Agency flacks and finance hacks

Michael Darragh
Aug 22, 2017 · 3 min read

At the end of 2016, the Wall Street Journal broke the story that the United States Department of Justice (DOJ) was investigating advertising agencies for violating antitrust laws by bid rigging.

A little over a week later, it was revealed that the DOJ had issued subpoenas for Interpublic, Omnicom and Publicis. Three days after that, WPP confirmed that it had also been issued a subpoena, making all four of the world’s largest marcomm holding companies by revenue parties of interest in a major U.S. Federal investigation.

What on earth had they (allegedly) done?

Well, these massive organizations encouraged the agencies under their umbrellas to collude by screwing over their clients and independent production and post-production vendors in order to increase profits for their holding company. Their agencies misled production and post-production companies about the rates used to bid for any given client’s business. The agency would inflate bids of independent third-party vendors in order to make it possible to undercut with a bid from a vendor under the same holding company.

Some companies are beginning to fight back. P&G, GroupM, Unilever and L’Oreal are all beginning to stress transparency and accountability, with some going so far as to tell agencies it’s their way or the highway. For example, P&G will no longer work with vendors who are unwilling to use MRC-accredited third-party vendor verification.

All of these changes are positive and good for the industry when we are talking about digital and media buys, but what about good old-fashioned account management and billing items such as third-party expenses? When you are paying for an agency team to fly in for a meeting, are you going to trust the same agency that is under investigation by the DOJ for bid rigging and has been complicit in normalizing exploitive billing practices is going to look out for your organisation’s best interests when purchasing those plane tickets?

No. That markup, that you will never be privy to, will far exceed what they claim it is for: “Administrative expenses, cost of interest, loss of investment opportunity, risk of carrying expenses… oh, and we forgot to tell you about the percentage that goes to our bottom line.”

Don’t worry, if there’s any consolation for clients, some agencies happily screw their own people over too. The Meetings budget, which clients assume is spent on business class, might be spent on a budget airline and hotel, to the detriment of a hard-working account director traveling to the other side of the world. While clients are investing in a well-rested and ready to work agency account director, they are getting a worn out, frustrated worker, getting no per diem and concerned about the hefty data roaming charge on his/her personal phone that must always be kept on.

Clients deserve better. Talented third-party vendors deserve a fair chance. Billing practices that are clear for clients will make us all accountable.


Originally published at elephant.md

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Michael Darragh

Written by

CEO of Elephant.md - Creative Technology Services with agility and economy for Global Brands.

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