Madison Avenue ad-buying practices under Federal scrutiny

Tuesday, 2 October 2018 00:00 - - {{hitsCtrl.values.hits}}

Los Angeles (Variety.com): The opaque nature of media buying practices is under new scrutiny, with federal prosecutors in Manhattan believed to have opened an investigation into the matter, according to a report in The Wall Street Journal, and issuing subpoenas as part of their work.

The investigation is examining agencies getting rebates from media outlets, the Journal said, citing people familiar with the matter. Havas, the French company that is owned by Vivendi SA, is being looked at as part of the investigation, the report said. A Havas spokesperson could not be reached for immediate comment.

Much of the media business could not operate without the flow of ad dollars, and five big advertising companies – Interpublic Group. Omnicom Group. WPP. Publicis Groupe of France and Havas – allocate billions of dollars in Madison Avenue cash thanks to their control over big agencies like Wavemaker, Spark Foundry, Initiative, and OMD.

In 2016. an influential trade organization, the Association of National Advertisers, released a report alleging that various media companies offer rebates to big media-buying firms in exchange for a greater amount of ad dollars – a prospect that suggests the potential allocation of billions of dollars in advertising may be influenced by a desire for a sort of kickback, rather than being done in the interests of big-spending clients.

Relying on interviews with 150 people conducted by K2, an investigations firm, the ANA found that media owners paid rebates to agencies “in amounts ranging from 1.67% to approximately 20% of aggregate media spending, depending upon the deal.” In some cases, the percentage of the rebate owed increased along with agency spend, the company’s report stated.