Agencies in Turmoil: Contracts, Rebates and “Dark Pools”

First up a story has emerged that two unidentified US ad tech sales vendors have broken cover and spoken of terms of business between themselves and HavasSummarizing it seems that the US vendors were told they needed to pay fees to a Spanish entity owned by Havas amp8220based on the amount of business Havas Media did with the vendorsamp8221 These fees would secure amp8220planning servicesamp8221 One of the vendors has suggested no such services were ever delivered Havas has denied that any of this has anything to do with rebates and is all a matter of badly worded clausesNo one has yet explained exactly what planning services a Spanish entity could be expected to supply to US ad tech vendors But maybe there are such services and maybe theyamp8217re truly valuable to the vendorsStill if that was the case and this was all an open business transaction of value to the vendor then why go anonymously to the pressLetamp8217s set aside the detail for a moment and delve back in timeWhen the French passed Loi Sapin back in the 1990amp8217s media agency profits plummeted This law made broking impossible as each order for media space had to be authorized by the client concerned The notion was this All space had to be bought on the clientamp8217s instructionThe media agency fraternity came up with the idea of selling amp8220research projectsamp8221 to media vendors These were among the most expensive research projects ever commissioned as of course they existed only to allow the agency to collect rebates and kickbacks but through another routeThere was certainly at least one occasion when one agency issued an instruction that these amp8220research reportsamp8221 had to look substantial so that should any authority go poking around there would never be any question that the media vendor was genuinely buying research of immense value or at least something worth the inordinate amount amp8220paidamp8221 for itThe rebate that never was and is in fact a payment for a service supplied is an old trickSuch tricks old or otherwise will no doubt be front of mind for whoever gets to conduct the ANAamp8217s consultancy enquiry into rebates and related matters announced last week The RFP states the enquiry will also explore amp8220barter arbitrage 39dark pools39 or inventory sourced from a variety of processes and resold to clients agency trading desks and global inventoryamp160managementswaps amp8230 Holding companies have the scope and complexity to perpetuate transparency issuesamp8221Good for the ANA What is needed is an objective look into this whole matter Itamp8217s only then that trust can start to be rebuilt between media agencies and their clientsMeantime back in the amp8220donamp8217t letamp8217s forget whose money this isamp8221 department comes news from a loyal Cog Blog reader in a land faraway This reader has been sent by an advertiser the terms of a contract between the advertiser and his agency I paraphrase but here is a verbatim extractamp8220Client may appoint any internationally recognized financial audit firms including but not limited to Deloitte KPMG Ernest ampamp Young PricewaterhouseCoopers for the purposes of the audit of Basic Services as per this AgreementAudit firms who are only into media audit services will not be consideredClient shall consult AGENCY before the final appointment of the auditorsAudit as mentioned here is restricted to process audit only The audit shall take place only at the office of AGENCY The frequency of such audit shall be no more than once a yearThe auditor will be required by AGENCY to sign a nondisclosure agreement NDA prior toamp160participating in any such audit and shall not be permitted to share any confidential information with Clientamp8221So the agency gets to veto the auditor and refuses to allow a media audit And will not allow any confidential information to be shared with the clientWhat was it Sir Martin Sorrell said at Ad Week in London in April 2014 Ah yes amp8220There has to be somebody who has to evaluate the amount they clients spend and where they spend itamp8221And GroupMamp8217s Irwin Gotlieb in Ad Age this April amp8220When we talk to our staff we remind them constantly that they39re acting in the best interests of their clientsamp8221Iamp8217m sure you saw this coming but the agency laying down the law on auditors is a GroupM shopThe opinions and points of view expressed in this commentary are exclusively the views of the author and do not necessarily represent the views of MediaVillage management or associated bloggersamp160

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Agencies in Turmoil: Contracts, Rebates and “Dark Pools”

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Brian Jacobs

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Agencies in Turmoil: Contracts, Rebates and “Dark Pools”

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