Media Agencies To Big Tech Brands Being Probed For Kick Backs.
The media buying practises of agencies used by some of the World’s biggest tech Companies are under investigation by the FBI over their media buying practises.
The FBI has already begun issuing subpoenas as part of the probe which could spill over to Australia with authorities telling ChannelNews that they “will watch with interest” how the US investigation stacks up. The investigation is looking at, nontrans parent ad-buying practices, including agencies receiving rebates from media outlets and not passing that rebate on to their client’s sources said. said.
Federal prosecutors in Manhattan have targeted the likes of Havas, the media agency for LG. WPP the media agency for the likes of Microsoft, Dell and several other major brands.
WPP, Omnicom, Publicis, Interpublic and MDC Partners admitted to the WSJ, that some of their subsidiaries were subpoenaed by the Justice Department, which is investigating whether these agencies have manipulated the bidding process by urging independent companies to inflate their prices so that contracts could be awarded to the agencies’ own production and postproduction outfits. At the time, the ad companies said they were cooperating with the investigation.
ChannelNews has been told that the practise is widespread in Australia with large media Companies handing agencies “marketing rebates” above and beyond the commission that is shown on invoices to clients. Among the worst offenders are Asian linked agencies.
According to the Wall Street Journal the FBI has been interviewing people in the ad business about ad-buying practices and about a 2016 investigation of the industry commissioned by the US Association of National Advertisers.
The 2016 study, which was conducted by corporate investigations firm K2 Intelligence, found that rebates and other nontrans parent practices were “pervasive” in the U.S.
The investigation comes amid deteriorating trust between agencies and marketers, an increasing number of whom have taken ad-buying duties in-house and demanded more transparency in their agency contracts in the wake of the ANA report’s publication.
Ad trade magazine Campaign initially reported in June that the FBI was gathering information about the ad industry’s media-buying practices.
Rebates or agency-volume bonuses are a common business practice in several Countries according to ad executives and auditing firms. However, historically they haven’t been part of the way ad deals work in the U.S.
The ad business is dominated by six ad holding companies— WPP, Omnicom Group, OMC, Publicis Groupe, Interpublic Group, Dentsu and Havas.
Combined, the six firms are responsible for roughly a third of the estimated $580 billion in global ad spending, Pivotal Research’s Mr. Wieser estimates.
This isn’t the first time the government has taken a hard look at Madison Avenue. In late 2016, The Wall Street Journal reported that the Justice Department began an investigation into whether ad agencies inappropriately steered commercial-production business to their in-house production units—rather than independent companies—by rigging the bidding process for those contracts.