GroupM Responds to Industry Rebate Allegations
GroupM's response to allegations by ad veteran Jon Mandel of industry-wide secret rebates in the U.S. has come swift and strong.
"In the U.S., rebates or other forms of hidden revenue are not part of GroupM's trading relationships with vendors," said Rob Norman, chief digital officer at WPP's GroupM, in a statement Friday. "GroupM and its agencies have not sought nor received any rebates from U.S. media vendors or other parties with whom we do business on behalf of our clients. In other markets around the world, rebates are sometimes part of the buy-sell relationship between agency and vendor. GroupM returns those rebates to advertisers in compliance with and as required by our client contracts."
The GroupM statement was provoked by a public declaration Thursday from former Mediacom CEO Jon Mandel, who said media agency rebates and kickbacks, long thought to be something that happened overseas, are actually more widespread. Mr. Mandel made his remarks to the Association of National Advertisers Media Leadership Conference on Thursday in Hollywood, Fla.
Mr. Norman responded to specific points raised by Mr. Mandel in a follow-up interview with Ad Age:
Ad Age: Why do you think these allegations harmful for the industry and agencies like GroupM?
Mr. Norman: The integrity of the marketplace is central to its sustainability. We have been robust on this point from ad fraud to viewability to contractual compliance.
Ad Age: Mr. Mandel said clients should question agencies taking equity stakes in vendors that could be adverse to client interests. What's GroupM's response to that?
Mr. Norman: Such as we have such investment they are on the record. We are a public company. Any such investments are known. Clients are informed of our investments and can and do apply greater scrutiny to transactions with related parties.
Ad Age: Mr. Mandel said at the ANA, "Have you ever wondered why fees to agencies have gone down and yet the declared profits to these agencies are up?" If that's the case at GroupM, can you comment on where some of those profits come from?
Mr. Norman: Like our clients we strive for growth in absolute volume, growth in market share, increased efficiency and yes, the development of new business models like Xaxis. We have been consistent in declaring such activities, explaining the models, and requiring specific "opt-in" contract language if clients are to participate.
Ad Age: What is the group doing to ensure that rebates or other forms of hidden revenue are not part of GroupM's trading relationships with vendors around the world? Beyond taking a position, is there any new action GroupM plans on taking to dispel these allegations, such as spearheading an industry coalition?
Mr. Norman: We have always said that these issues are governed by contractual compliance between agencies and clients. We live by that because it's right and because it's required in our own regulatory environment. We think that's the appropriate position and does not require a coalition to determine it.
Ad Age: Generally why do you think Mr. Mandel is coming out now, and why is there more conversation around rebates?
Mr. Norman: We can't and won't comment on Mr. Mandel's motivations. Rebates have been discussed forever. More recently the broader issue of trust in the supply chain is of significant interest.