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Agency production probe deepens

News, 19 December 2016

NEW YORK: Agencies owned by Omnicom Group and Publicis Groupe have received subpoenas from the US Department of Justice (DoJ) as part of a widening investigation into how production and post-production contracts are awarded in the ad industry.

Omnicom released a statement on Friday, 16th December, outlining what had happened. "On Dec. 14, 2016, two subsidiaries within Omnicom Group Inc. (NYSE: OMC) received subpoenas from the US Department of Justice Antitrust Division concerning its ongoing investigation of video production and post-production practices in the advertising industry," the holding group said.

"Omnicom's outside legal counsel has contacted representatives of the Antitrust Division, and the company is fully cooperating with the investigation."

The DoJ’s investigation was originally reported by the Wall Street Journal in early December. The news title suggested this has been underway for several months, with ad industry executives being interviewed about how production and post-production contracts are handed out.

More specifically, the government body is exploring if agencies unethically influence this process in an attempt to boost their revenues from a $5bn business covering areas like directing, special effects and sound editing.

The DoJ’s primary focus is said to involve whether agencies encourage independent providers of production and post-production services to artificially inflate their prices during the bidding process.

As a result, the production and post-production divisions directly owned by agencies – but often operating under different names – would then stand to gain a favourable position in the bidding process.

The quid pro quo for independent production companies might, under this theory, be the promise of future business from an agency or, potentially, a financial payment. Agencies, alternatively, may threaten to sever future ties with uncooperative production companies.

Interpublic Group became the first major holding company to confirm it was helping the DoJ, having been asked for documents regarding video production practices.

"The policies in our company's Code of Conduct require that we do business in a manner that is fully consistent with the best interests of our clients – in the case of production, that means requiring triple bids on all projects above a minimal dollar threshold," the organisation stated on 7th December.

On the same day that Omnicom revealed two of its businesses had received subpoenas, Publicis Groupe reported one of its subsidiaries was also assisting the DoJ.

"As part of the investigation led by the US Department of Justice Antitrust Division concerning video production and post-production practices in the advertising industry, one of the subsidiaries of Publicis Groupe received a subpoena dated Dec. 14, 2016," the company said.

"Publicis Groupe, supported by external counsel, will fully and productively collaborate with the investigation."

UPDATE: On Monday, 19th December, WPP Group confirmed it, too, is working with the DoJ, stating: "WPP confirms that, similarly to Interpublic, Omnicom and Publicis, three of its subsidiaries have received subpoenas from the US Department of Justice Antitrust Division concerning the Division's ongoing investigation of video production and post-production practices in the advertising industry.

"WPP and its subsidiaries are fully cooperating with the enquiries."

Data sourced from Ad Age, Business Insider, Wall Street Journal; additional content by Warc staff