THE KICKBACK COVER-UP

It didn't take long.

Last week I speculated that the advertising industry, particularly the huge "Wall Street" agencies, were in for a rough ride this year. On Tuesday, in an article headlined "Ad Agencies Are Paying Out Secret Settlements So They Don't Have To Show Clients All Their Contracts,"  Business Insider reported  that agencies were trying to buy clients' silence about agency corruption with secret million dollar payments.

Let's start this story at the beginning.

In June of last year the Association of National Advertisers released the results of a months-long investigation into alleged unsavory practices by ad agencies. The conclusion was that corruption in the form of kickbacks from media suppliers, and other nasty practices, were "pervasive."

The 4A's (the ad agency trade association) and most of the individual "Wall Street" agencies denied everything. At the time I wrote the following about the 4A's denial...

"If you wanted to create an example of how guilty parties obfuscate and throw horseshit in your face, you couldn't have done a better job. It's a text book example of how to torture language to be unmistakably devious and unconvincing... Anyone who believes that the 4A's response is anything other than a pathetic smokescreen is a moron."

Now, according to Business Insider, the big agencies are proving their "innocence" by paying out millions to aggrieved advertisers.

This is a critical moment for the 4A's. They cannot continue to maintain that there was no wrongdoing while their constituent members are making secret payoffs. They need to investigate the Business Insider story immediately and let us know of it's true. If the story is correct, the leaders of the 4A's either have to withdraw their previous denials or step down. They cannot be allowed to squander the credibility of our industry in a misguided effort to defend a gaggle of unsavory aristocrats.

The ANA is not blameless in this either. In order to get their hush money, the advertisers have to agree to auction off their virtue:

     1. They have to agree not to audit the agencies.
     2. They have to agree not to require the agencies to reveal the secret contracts they had with media suppliers.
     3. They have to sign a non-disclosure agreement in which they promise never to reveal that they traded integrity for money.

In other words, they are being asked to leave the door open for more underhanded practices by not bringing to light what has been happening. Now every advertiser has to guess what shady deals have been going on and guess where the loopholes may be in their agency agreement. If the ANA had any sense, for their own self-interest, they'd pressure their members to lay all the cards on the table.

According to Business Insider's report, there have been at least 20 cases in which payments have been made or are being negotiated.

Advertisers are getting as much as $10 million and more in recompense from "innocent" agencies for their charming media buying habits --"particularly digital media." Duh.

The payoffs have been carefully kept "below the materiality threshold at which agency holding companies would have to disclose them in their annual reports." Isn't that lovely?

When is the SEC going to have a nice close look at these cutie pies?

                                      And Just In Case You Happen To Be In Poland This Week...
                                            ...I'll be speaking on Wednesday at TV Day in Warsaw.

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