Among the findings of the ANA’s Production Transparency in the U.S. Advertising Industry report: the use of agency in-house production is not always transparent to the advertiser, leading to cost inefficiencies and “a disrupted competitive landscape”.
The report included a range of allegations, among them that some agencies had nudged production and post-production contracts toward their in-house production arms, made possible by the agencies’ control of the bidding system.
“We’ve been hearing rumblings about it for the past couple of years in the committee system,” said ANA group executive vice president Bill Duggan, speaking to Adweek. It was only after smaller independent editors spoke out about their competitive disadvantage that these practices came under scrutiny.
The findings emerge just half a year after the Wall Street Journal reported that the US Department of Justice had launched an investigation into whether ad agencies and holding companies were rigging bids in order to direct business in-house, an illegal practice. The four largest holding groups were all subpoenaed last December.
A supporting study found that fewer than half the respondents required their agency to disclose if they were bidding a production job to an in-house or affiliated production company. Similarly, over 60% of respondents didn’t require or didn’t know if their agency contract required production rebates and other incentives to be passed back to their company.
In a statement, ANA CEO Bob Liodice said the report demonstrates the fundamental importance of transparency across the ecosystem. “Marketers,” he added, “are strongly encouraged to revisit their business protocol and their agency contracts.
“Additionally, marketers must step up their supervision and understanding of the production ecosystem to ensure that their investments are managed superbly.”
In a comment to the Wall Street Journal, the holding company WPP said “we haven’t seen a final version of the report, although the ANA did circulate a draft version some months ago, which we thought was flawed in several material ways.” The company added that it would not comment until it had seen the final report.
Recommendations from the ANA included greater awareness of in-house capabilities within agencies, alongside a general requirement of disclosure before bidding commences. Finally, advertisers must take control and seek independent audit of their agency contracts.
Data sourced from the ANA, Adweek, Wall Street Journal; additional content by WARC staff