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Omnicom and Publicis dragged into US Justice Department production-rigging probe

The US Department of Justice has now contacted three of the top four advertising holding companies about its investigation into alleged rigging of production quotes according to the companies themselves: Omnicom (two subsidiaries), Publicis Groupe and Interpublic, which we knew about. WPP, Dentsu and Havas have so far declined opportunities to confirm or deny any such contacts. The DoJ is not commenting.

The attorney on the case Nancy Meiklejohn has previous in such cases (if we may say that about a law officer) having prosecuted a number of ad agency executives in the past for rigging print bids. Some ended up in jail.

This new probe grew out of the US Association of National Advertisers’ investigation into so-called media “transparency,” originally set up to investigate undisclosed rebates from media owners to agencies. Wrongdoing in this is hard to prove as media owners customarily reward media agencies for allocating them a certain share of spend. One might wonder why they don’t just offer a discount and that’s the way things might happen in the future.

Rigging production bids by inviting independent production and post-production houses to submit high bids so the agency’s own operation can undercut them is, one would have thought, rather more clear cut and easier to prove. It is the same in essence as the print scandals unearthed a decade ago. There were instances of this in the UK as well as the US.

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Not all the focus should be on agencies though. Clients, it seems, are once more having the wool pulled over their eyes courtesy of their own behaviour. Media rebates have grown in importance as client procurement departments (who mostly know little about advertising or media) have ground down headline fees and commissions. The same is true in production.

Any idiot should be able to work out that publicly-quoted advertising holding companies (whose margins are public knowledge) have to make their money somewhere and are not going to work for 0.5 per cent or whatever figure the client fondly imagines they will.

The serried ranks of ad consultants also have questions to answer. They know this as well as anyone but seem rather reluctant to tell their clients they’re barking up the wrong tree.

Update

So has WPP so it looks as though everyone’s joining the party.

WPP’s statement reads:

WPP confirms that, similarly to Interpublic, Omnicom and Publicis, three of its subsidiaries have received subpoenas from the U.S. Department of Justice Antitrust Division concerning the Division’s ongoing investigation of video production and post-production practices in the advertising industry. WPP and its subsidiaries are fully cooperating with the enquiries.

Just the job for a relaxed Christmas/holiday season.

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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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