Multiple Publications Claim That Factory Design Labs Failed to Properly Pay Them for Ad Placements

By Patrick Coffee 

Factory Design Labs of Denver has been through a few major changes in recent years, most prominent among them the departure of former CEO Scott Mellin, who tells us that he stepped down as chief brand officer in December 2014 for personal reasons to be replaced by predecessor and agency founder Jonas Tempel and left the agency altogether last July.

The company also recently pivoted from being a design agency to also providing media services. But according to a story that ran in the Denver Post over the weekend, the agency has repeatedly failed to uphold the publishing portion of its media duties, leaving “several magazines with unpaid bills” and “rais[ing] the ire of media outlets and at least one company that paid Factory to place ads.”

Staff reporter Jason Blevins writes that Factory told multiple outdoor sports publications that it would be unable to pay for ads it had placed on behalf of its media clients, many of which are area ski resorts or producers of outdoor sports equipment. An ad sales executive from an unnamed national magazine said:

“They have a lot of outstanding balances and delinquent payments with us for all my clients that had media managed through Factory … I was flabbergasted when (a client) shared with me that they had indeed paid Factory and Factory was not paying us for those bills.”

The accusation, then, is that the agency accepted full payment from its clients before telling the media companies that ran the ads that it would be unable to fulfill its part of the agreement and attempting to negotiate alternate deals that paid as little as 8 cents on the dollar, according to Snow Magazine publisher Barbara Sanders. As one anonymous media executive put it, “Where did the money go?”

Blevins contacted various media executives who declined to comment on the record. Agency president Bob Reimer also did not say anything for the Denver Post story, citing unspecified “confidentiality and non-defamation agreements.”

We recently spoke to a source with direct knowledge of the matter who claimed that Factory Design Labs made repeated attempts to spin the story told by these media partners as one for which the agency is not to blame.

According to additional sources who spoke to The Denver Post on condition of anonymity, Factory blames its inability to honor business agreements on the loss of The North Face account. It’s true that the shop had been AOR on that business since 2007, but rumors of a split began circulating almost two years ago when Mekanism took over responsibility for the outdoor gear company’s TV campaigns. The first such effort launched in November 2014, and Mekanism officially became the client’s lead creative agency partner with the “Never Stop ____” campaign less than a year later.

Regarding the alleged non-payment, Sanders told the Denver Post, “…no one is talking about it in public. It’s like it didn’t happen.”

In a Facebook note posted on Sunday at noon, CEO Tempel writes that the Post story “represent[s] a general approximation of the truth” that is “greatly in need of some context.” He then notes that the agency has been involved in a “critical restructuring” since January 2015 that has required the team to “radically reduce expenses.” He does not, however, specifically connect this observation to Factory Design Labs’ admitted inability to honor its agreements with its various media partners.