US DoJ Clears Five Top Holding Companies of Bid Rigging
Five major agency holding companies who were subject to an investigation by the US Department of Justice since 2016 say they have been cleared of any wrongdoing.
MDC Partners, Omnicom, Publicis Groupe, WPP and IPG have each confirmed that the investigations into their subsidiaries have been closed without any action taken.
The probe was launched by the DoJ in 2016 into whether these agencies were unfairly directing business towards in-house production departments and away from independent companies. Some had alleged that agencies were fixing the bidding process by encouraging production shops to increase their bids so that the in-house departments could undercut them.
AICP president and CEO Matt Miller issued the following statement to all members by way of a response:
"Many have likely read the press reports that the major holding companies - MDC Partners, Omnicom, Publicis Groupe, WPP and IPG - have all affirmed during normal SEC disclosures that the Department of Justice (DOJ) investigation into unfair bidding practices by their agencies have been closed, with no action taken.
"The investigation began in 2016 when the DOJ began looking into agencies and whether they were unfairly utilizing their position of evaluating bids for clients to direct work to predetermined entities which could include their in-house units, rather than allowing the multi-bid requirement by a client work as intended: to uncover the best solution both creatively and financially.
"From press reports since that time, it was widely known that many in the industry were interviewed and cooperated with the DOJ and the FBI during this process. Unlike some of the coverage yesterday, the genesis of this investigation is still not clear (one article insinuated that it was the independent production industry that initiated this investigation).
"I for one am pleased that the probe concluded without criminal charges or indictments against those working in our industry; many of whom would have merely been company pawns in a complicated, evolving business. The positive conclusion of this was not about people going to jail.
"At its core, this was about shifting business models and inherent conflicts of interest that have been developing when agencies are playing multiple roles in what had been (until quite recently) a siloed model which allowed them to act primarily in the interest of their clients.
Regardless of whether or not criminal activity was uncovered or pursued to its fullest by the Department of Justice, it is crucial for the future of this business that we continue to insist upon fair, transparent and unconflicted bidding practices—and that we do not engage in activities that are weighted or loaded or possibly rigged. It is not in the interest of your company, the agency or ultimately in the service of the brands that we are all engaged to create messaging for.
"In the past two years, clients have never paid more attention to how bidding is handled. There has never been more acknowledgment regarding the amount of proprietary detailed information that we regularly create to articulate our approach during bidding (a system we developed over 40 years ago), and there has never been more open dialogue about fair competition and respect for the proper use of bidding information. With or without Big Brother watching, we must be vigilant that this progress continues.
"Common-sense ethics should continue to be your operating principle in conducting your business, and you should insist on the same from those with whom you do business. Prior to this investigation, AICP issued Bidding Guidelines which articulated general bidding policies for an industry that was clearly undergoing change; we shared them openly with clients and agencies alike. I would highly suggest reviewing these again and continue sharing them with all parties you do business with."
Reacting to this development, Steve Davies, chief executive of the Advertising Producers Association in the UK, said: “We didn’t have bid rigging here [in the UK]. We have bid manipulation. If you’re controlling bids you can control the supply of manipulation to the other bidders. And you can fail to negotiate them down on things you’d normally negotiate them down on or give them a high target figure and beat it. Being both the decision maker on the bids and being the bidder is still not in in the interest of the client because it warps the free market. So whether it’s illegal or not is irrelevant as far as the client’s concerned. Just because some practice is not illegal doesn’t necessarily mean it’s in their interests.”
