DOJ declines to pursue alleged unfair video production business practices
Whew!
Big ad agencies are breathing a sigh of relief with the conclusion of a major Department of Justice (DOJ) probe.
The investigation, launched in 2016, lifted the lid on suspected video production bid rigging by the big five ad holding companies ‒ MDC, IPG, WPP, Publicis and Omnicom. The DOJ was following up on reports that the agencies were unfairly directing production business away from independent shops and straight into their own in-house units. The companies were allegedly asking production houses to bump up their prices so that contracts would be delivered in-house.
The announcement of the investigation two years ago landed with a loud thump amid overall industry concern about transparency and fair play, following closely on the heels of an Association of National Advertisers' investigation that revealed widespread use of rebates and "other non-transparent practices" within the industry. According to Ad Age, questions regarding video production were addressed in the ANA's original report, but were subsequently removed.
The Takeaway
Various subsidiaries of the major holding companies received subpoenas over the course of the investigation, but by mid-November all five reported that they had received confirmation from the DOJ that the investigation had closed without any action.
Video advertising has emerged as a critical source of revenue for the agencies, with video ad spending expected to increase from $91 billion in 2018 to $103 billion over the next five years. The close of the investigation is therefore a big boost for the companies as they try to maintain client trust in a marketplace troubled by transparency concerns; consider the ongoing probe by the Federal Bureau of Investigation into media-buying practices, including wire fraud, conspiracy and racketeering. Nevertheless, advertising agencies should remain vigilant about increasing scrutiny of their business practices.
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