US government antitrust attorney Rebecca Meiklejohn is leading an investigation into whether big agencies are bullying independent production companies into submitting high bids so they can undercut them and push work into their own (mostly holding company-owned) in-house production and post-production units, according to a Wall Street Journal report.
Meiklejohn (below) led an investigation into various illegal agency practices back in 2002, one which resulted in jail sentences. This investigation seems to have been given extra legs by the recent ANA report into undisclosed media rebates. Apparently the first draft of the report by K2 mentioned the alleged practice. It reportedly said that post-production companies were urged to inflate their bids “to create a paper trail that justified to the advertiser its decision to award the project to an in-house facility, which provided a rival bid at a lower price.”
Meiklejohn has subpoenaed investigator K2 to gain additional information.
The last thing the ad business, and the big holding companies in particular, need is more evidence of dodgy dealings. The holding companies are on a relentless search for more income and better margins and production is obviously a key area. All of them now have their own in-house production units, what’s changed is the range of work they’re after. High end TV production, where much of the money is, was always the preserve of top flight production companies but, these days, it’s all about the director and if they’re prepared to work directly for an agency so be it.
But why would production companies go along with bid-rigging? Because agencies are still their biggest customers and one favour deserves another, presumably. Trouble is, it’s illegal, in the US anyway and probably other places besides.
And the sums of money are significant. In the US production is reckoned to be $5bn business and it’s getting bigger as more advertisers seek to produce more content to feed digital channels and social media like Facebook.
Meiklejohn’s problem is proving, firstly, that it’s going on and, secondly, that anyone is seriously disadvantaged. In the case of the ANA’s investigation into media rebates the big holding companies refused to co-operate and, for now, that investigation seems to have stalled. One person’s undisclosed media rebate is another’s volume discount.
Rigging production bids looks a rather more clear cut issue.