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Four of five big media agency bosses silent on question of value banks in Australia

The local heads of four of the five major media agency holding companies have failed to answer questions about whether they operate ‘value banks’ and other controversial media rebate practices in Australia.

Money notesAn ANA report released yesterday claims the US ad industry faces “systemic non-transparent business practices” in terms of media owners providing “kick backs” to agencies.

But asked whether they operate similar media rebate, media credit or value bank practices locally, the heads of major holding groups Dentsu Aegis, IPG Mediabrands, Omnicom and Publicis Media all refused to comment.

In March 2015 GroupM admitted its agency Mediacom had not only operated value banks but that it had charged four clients for advertising inventory that should have been passed on at no additional cost.

Value banks refers to using inventory given to them either for free, or at a heavily discounted rate, by media companies in return for putting a certain amount of business their way. Clients are often concerned that such payments could be influencing the recommendations made by agencies on where to spend their money.

In the wake of the ANA report GroupM issued a statement locally stating that it was “the most audited media group in Australia”, claiming the company had substantially improved its processes throughout the past 18 months.

“GroupM are the most audited media group in Australia. Working with EY we have improved our systems and processes to even greater levels of compliance and quality assurance. We have the only dedicated compliance team in the country, which oversees a consistent national compliance process across all GroupM Australia agencies,” said the company, in a statement.

“Among a number of improvements implemented by the compliance team was the introduction of guidelines and a process that guarantees trading accuracy. In rare cases, any compliance concerns identified have been resolved totally to our client’s satisfaction.”

Dentsu Aegis CEO Simon Ryan, IPG Mediabrands CEO Danny Bass and Publicis Media CEO Matt James all declined to answer questions about the local implications of the ANA findings, pointing to their group’s global responses. At the time of publishing Omnicom’s Leigh Terry had not responded to a request for comment.

The industry group representing Australia’s major media agencies the Media Federation of Australia (MFA) has said it is reviewing the ANA report and touted its own one page “transparency framework”.

Madden: MFA reviewing the ANA report.

Madden: MFA reviewing the ANA report.

“The MFA is reviewing the report by the US based Association of National Advertisers and will assess any implications it may have for the Australian market,” said Sophie Madden, CEO of the MFA.

“The MFA has worked closely with the AANA through our joint AANA MFA Media Forum Group on the issue of transparency and fairness and this continues to be one of our top priorities. This resulted in the release last year of the MFA Transparency Framework, supported by the AANA.

“The MFA is unable to comment further until it has fully reviewed the ANA report.”

In November of 2015 MFA quietly released its “transparency framework” a one-page document for the first time acknowledges the existence of value banks and says:

Where value banks exist they are used at the discretion of the Agency or the Agency Holding Company and in accordance with the clients’ contract. Value banks are defined as space, time, impressions, awarded free of charge by media owners to agencies as a reward for volume commitments.”

But senior industry figures have questioned why the industry needs an overarching position on value banks when only one out of five of the major groups admits to having value banks, leading them to question if the practice is more widespread.

darren woolley

Woolley: rebate practices are widespread in Australia

“We have been aware of value banks in Australia for at least four years,” said Darren Woolley, CEO of marketing consultancy TrinityP3. “It is interesting that people have not been willing to make any moves on this until the ANA brought this to a head.

“This is happening here. It was 2012 when we first became aware of this behaviour and it is across most of the groups.”

Globally a number of the major holding groups have sought to undermine the ANA report by attacking it’s failure to ‘name names’ of agencies acting unethically.

Jerry Buhlmann, Global CEO of Dentsu Aegis Network, which operates Carat, Dentsu Mitchells and Vizeum, attacked it as “an insubstantive report with subjective methodologies and anonymous input”.

“Our media buying process is robust and transparent for our clients, is subject to rigorous compliance processes and all our clients have the ability to audit us,” he added in a statement.

Publicis Groupe, owner of Starcom and Zenith Optimedia, put out a statement saying: “The ANA has failed its members, advertisers, agencies and the entire industry by releasing a report that relies on allegations about situations involving unnamed companies and individuals to make broad, unsubstantiated and unverifiable assertions.

“Despite repeated urging by Publicis Groupe and others in the industry to include names and sources in its report, the document hides behind suspicions and anonymity rather than encouraging real accountability.”

