ANA report finds rebates to be widespread in US media landscape

The Association of National Advertisers (ANA) has released a report that states “non-transparent business practices” – including rebates – are pervasive in the US media buying landscape.

The report, which was conducted in partnership with K2 Intelligence, comes more than a year after former Mediacom chief executive Jon Mandel stated that rebates are widespread in the US ad market. Following his remarks, the ANA and the American Association of Advertising Agencies (4A’s) formed a joint task force in April of last year to look into the accusations. The task force included marketers from brands including Unilever and L’Oreal as well as media bosses from GroupM, Starcom MediaVest Group and others.

In October, the ANA announced that it had selected investigative consultancy K2 Intelligence and marketing analytics firm Ebiquity to lead a “media transparency fact-finding effort” on behalf of the organization. Today’s 58-page report details the results of K2 Intelligence’s study, which was conducted from October 2015 through May of this year. According to the ANA, it reveals “evidence of a fundamental disconnect in the advertising industry regarding the basic nature of the advertiser-agency relationship."

Bob Liodice, president and chief executive of the ANA, said of the report: “Advertisers and their agencies are lacking ‘full disclosure’ as the cornerstone principle of their media management practices. Such disclosure is absolutely essential if they are to build trust as the foundation of their relationships with their long-term business partners.”

While the report does not name any specific companies or individuals, the ANA said the findings are based upon “detailed source accounts from dozens of confidential, personal interviews as well as documentary evidence.” According to K2 Intelligence, of the 41 sources who reported that media rebate deals occur in the US, 34 indicated that the rebates were not disclosed to advertisers, were not passed through to advertisers, and/or were demanded by agencies.

One of the key findings in the report was that “cash rebates from media companies were provided to agencies with payments based on the amount spent on media,” but the study states that advertisers interviewed by K2 Intelligence indicated that they did not receive rebates or were unaware of them being returned. It also states that “contracts for rebates and other non-transparent business practices were negotiated and sometimes signed by high-level agency executives.”

Based upon the study, the ANA said that Ebiquity and marketing auditor subsidiary Firm Decisions will release a report in the coming weeks detailing recommendations for marketers. In the meantime, the two firms are recommending that marketers “re-examine all existing media agency contracts and meticulously review all terms and conditions.”

In response to the ANA, the 4A’s called the K2 Intelligence report “anonymous, inconclusive, and one-sided,” concluding that these factors “undercut the integrity of its findings.”

“We call upon the ANA in the strongest terms to make available to specific agencies on a confidential basis all of the materials related to them,” the 4A’s said. “Without an opportunity for agencies to assess and address the veracity of information provided to K2, sweeping allegations will continue to drive attention-grabbing headlines; this does nothing to foster a productive conversation or to move our industry forward.”

In January of this year, the 4A’s released a set of media transparency guidelines on its own, which covered three main topics including client and agency relationships for US media planning and buying services, commercial relationships between agencies and media vendors, and client/agency governance.

The ANA called the guidelines “premature” and said that they “fail to adequately reflect the best interests of marketers.” The organization was also upset that the 4A’s issued the guidelines with the “unauthorized use of ANA member company names.”

Publicis Groupe has also voiced its opinion on the ANA’s findings. In a statement, the holding company said that the ANA “has failed its members, advertisers, agencies and the entire industry by releasing a report that relies on allegations about situations involving unnamed companies and individuals to make broad, unsubstantiated and unverifiable assertions.”

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Minda Smiley

Minda Smiley is a reporter at The Drum covering creativity and advertising. Based in Philadelphia, she primarily covers independent agencies and B2B marketing. She also oversees The Drum’s “Independent Influence,” a weekly series that spotlights the work, perspectives and inspirations behind independent agencies. During her time at The Drum, she has covered industry events including SXSW, ANA Masters of Marketing, 4A’s Transformation and C2 Montréal. She is a graduate of the City University of New York’s Graduate School of Journalism.

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