News Analysis: Miller Suit Ripples In Media Circles

Guarantees, Common Practices, Ethics and Obligations at Issue NEW YORK--The federal lawsuit Miller Brewing launched against Bates USA and Zenith Media on June 18 provides a study in business ethics versus legal obligation, as well as far-reaching media buying practices. The breach-of-contract and negligence suit claims that Bates and Zenith owe the Milwaukee brewer $6.9 million for failing to deliver on media buys and then refusing to provide "make-goods" or the cash equivalent. The nasty claim of "double billing" to the tune of $1 million is also leveled against Bates. Observers say the suit is interesting and unusual because it illustrates the complexity of media buying deals, the occasional drama in agency-client relationships and the issue of fulfilling promises and contractual obligations. Bates and Zenith executives have declined comment. But sources said the contract with Miller does not involve any guarantees for ratings shortfalls, which could, some observers say, weaken Miller's legal case. While not a common practice, making such guarantees for local time (network deals always involve guarantees) varies by agency and client and it is unclear what, if any, verbal guarantees were made to Miller. It is an unwritten rule, however, to follow up or "make-good" on buys that do not deliver. "In my experience, you manage an account even if it's lost, after the fact," said Charlie Rutman, executive vice president and director of media services at Carat MBS here. The reason for that, he said, is because it makes good business sense to stay on good terms with clients and it is also proper ethically. "It is the right thing to do," he said. Many observers are surprised that Bates and Zenith would burn a bridge as large as Miller parent Philip Morris. So what led PM to finally file suit, 18 months after firing the agencies? Miller representative Scott Bussen said the client took this course of action when it became clear that the two agencies "weren't going to resolve it fairly. At this point we had to take the next step." Interestingly, the lawsuit claims that Saatchi chief executive officer Robert Seelert personally "acknowledged and apologized" to Miller director of marketing Michael Hart in August 1996 for "Zenith's failure to deliver the agreed upon television audience" and said he would "make Miller whole." Zenith negotiated some make-goods, but not enough for Miller's taste. Three months later, the brewer pulled the planning and buying tasks, worth $200 million, from Bates and Zenith, respectively. Around the same time, Miller hired Steve Buerger as director of media services. Sources said that Zenith obtained a positive quote about the agency from Buerger that it used in new business pitches. In December 1997, Miller sent a letter to the defendants laying "a formal claim for the under-delivery of advertising or its monetary equivalent." This March, Bates responded "denying" responsibility and refusing to make payments. The relationship between Miller and Zenith got off to a bad start. Zenith took on the buying portion of the Miller business from Bates in February of 1995, shortly after it was formed. Within a year, the upstart media shop received failing grades in its annual evaluation for not executing timely buys in the fall of '95. Zenith argues that changes at the client made its media buying chores more complex, as a result of the company's Service 2000 initiative. That program decentralized authority over the client's media buys to dozens of local and regional executives. As a result, sources said, Zenith was unable to get quick decisions from the client. Others said plenty of media agencies handle decentralized accounts without such problems. In addition, Zenith may argue that the shift in focus at Miller away from local buys to network and cable TV would have made the process of demanding make-goods tougher especially with "lame duck" status. One source's explanation is that at the time of the account loss, the agencies laid off dozens of people, reducing the manpower to follow up on the make-goods, which were needed in many of the 150 markets where Miller advertised. Perhaps both agencies felt the other was responsible. The contract with Miller is with Bates, but it was on Zenith's watch when the shortfalls took place and went unnoticed. The suit alleges that Bates had provided the client the required post-buy analyses, but Zenith failed to do so. If it moves forward, some say the suit could have vast implications for media buyers. "The concept of Miller Brewing suing a little guy like Bates or Zenith is hard to understand," said one media executive. "If clients start going after agencies this way, it means that agencies will have to be a lot more careful about what they promise." Zenith insiders grumble that the lawsuit is a desperate attempt by Miller to assign blame for flat sales. Miller has been on a cost-cutting spree for three years. "Who wouldn't want to add a few million dollars to their bottom line?" snapped one executive. Zenith and Bates were given 30 days to respond to the suit.

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News Analysis: Miller Suit Ripples In Media Circles

Cristina Merrill

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Cristina Merrill