LONDON: The parent company of The Guardian has disclosed that it pays rebates to ad agencies, in the form of free advertising space or cash payments, in return for certain levels of spend.

The Guardian Media Group mentioned the practice in its published annual accounts, although a spokesman declined to comment further when contacted by Campaign, which first reported the news.

According to its financial statement, Guardian Media Group said: "The group enters into agreements with advertising agencies, which are subject to a minimum spend and typically include a commitment to deliver rebates to the agency based on the level of agency spend over the contract period.

"These rebates can take the form of free advertising space, cash payments or both. The rebate provision is calculated using the forecast spend over the contract period and the rebate entitlement set out in the trading agreement.

"Calculating the required provision therefore requires an estimate of future period spend in determining what tier of spend the agencies may reach over the agreement."

Rebates in the UK are not uncommon, Campaign reported, but they are controversial in the US where the Association of National Advertisers warned its members in June that non-transparent business practices by US media agencies were "pervasive".

These rebates can be contentious because advertisers may consider that any savings should be returned to them. Generous rebates might also encourage media agencies to choose to spend with a particular media owner.

The Guardian is reported to have been paying rebates for some time. It is the second leading UK publisher to disclose rebate payments in its accounts, following a similar initiative by Daily Mail & General Trust at the end of last year.

Data sourced from Campaign; additional content by Warc staff