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How to Prevent Fraud in Production Bidding

Advice from the DOJ

Back in 2002, the U.S. Department of Justice Antitrust Division secured convictions that led to prison time for six executives in the Grey Worldwide / Color Wheel bid-rigging scheme. Rebecca Meiklejohn, a DOJ litigator, led the case which involved kickbacks and bid-rigging for production work on two of Grey’s largest accounts, Procter & Gamble Co. and Brown & Williamson Tobacco Corp. (Note:  Grey was not the only agency that’s had isolated cases of misconduct by production staff.)

While speaking at the Association of National Advertisers’ Agency Financial Management conference back in 2005, Meiklejohn stated that it tends to be individuals within an agency that perpetrate these production related frauds despite any policies and best practices that agencies have in place. At the time, Meiklejohn recommended advertisers and their agencies require and enforce the following procedures to prevent procurement fraud:

  1. Competitive Bidding – all bids must be secured in writing with date stamp and prior to submitting bids to the client
  2. Conflict of Interest Policies – these need to be well defined and prohibit agencies from accepting any gratuities from suppliers
  3. Paper Trail – thorough production files must be maintained and include all original as well as revised bids and client authorizations, and all with date stamps
  4. Checks and Balances – agencies must have separate authority for awarding contracts from those approving supplier invoices, and clients must beware of telltale signs of improprieties, such as faxes without date stamps
Production Bid Management Challenges in the Digital Age

At Bajkowski + Partners, we’ve performed numerous process audits for clients that have included reviews of production management practices and we still uncover deficiencies within both the clients and their agencies. While we have not uncovered situations that indicate any intentional wrongdoing, we have seen several new production bid management challenges arise since production management went digital.

At the agencies, we typically find the following issues during a process and contract compliance audit:Continue reading

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Ad Agencies Under Investigation for Rigged Production Bidding Practices

According to recent articles by The Wall Street Journal and Advertising Age, the Department of Justice has launched a probe into advertising agency practices around the production bidding process. The inquiry focuses on whether or not agencies are engaging in unfair business practices in order to award more work to their own in-house production departments – potentially violating antitrust laws which prohibit price-fixing and bid-rigging.

In this alleged rigged bidding process, according to the Journal, agencies are purported to seek inflated bids Continue reading

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Choice Hotels Launches Brand Refresh

Choice Hotels Boosts Ad Budget by Double Digits, Launches Brand Refresh…New Campaign Encourages Face-to-Face Connections

Choice Hotels International is boosting its ad budget by 13% this year, as it undertakes a brand overhaul… The spot, which uses The Clash’s “Should I Stay or Should I go?” employs an approach… read more

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Comment on Ad Age Article “Agencies Look to Defend Intellectual Property Rights in Reviews”

Our response to an article that ran in today’s Ad Age about the “4A’s Missive Sent to Search Consultants Argues for New Agreements in New-Business Pitch Contracts”

Rather than trying to put the onus on consultants to add a “creative ownership” clause to its contract with the client, how about if the agencies refuse to sign any mutual confidentiality contracts that have clauses transferring the ownership of agency pitch IP to clients without compensation.

We also believe this is a telltale sign of how a client views the agency relationship and work product – if they don’t respect it now, it’s not going to get better later. This is also the kind of client we prefer not to do business with.

Honestly, we’ve never come across a situation where the client did not understand that any work shown by an agency during a pitch is still the IP of that agency unless some monetary consideration is negotiated. It’s not like the pitch work is a new business tchotchke.

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