Advertising Week

Production Costs Can Be Rigged Without Being Illegal

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Philipp Schuster, Bayer
Philipp Schuster, Bayer Credit: Advertising Week Europe

While the U.S. Department of Justice investigates ad agencies accused of unscrupulously directing production jobs into their own in-house departments, the same set of problems is eating away at agency trust in Europe.

At a session during Advertising Week Europe, production company representatives accused agencies of giving themselves an unfair advantage when bidding for production work.

Steve Davies, CEO of the U.K. Advertising Producers Association, stopped short of accusing agencies of illegal practices. However, he said, "There are so many ways you can favor yourself without doing anything as crass as entering a criminal conspiracy … You just have to not negotiate the price you get from a production company, or not supply them with information as you go along."

The panel, which also included Bayer's procurement director, Philipp Schuster, agreed that agencies should not be allowed to judge their own bids when competing against a production company.

Mr. Schuster, who until recently was director of procurement at Adidas, said, "The referee can't also be a player. It doesn't make sense for agencies to judge their own bid. We have to set up a process where this is not possible, or bring in an independent person."

Mr. Davies called for agencies to pledge never to bid directly against production companies, but production consultant Claire Randall disagreed. She said, "It would be a shame to say there shouldn't be any bidding against each other. It's better to find a solution to manage the process correctly so it's fair and transparent. The bids should go direct to a client or a consultant. It's better to do that than to say it can only be one or the other."

There was also an agreement that without fair competition, the interests of the marketer are not being served. Mr. Davies said, "It's better for the client if a bid is won fairly in a genuine competitive situation rather than just through smoke and mirrors …"

Mr. Davies said that agencies had claimed to him that they wouldn't favor their own bids. He countered, "Although I have faith in their own personal integrity, I just don't think that's possible. It's not just about being fair, it's about being seen to be fair, in order to maintain credibility in the system."

He spoke about the financial pressure on agencies and suggested that in-house production was a good way for an agency to respond to its own financial challenges. However, he added, "The problem comes when an agency is making decisions in its own interest above its clients' interests."

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