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Federal Prosecutors Subpoena Media Buying Executives

Investigation of Agency Buying Services Probe Over Media Transparency

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Federal prosecutors investigating shady media-buying practices in the ad industry have reportedly begun issuing subpoenas

Last week the Wall Street Journal reported Havas had been subpoenaed by federal prosecutors
over the U.S.’s ongoing investigation into media-buying practices. Federal prosecutors in Manhattan investigating shady media-buying practices in the ad industry have reportedly begun issuing subpoenas.

The recurring theme of buying agencies receiving rebates from the media owners and other non transparent practices is back in the news. It has never gone away. Now that its back in the news and subpoenas are being issued, we’ll be hearing more substance soon.

Havas Media Group US, issued a statement, noting “it cannot comment regarding an ongoing investigation within the industry.” 

Smoking gun?  Are there dirty hands in OOH?  Let’s hope not.

We all know how competitive it is pitching, winning and maintaining business. In every circumstance I am familiar with and that is a number to count in dozens; one of the pitch points, is saving the potential new business prospect significant dollars on rates often by cutting fees. There is not a lot of profit margin available to buying services. The prospective clients who review new business pitches, make it clear, a few points can make a difference in their selection.

One piece of business we pitched, we came in with a 5% fee. The client told us we were 30% higher than the buying agency which was selected. Our proposal was the second to the lowest. Few clients will ever admit fee is the most important consideration in selecting a buying service.  All things being equal or the appearance of such, those who offer the lowest fees sure seem to be the ones who win the business. I’ve been involved with buying fees as low as 1.99% (can’t make money) to as high as 30%.  The average fee ran between 5 and 7%.  Fees are critical, for both parties.  Fees charged for buying have dropped over the years and the trend continues.

The average fee ran between 5 and 7%.

How does the agency make money? Rebates from vendors are one source and it can be substantial.  The question is, who is being transparent?  Is it enough to have it in small print on an agreement?  Legally it is.  Ethically should the new business pitch include comments about keeping any rebates? Rebates, which includes a wide definition of any form of remuneration returning to the buying group from the vendor.

That remuneration could include dollars at the end of the year, access to trades of good and services, unattached ‘bonus space’ for the buying services to resell, research funding for performance proofs or studies and more.

remuneration could include dollars/check at the end of the year, access to trades of good and services, unattached ‘bonus space’ for the buying services to resell, research funding for performance proofs or studies and more.

The Wall Street Journal reports ‘others’ are cooperating with investigations. The FBI has been interviewing an array of people in the ad industry over the past few months

I don’t envy anyone who has been operating in the grey areas, especially those who take direction from the highest levels of their agency.  Those C level suite execs may feel shielded by the fact their media directors or buying service heads are the ones who actually negotiating the ‘deals’.  It is a tough spot to be in.  Make your revenues or you’re out. That’s the challenge.

Who is clean and who isn’t?  We’ll leave to the Feds to figure that one out.  Unfortunately, its places a cloud over everyone, guilty or not.

Who is clean and who isn’t?  We’ll leave to the Feds to figure that one out.  Unfortunately, its places a cloud over everyone, guilty or not.

Here are 4 links to the most recent articles late last week on the subject:

Link to The Wall Street Journal article ⇒Federal Prosecutors Probe Ad Industry’s Media-Buying Practices  Investigation examines whether advertising agencies received rebates from media outlets

Link to the Media Post / Agency Daily article ⇒Feds Probe Agencies Over Media Transparency

Link to the Ad Age article⇒  ‘FEDS MEDIA-BUYING PROBE IS ‘CLOUD THAT WILL HANG OVER THE INDUSTRY’

Link to Business Insider reports⇒here

 

 

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2 Comments
  1. Gino J Sesto says

    Big agencies have always had the fix in. Its getting old. About time the big agencies get the treatment they deserved.

  2. Bill Board says

    Thank you for your comment on this important topic which has been part of the Industry in one form or another for decades.
    I would add to your post, ‘smaller agencies’ are beneficiaries to the excesses of greed as well. It is not the ‘Big Agencies’ who are guilty. From a risk verses reward basis, the Feds may find it more rewarding to prosecute them. There is nothing that helps the concentration like a good hanging.