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Big US advertisers to investigate media rebates

The American Association on National Advertisers (ANA) and Advertising Agencies (4As) are convening a task force of senior marketing and agency executives to find out if the big media agencies and their owners are ripping off clients over rebates from media owners.

liodice-hed-2013Or, as ANA CEO Bob Liodice (left) puts it, rather more politely: “We are genuinely pleased that the leaders of our industry recognize that transparency concerns, real and perceived, need to be addressed and mitigated. Media transactions have become increasingly complex and our priorities must include recommended practices that enhance the understanding of the transaction processes.”

The group consists of representatives from L’Oreal, Unilever and Procter & Gamble, the latter represented by brand boss Marc Pritchard who’s currently trying to find another $500m in savings on agency fees. From the agency side Omnicom, Publicis Groupe and WPP will be represented.

Should be interesting as the group is investigating things that pretty well all of them have said publicly aren’t going on at all. The bosses of all the holding companies denied anything untoward when delivering their Q1 numbers last week. The advertisers’ official line at least has been that they receive their dues from their agencies.

The issue bubbled up in the Us when former MediaCom boss Jon Mandel told an ANA meeting recently that agencies were trousering rebates – either in cash or kind – rather than passing them back to clients. The pressure was compounded by Pivotal Research senior analyst Brian Wieser when he advised clients to sell holding company shares because clients were likely to take a harder line.

On the face of it, this seems a pretty easy issue to resolve. Either Mandel is right or wrong. But the devil, as usual, is in the detail; in this case the fine print of the contracts between the marcoms companies, their media agencies and clients.

At the very least the issue will tempt many big advertisers to tear up these contracts – by reviewing their business – and start again. Unilever is currently reviewing its global media anyway while L’Oreal is reviewing in the US. Pritchard and P&G will surely follow.

The holding companies are worried, as WPP’s Sir Martin Sorrell has admitted. “We are the only group that have made any public statement,” he says. “We said what the model is in the US, the way it’s a non-rebate model. We’ve made that quite clear. I would urge greater transparency in what’s happening to net sales and revenues, then we would have less black box and more open box. I think this is really very important. As an industry we have to get this right.”

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About Stephen Foster

Stephen is a former editor of Marketing Week and London Evening Standard advertising columnist. He wrote City Republic for Brand Republic and is a partner in communications consultancy The Editorial Partnership.
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