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Miller Brewing Co. last week filed a $6.9 million breach-of-contract and negligence lawsuit against Bates USA and Zenith Media Services, New York.

The No. 2 brewer charged in the suit, filed in U.S. District Court in Milwaukee, that its former creative and media agencies failed to secure make-goods for local TV spots in 1995 and 1996 that missed ratings goals, despite assurances from top executives.

The $6.9 million reflects the estimated value of the make-goods, free ads that make up for ratings shortfalls.


"This suit is utterly ridiculous and without merit," said Rich Hamilton, CEO of Zenith. "It relates to alleged guarantees on local TV; the alleged guarantees were not made." Zenith and Bates said they will vigorously defend themselves against the suit.

Miller is suing Bates for an additional $937,997, saying the agency double-billed the brewer for services.

A Miller spokesman said the brewer unsuccessfully sought restitution while it worked with Bates and Zenith and after dismissing them in December 1996.

"We're looking for the folks at Bates and Zenith to live up to their deal," said the spokesman. The shops "basically felt they could wash their hands of it" after being dismissed, he said.

But one veteran spot TV executive at a rival agency said taking such legal action is "very, very unusual."

Added another buying executive: "Most buyers make their clients whole with make-goods, even if the client has left the agency."


Miller shifted all media buying -- local and national -- to Leo Burnett USA, Chicago, starting December 1996. Billings were $263.5 million in 1997, according to Competitive Media Reporting. TeleVest, now a unit of MacManus Group, handled national media buying in '95 and '96.

Before their dismissal, Bates handled creative for Miller Genuine Draft and media planning for all brands, while Zenith handled local and sports buying. Both agencies, along with Zenith's other half-owner, Saatchi & Saatchi, were then units of Cordiant.

Miller's relationship with Zenith had been particularly rocky before the dismissal, with the brewer repeatedly giving the shop poor performance grades.


The suit offers a glimpse into the degeneration of the relationship between Miller and the agencies. Miller moved local buying to Zenith from Bates in 1995 after Zenith was organized to handle buying for Cordiant-owned agencies. Bates retained media-planning duties.

According to the suit, Bates had done a good job of performing post-buy analyses and obtaining necessary make-goods. But from February 1995 on, the performance allegedly suffered. According to the suit, the agencies failed to get the lowest prices for local TV ads; failed to obtain make-goods for underdeliveries; and failed to file timely post-buy reports.

Meanwhile, the agencies submitted bills to Miller claiming they had tried to obtain the lowest-cost advertising, the suit said.

The matter came to a head on Aug. 2, 1996, according to the suit, when Zenith made a presentation to Miller promising to deliver on make-goods owed to the marketer.


Saatchi CEO Robert Seelert and Bates CEO William Whitehead later called J. Michael Hart, Miller marketing services director, to apologize for the shortcomings and promise to fulfill their obligations, the suit said.

Despite the assurances, the shops only got "a small portion of what they could have obtained by applying skill and diligence ordinary in their field," according to the suit.

Miller terminated its relationship with the agencies in December 1996, but continued trying to obtain the make-goods, the suit said. In December 1997, the brewer made a formal claim for the underdelivery or a monetary equivalent.

Bates responded in March of this year, denying any responsibility for compensating Miller. It also refused to reimburse Miller for alleged overbilling, according to the suit.


Miller's action is the second high-profile client-agency lawsuit in recent weeks.

In a reversal of the MIller suit, D'Arcy Masius Benton & Bowles, New York, filed a $9 million breach of contract suit earlier this month against former client Gateway (AA, June 8).

Contributing: Laura Petrecca, Chuck Ross

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