). Why? He said the $2500 cart was cheap insurance of keeping the contract. The prom alone at this school is a $21,000 sale (in one night!), plus all the sports and seniors. Generally the 'little heads' isn't all that profitable, it's the other stuff you want.
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