Production Company Trade Groups, ANA Respond to Department of Justice ‘Bid Rigging’ Investigation

By Patrick Coffee Comment

Back in December, the Wall Street Journal broke news that the Department of Justice had launched an investigation into “bid rigging,” or the process by which certain agencies (allegedly) make things more difficult for both clients and production/post-production companies by lying about rates or making deals to score more contracts.

We later learned, via public statements, that all four of the largest holding companies had been subpoenaed as part of this probe.

Since then, the story has pretty much gone silent in terms of press coverage. But there has been movement within the industry and its various representative bodies.

Earlier this week, both the AICE and the AICP (which are completely separate organizations that happen to share an office building) released internal memos to members updating them on recent developments. In short, the investigation continues despite the fact that Jefferson Beauregard Sessions III now runs the DoJ.

From the AICE memo, which begins with a summary of the events to date:

“As a trade association, AICE’s policy is to refrain from commenting on the investigation itself but rather to focus on our continued push to raise awareness among advertisers about transparency issues in an effort to affect change in the non-transparent practices employed by ad agencies with in-house capabilities.”

In what may be the most significant development, the Association of National Advertisers has quietly created a Production Transparency Task Force. So far, it amounts to a series of webinars and meetings dating back to the month before the DoJ news went public, with the AICE invited to one event to present its own concerns about competition between agency production departments and independents. The memo adds, “The task force expects to complete their work soon and should have findings to share at some point this spring.”

This sounds quite similar to the Task Force on Media Transparency, which launched as a joint effort between the 4A’s and ANA in 2015. The former organization split from the pair last January and issued its own recommendations, which the ANA quickly called “premature.” ANA has also maintained a Production Management Committee for years.

On the bid rigging front, the ANA plans to “recommended contract language” that clients can use to prevent agencies from attempting to score production work without their direct knowledge.

The AICP has already drafted its own suggested language, taken from a separate note sent to members in early February:

“[Production Company] is submitting this bid with the understanding that the Agency is soliciting bona fide, competitive bids and that the Agency is not soliciting a “Complementary Bid,” which is deemed an illegal, anti-competitive bidding practice according to the US Department of Justice. Furthermore, [Production Company] is submitting this bid with the understanding that to ensure a fair and non-conflicted bidding process, no entity in the bidding pool, directly or indirectly, is a parent, subsidiary, division, affiliate or sibling of the Agency.”

This January, ANA held a Transparency Day “designed to educate advertisers on several transparency-related issues.” Approximately 35 top marketing executives attended and said that “they are now paying very close attention to this issue,” and the AICE memo also claims that several individual companies have reached out to that organization seeking more information. It goes on to recommend that members should ” be wary of requests for any bid submission that feels like it might be solicited by the agency merely as a way of satisfying client requirements and does not represent an honest and fair opportunity to win a project.”

An ANA spokesperson declined to comment for this post, as did a rep for AICE.

But we hear there’s a mood of cautious optimism among the production community, with some hints of agencies complying with the groups’ proposed guidelines. According to at least one party, some post-production companies have recently scored contracts with clients who did not realize that their agency partners were giving themselves all related work until news of the investigation broke. We also hear that production consultants have looked to take a more active role in the process over the past two-plus months.

The Department of Justice itself has not announced any new developments in the probe. But they didn’t announce the subpoenas, either. That’s just not how they roll.

In other news that everyone already knows, a longtime veteran of the production and post-production industries recently told us that, back in the day, related budgets would often include an item labeled “lumber” that was commonly understood to be shorthand for cocaine.

The more things change, etc.

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