UPDATE: DOJ Issues Subpoenas to Omnicom, Publicis and WPP in Production ‘Bid Rigging’ Probe

The four top holding companies, starting a few weeks ago with Interpublic Group, have one or more agency subsidiaries that have received subpoenas as part of the U.S. Department of Justice Antitrust Division’s investigation into video production and post-production bidding practices.

According to an article in today’s issue of Adweek,  “Adweek spoke to several longtime veterans of creative shops and production companies, who described scenarios in which agencies either misled production partners about the rates clients will pay for their work or asked them to offer artificially inflated rates as ‘favors.'”

Allegations assert that agencies are obtaining inflated third party bids to make bids from the in-house agency production studios more competitive and retain the work that would otherwise go to an external production or post-production house.

While representatives from each of the holding companies confirmed that subpoenas had been received by one or more of their agencies, and that they intended to cooperate fully with the DOJ, all declined to provide further details on which agencies had been subpoenaed.

 

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Agency Transparency Issues, Audits and Reviews Projected to Increase Sharply in 2017

Adding fuel to the fire

The gap in client-agency relationships widened when, in March 2015, allegations by former Mediacom CEO Jon Mandel of widespread U.S. media agency kickbacks during the Association of National Advertisers Media Leadership Conference led to an eight-month investigation conducted by K2 Intelligence for the ANA. The resulting K2 report, issued in early 2016, generated criticism on the reports validity by the agency community but got the attention of U.S. marketing and procurement professionals alike.

While no one will say whether this issue drove the spate of high profile media agency reviews over the past year, the timing is certainly hard to ignore. And it was definitely the reason behind some assignments 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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