Ad holding companies cleared in DOJ investigation into production practices
- WPP, IPG, Omnicom, Publicis and MDC Partners, which were subpoenaed by the Department of Justice as part of an investigation into video production and post-production practices, have been cleared of any wrongdoing, Adweek reported. Spokespeople from the ad holding groups said they received confirmation from the DOJ that the investigation had been closed.
- The companies were subpoenaed in 2016 and 2017 over allegations of "bid rigging," which refers to contract manipulations used to drive production work away from third-parties and to in-house units. The practice would have been a legal violation of fair bids between competing parties.
- Some agencies have seen brand clients replace traditional, long-term retainers with shorter-term projects and also reduced agency fees, as noted by The Wall Street Journal. Agencies have focused on production as a new revenue stream to account for this and help brands that need extra content for digital channels
The DOJ clearing the major ad holding groups on any wrongdoing around contract bid rigging comes as a win for agencies and helps to support their broader push to improve transparency. Agencies have seen the trust of brand clients degrade in recent years amid a number of reports uncovering non-transparent business practices.
Video production is also one of the most profitable parts of the advertising business and an area many agencies can't afford to lose out on. Video ad spending is expected to increase from $91 billion in 2018 to $103 billion by 2023, according to Forrester. The format's total share of the ad spending market is forecast to jump from 21% this year to 34%, the researcher said. Marketers are investing more in video to reach consumers on digital and mobile channels, as the rate of cord cutting continues to rise and people are spending more time on their smartphones.
Even though the DOJ's investigation into video production is closed, agencies are facing considerable challenges elsewhere, including through an ongoing FBI probe into their media-buying practices. Last week, the ANA shared a white paper with its members that offered details about the crimes potentially being examined, such as mail and wire fraud. The report, penned by the marketing trade body's outside counsel at the law firm Reed Smith, also attempted to allay concerns among marketers that there could be retaliation if they cooperate with investigators. Retaliation would also likely constitute a crime.