ANA Issues RFP For Consultant To Investigate Media Rebates
The Association of National Advertisers has issued a request for proposals seeking a consulting firm to conduct a wide-ranging investigation of media rebates and other deal terms in the U.S. It proposes interviews with marketers, agencies and vendors aimed at uncovering whether undisclosed deals exist.
The move is the latest in a series of increasingly assertive efforts by the nation's foremost group of advertisers to determine the extent of undisclosed rebates in the U.S. – something many marketers and consultants believe exist, but which agency executives deny. It continues a process that included white papers the past two years, but the RFP aims to go considerably beyond those efforts, which leaned heavily on surveys of marketers who were themselves often mystified by what's going on.
"It is apparent that a wide disparity of opinions exists throughout the industry," said Bill Duggan, ANA group exec VP in a statement. "The lack of a common perspective runs the risk of suboptimizing client/agency relationships and creating an environment of mistrust."
"One critical expectation is that the output from the study must be reported without bias," said ANA CEO Bob Liodice. "The report must demonstrate objectivity and integrity throughout to ensure that the study is beyond reproach."
Specifically the RFP, with all deliverables due by July 24, seeks to "demystify the landscape" by having an objective third party "conduct its own investigative analysis – interviewing marketers, agencies, publishers, vendors and other players to develop a fundamental understanding that can be shared with the industry at large."
The investigation shouldn't be confined just to rebates or "agency volume bonuses," but to a wide range of practices that affect or could affect how inventory is selected, including "barter, arbitrage, 'dark pools' (or inventory sourced from a variety of processes and re-sold to clients), agency trading desks, and global inventory management/swaps," the RFP states.
One key area of focus is the role of holding companies and how they're involved in the activity of their individual agency units. Holding companies have the scope and complexity to "perpetuate transparency issues," the RFP said, but their leaders "been emphatic that their organizations conduct business openly and with integrity."
The study will also look at whether undisclosed incentives may result in media plans that aren't in the best interests of clients; develop best practices and industry standards for transparency; and look at cases where marketers' behavior may be pushing the limits.
"Marketers should come under the same level of scrutiny that is being suggested for the agency business system," the RFP says. "Are marketers squeezing the agencies so hard that agencies have had to resort to less transparent behavior?"
One big question is whether a third party can uncover what marketers themselves sometimes feel they can't, even amid multi-billion-dollar agency reviews. In a transparency "town hall" session at the ANA Advertising Financial Management Conference in April, Ana Jernestaal, assistant VP-finance for L'Oreal USA, which is in the midst of a review of its $2.3 billion media buying account, said: "We know [rebates] exist, but we're sitting across the table from advertising agencies that are flatly denying it."
Speaking at the same conference, Irwin Gotlieb, chairman of WPP's GroupM, said incentive arrangements that put media agency compensation at risk if they don't deliver certain reach and cost or other targets have essentially made them no longer true "agents," of clients.
"You cease to be an agent the moment someone puts a gun to your head and says 'These are the CPMs you need to deliver,'" he said.
But he reiterated that GroupM engages in no collection of undisclosed rebates from media sellers and honors its contracts.
"When we talk to our staff, we remind them constantly that they're acting in the best interests of their clients," he said.
Media rebates have long been common outside the U.S. and are dealt with in client contracts there. They've long been considered rarer in the U.S., but the ANA began questioning that with a 2013 white paper in response to a member query.
The ANA commissioned former Mediacom CEO Jon Mandel, now a consultant, to join other media consultants in probing the issue further late last year. And a report Mr. Mandel delivered to the ANA Media Leadership Conference in March ignited a bigger controversy over the issue. Mr. Mandel quoted unnamed media-seller executives saying rebates are widespread in the U.S., sometimes lead to agencies not fulfilling their fiduciary duties to clients, and that the growth of such practices were among factors leading him to leave the agency business.
That, combined with an Ad Age cover story on the subject later that month constituted a tipping point on the issue, according to the RFP.
The ANA joined the 4A's in late April to assemble a task force of top marketer and agency executives to look into the issue. It includes representatives from the three largest packaged-goods advertisers in the world – Procter & Gamble Co., Unilever and L'Oreal -- all of them currently with active global or U.S. media reviews – and top executives from the media units of the three largest global holding companies – Group M, Omnicom Media Group and Publicis Groupe's Starcom MediaVest Group.
The study conducted as a result of the RFP ultimately will inform recommendations of that group.