Bid Rigging: The new ticking time bomb for the advertising industry

By - CTL
January 27, 2017
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By Marcus Honesta.

Well it seems that further to the report that CTL first published on the 8th of December last year (AD AGENCIES PROBED OVER CONTRACTS TO PRODUCE COMMERCIALS) the whole affair has taken a somewhat nasty turn in the UK. No doubt the fallout will have ramifications globally.

In an open letter published in Campaign UK yesterday, 65 Production companies said they “don’t want to be part of a system” in which agencies invite external bids for production work that they are considering pitching for themselves. This practice is called “bid rigging”.

It follows on from the Department of Justice investigation in the USA on whether agencies are intentionally rigging production bids to favor their in-house units.

The sixty-five production companies, including B Reel Films and Stink, have now signed the letter, up from an original 15 which consisted of big names Academy, Blink, Outsider, Rattling Stick and RSA Films.

Yesterday the IPA (Incorporated Practitioners in Advertising) said it was “unreasonable” to suggest agencies should not pitch against production companies for the same work.

Paul Bainsfair (above), the director-general at the IPA said the bidding system was not “rigged”, and claimed there were numerous examples of independent production companies pitching against agencies’ in-house divisions and winning.

The practice of competing for the same contracts is acceptable as long as agencies notify outside companies that they intend to do so, the IPA believes

Well, it is hardly surprising he would say this considering the pedigree of Mr. Bainsfair. He is a well-known figure in the AD industry. Before taking up his role as head of the IPA he was Chairman of Iris Worldwide. His previous roles include: Non Executive Chairman of Lean Mean Fighting Machine, President TBWA Europe, Director of Omnicom Europe, Founder and Co-Chairman of Bainsfair Sharkey Trott and a number of roles at Saatchi & Saatchi, where he began his career, which culminated in his final appointment as CEO in 1989.

Perhaps he was part of the problem? Lets talk about a conflict of interests. What else was he going to say?

Steve Davies (above), UK chief executive of the Advertising Producers Association, has also called for stricter guidelines around agencies’ use of in-house production divisions.

(The Advertising Producers Association was formed by and represents the interests of production companies, post-production and VFX and editing companies making commercials).

They claim that the APA’s objective is to create the best possible business environment for their members to operate in. “We provide standard contracts, production advice, recommended crew rates, advice on non standard contracts and copyright, disputes resolutions”.

One would have expected him to say nothing less.

In response to the IPA’s most recent statement, he countered that there are “myriad examples of agencies deciding to do the work themselves after the production companies asked to pitch have done treatments and budgets and in doing so provided useful creative and methodology”.

He added: “That doesn’t mean agencies can’t do the work, simply that they need to decide at the outset if they are doing the work or if they are having production companies treat and bid on it, not both.”

WPP, Interpublic Group, Omnicom and Publicis Groupe have been subpoenaed by the US DoJ investigation, which has not expanded to the UK.

Davies said: “We hope the IPA will reconsider – they need to stop defending the indefensible.” 

The full letter, with the additional signatures, is below.

Dear Campaign editor,

Re: “IPA wades in on ‘rigged’ production pitches row”

As production companies, we are used to and expect to fight hard to win work in the open and competitive market. That is what we expect. But a bidding system rigged against us isn’t – a system by which the agency inviting our bid is also contemplating bidding its own in-house production department for the work, or might do so when it has our bids in.

We don’t think such a system is capable of being operated fairly.

The IPA has advised agencies to “ensure it does not use any information disclosed to it by a production company to enhance its own bid”. That is impossible to achieve in practice. A production company’s creative ideas and methodology are in its treatment and budget. It is impossible for an agency receiving those to un-know them when working on their own bid.

Further, it will have the details of the amount that each production company has bid and can tailor its bid to undercut them – it can’t be seriously suggested that an agency that wants its in-house production company to do the work is going to bid more than the independent bids it has seen.

So, even with the best of intentions, the process will be rigged against us and we don’t want to be part of it. We genuinely don’t believe it is in the interests of agencies either – a fair open and transparent process is what advertisers want – and any system that isn’t risks dragging the industry into the murky waters that have brought about the US Justice Department’s investigation into bid rigging – which would be illegal in the UK too of course.

Let’s put as much distance as possible between the way we work in the UK and what has gone on in the US by having an industry-wide agreement here that an agency will never bid independent production companies when it is contemplating doing a production itself or might do so once the independent production companies’ bids are in. By doing so we can stand united as production companies and agencies to protect the integrity of this great business.

Of course, all of this applies to production in the widest sense – post production and editing companies too.

Yours faithfully,

James Bland & James Studholme, Blink Productions; Helen Hadfield, Bare Films; John Doris, Hunky Dory; Lizie Gower & Simon Cooper, Academy Films; Kai-Lu Hsiung, RSA Films; Jani Guest & Rupert Reynolds McLean, Independent Films; Brock Van Den Bogaerde, Sneezing Tree Films; Fergus Brown & Chris Barrett, Smuggler; Charlie Crompton, Rogue; Sam Sneade, Speade; Donnie Masters, Serious; Helen Kenny, Sonny and MJZ; Johnnie Frankel & Katie Keith, Rattling Stick; Richard Packer & Robert Campbell, Outsider; Jenny Beckett, Partizan; Margo Mars, B Reel Films; Cal Gordon, Burning Reel; Geoff Stickler, Steam; Kim Griffin, Fresh Film; Max Yeoman & Hughie Phillips, Mindseye; Dave Cooper, Scramble; Tim Katz, Knucklehead; Carlos Carneiro, London Sessions; Spencer Friend, Joyrider; Justine White, Freefolk; Ben Link & Heather Link, Missing Link Films; Matthew Fone, Riff Raff Films; Gus Filgate, Little Fish Films; Jane Bolton & Cabell Hopkins, Fat Lemon; Dawn Laren, Moxie; Jeremy McWilliams, Bang TV; Richard Martin, Nice Shirt Films; Marta Bobic, Canada London; Sasha Nixon, Forever Pictures; James Tomkinson, Nexus; Charlotte Fuller, PI Film Network; Mike Wells, HLA; Dan O’Rourke, Not To Scale; Stephen Brierly, Park Pictures; Daniel Bergman, Stink; Miles Payne, Agile Films; Ben Schneider, Radical Media; Spencer Dodd, The Sweet Shop; Anna Smith, Iconoclast; Matt Buels, Hungry Man; Laura Gregory & Sheridan Thomas, Great Guns; Alan Traquair, Burger; Nick Crabb, 2AM; Anna Ryabtsun, Wanda; Philippa Thomas, Thomas Thomas; Kate Taylor, Skunk; Stefano Marrone, Nucco Brain; Dom Freeman, Black Label; John Hassay, Good Egg; Nell Jordan, O Positive; Shawn Lacy, Hanna Bayatti, Charlotte Woodhead, Biscuit; Isabella Parish, 1st Avenue Machine; Rob Godbold, Bold; Barnaby Spurrier, Tomboy; Pete Chambers, Mad Cow; Holly Hartley, Short Films; Bob Ford, Loki; Sorcha Shepherd, Caviar London; Juliette Larthe, Pretty Bird

 

You can be sure we haven’t heard the last of this. In our next installment we will explain just how bid rigging really works.

 

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