Federal Probe Leads to Grand Jury Subpoenas
for Large Marketer
With the Fat Lady no where in sight approaching the microphone, the investigation into media buying is in full swing. Federal Grand Jury subpoenas have been issued. And if people were nervous last year when the story started coming to life, some must be down right hysterical this week upon receiving the legal documents. Not a the special delivery anyone likes arriving to the front lobby.
Ad Age reports via Jack Neff, the feds issued subpoenas for records from a major ‘marketer’ in the investigation into media buying ‘practices.’ Rebates in the form of cash, which are not shared with clients is one of the mentioned accusations. Similarly, kick backs of any kind, like bonus space to be resold or funding ‘special projects’ which profit the marketer on the back of clients buys would be examples of others. One would wonder if special gifts, goods and services beyond the standard acceptable practices would be other violations which may be under the scope of investigation.
The bottom line is, the reporting or lack of and failure to pass along benefits to the client would fall into illegal activity as well. Certainly from an ethical perspective, it’s a problem. The Federal government’s law enforcement high jump bar is one which may not be quite as high as some might hope to escape the long arm of the law.
Know one seems to know who the culprit(s) are under the summons. Ad Age writer Jack Neff, quotes a source who “describes the client as having a mid-nine figure media budget, (that could be as much as $500,000,000) and the subpoena seeks two years of financial records, emails and other communications between the client and its agency.”
$500,000,000 includes a significant number of potential advertisers who spend that much on media in the US. While everyone is looking around wondering who might be getting probed, one can not help but wonder what role media providers might play in the story. It is the media owners who are ‘writing the checks’ and while they may escape punishment they certainly must be considered culpable and considered as unethical participants in the practices.
For the record, we have heard nothing about OOH being singled out in this story.
What are your thoughts? Should media owners be accountable for kicking back ‘dollars,’ fully knowing the money is staying with the agency? What about similar practices some vendors participate in with receiving ‘rebates’ from their vendors? That’s a different can of worms but it is, a can of worms none the less.
Read the full story from Ad Age here⇒ FEDERAL GRAND JURY SUBPOENAS MAJOR MARKETER IN U.S. MEDIA BUYING PROBE
The TV and Radio business always functioned with a gross and net rate. There is nothing wrong with taking a commission if that is how you and your client agree you should be compensated. However, if your client contract dictates you are to charge net rates, and you don’t disclose you are “taking a commission,” and keep an offered bonus without disclosing it to the client, then you are committing fraud. I get offers like this primarily from digital media outlets. I just make sure my client benefits from the offer according to our contract. Media agencies are supposed to be able to generate unbiased media plans for their clients solely based on the strength of a proposal to deliver on objectives. That objectivity goes away if we start keeping sales incentives that we should be reporting to our clients. This is not a difficult concept to grasp.
Evan Brown thank you for the comments. We could not agree more. Objectivity from an ethical perspective should be the primary incentive which guides agency decision making.
The temptation and pressure from ‘management’ creates poor choices from those immediately below the highest level of agency management, to meet revenue goals.
That coupled with the ease with which media owners offer ‘off the books discounts’ makes the enticement too great to refuse. Not a difficult concept to grasp as you say but in context sadly a difficult concept to execute.