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Hires, Wins & Business

ANA Report Takes Aim at “Anti-Competitive” Behaviour in the US Advertising Industry

The report puts bid rigging and non-transparent production practices back in the spotlight following the reveal of last December’s Department of Justice investigation

ANA Report Takes Aim at “Anti-Competitive” Behaviour in the US Advertising Industry

The US Association of National Advertisers (ANA) has published its report on anti-competitive practices and in-house production, entitled “Production Transparency in the US Advertising Industry” this week.

The report, which is separate from the ongoing US Department of Justice investigation into bid rigging, looks at the issue from the perspective of advertisers. It goes into specific detail, but generally concludes that “transparency issues exist in the production ecosystem” and that “improved advertising production management is within advertisers’ control.”

Steve Davies, Chief Executive of the UK Advertising Producers Association, added, in a mail to members: “The ANA report concludes that agencies are engaging in anti-competitive behaviour that is a conflict of interest and damaging to the interests of advertisers.”

The report’s executive summary defined transparency as “the full disclosure of relevant information required for informed and intelligent decision-making. It is distinguished by the lack of hidden agendas and conditions.”

It surmised that “a non-transparent business practice is one in which relevant information is not disclosed
or is intentionally obscured from one party to a transaction,” and that “advertising production transparency issues have been building for several years.”

Additionally, “issues related to production transparency extend beyond the United States. This is
a current topic in Australia, Europe, and South Africa”.

Here are the key conclusions from the executive summary:

Twelve subject matter experts from industry trade associations, production consultants,
experienced auditing organizations, an industry law firm, and K2 Intelligence supplemented
by an ANA member survey provided consistent perspectives and the following conclusions:

•Transparency issues exist in the production ecosystem.
o Transparency concerns exist at multiple agencies and holding companies. Eleven of the 12 subject matter experts support this conclusion.
o The use of agency in-house production resources is not always transparent to the advertiser.
o Production business processes marked by agency control of the bidding system — where
the agency also competes for the business — is sometimes dysfunctional and conflicted
because the buyer can also be the seller of the services.
o Non-transparent agency-controlled bidding can lead to costly, inefficient, and sub-optimal
advertiser business decisions. The financial impact to marketers can be significant.
o Where non-transparent practices exist, the production and editing competitive landscape
becomes potentially compromised and unreliable. Such situations may jeopardize the
health and well-being of competitors in the production and editing ecosystem.
o The state commercial production incentive system is often not transparent to advertisers,
and therefore advertisers may not be receiving the financial benefits they are due.

• Improved advertising production management is within advertisers’ control. Advertiser
disciplines, accountabilities, and controls for production need to be evaluated, upgraded,
and restructured to substantially elevate decision-making quality and enhance disciplines
and overall financial management.
o Advertisers must be aware that many agencies have in-house production/editorial and
music production resources and that these resources are bidding against outside suppliers.
o Advertisers must be more astute in contractual relationships, including those between
the advertiser and agency and between the agency and production suppliers.
o Advertisers must understand the bidding process to help reduce the likelihood of potential
conflicts of interest among competing parties.
o Advertisers must be fully aware of their rights in leveraging state commercial production
incentives.
o Advertisers must understand when the agency is acting as principal versus its legacy role
as agent for a disclosed principal.
o Advertisers must develop internal production management disciplines to ensure consistency
and reliability in the decision-making process.

The full report can be downloaded here.