The full Dentsu Aegis, IPG Mediabrands and Publicis Media statements can be found below:

Dentsu Aegis statement:

“Today’s ANA Report (June 7th) is an insubstantive report with subjective methodologies and anonymous input. The business practices referenced in this report do not exist within our US business. Our media buying process is robust and transparent for our clients, is subject to rigorous compliance processes and all our clients have the ability to audit us. Furthermore, we pride ourselves on our focused and extensive efforts on compliance policies, practices and controls.”

IPG Mediabrands statement:

IPG has been a leader in terms of media transparency since 2005 when we proactively confronted the types of non-transparent practices raised in today’s ANA report. We eliminated these practices from our organization, issued public disclosures and strengthened our governance controls.

Since that time, we have continued to modernize our transparency practices for an increasingly digital and complex media landscape. Here at IPG we do not accept rebates in the U.S., nor do we believe rebates should be part of U.S. market practices. Additionally, IPG does not buy “inventory media,” where we pre-purchase media on our own account and re-sell it to clients – this decision has been a point of differentiation for our company.

As a result, we have a high degree of clarity in our contracts with clients and media owners regarding our respective roles and interests. Our practices have been reviewed in numerous audits conducted at clients’ requests by a variety of firms, including ones that participated in creating the ANA report, and we are very proud of our track record.

The broad and anonymous nature of the report’s allegations is unfortunate and inflammatory. The picture the report describes is not consistent with our actual business practices.

Publicis Media’s statement:

We fully understand that clients need to be certain that their investments are managed in a professional way and according to the contracts they have signed. Mutual trust has been a pillar of our Groupe for decades.

Had the ANA been willing to have an open dialogue with our industry we would have been immediately ready to cooperate, as we did last year, and that is reflected in our engagement with the 4A’s.

By refusing such a dialogue and choosing a sensational approach, it seems clear that the ANA is not trying to find a solution to the alleged problems, and instead is acting with other goals in mind.

The ANA has failed its members, advertisers, agencies and the entire industry by releasing a report that relies on allegations about situations involving unnamed companies and individuals to make broad, unsubstantiated and unverifiable assertions.

Despite repeated urging by Publicis Groupe and others in the industry to include names and sources in its report, the document hides behind suspicions and anonymity rather than encouraging real accountability.

As a result, the report fails to achieve a constructive outcome of encouraging change that can assure advertisers and agencies are well-equipped to work together in a rapidly evolving media environment.

The various highlighted practices distort the picture of the marketplace by suggesting that they are pervasive.

These allegations are too serious for the ANA to act in such an unhelpful way. If the report’s authors have evidence of wrongdoing by specific agencies, they should come forward and state their case, so that the appropriate action can be taken.

The unsubstantiated claims are already causing serious damage to the reputation of the industry and endangering the most valuable component of the agency-advertiser relationship: trust. Trust is a key tenet at Publicis Groupe.

We are committed to understanding and respecting our clients’ transparency requirements in all situations, and this is a standard part of our client contract negotiation process.

Publicis Groupe has strict internal rules, including a code of conduct that serves as important controls on our practices and public reporting.

In addition, we continually examine our processes and procedures to ensure we are following best practices, and our people are expected to meet these high standards. We are crystal clear: we are committed to full compliance with the terms of the client-agency agreements we sign.

We always want to hear from any client that has concerns about the delivery of our services and how we are compensated, so that we can address those directly with them.

We also recognize that some alleged practices under question may not be egregious transgressions but rather outmoded practices that have not kept pace with the fast changes in the media landscape that require more engagement and dialogue between agencies and clients, and better alignment to assure comfort and consensus.

Consistent with our strong advocacy for the industry and our clients’ best interests, we were active participants in discussions last year with the ANA and the 4A’s toward the shared goal of enhancing media transparency. We were on the verge of announcing a broad set of principles when these efforts were unexpectedly abandoned by the ANA.

We remain strong advocates of developing industry guidance now. Our letter sent to the 4A’s on May 30, before the report was released, outlined our concerns about the ANA’s approach, which went unheeded.

Ultimately, the industry has been diminished and maligned by the ANA’s short-sighted and unilateral agenda of casting aspersions on an entire industry, rather than promoting trust and transparency, which should be paramount. We are continuing to review the ANA’s report, and will comment further as appropriate.

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