Latest agency bid-rigging scandal centers on in-house production

The US Department of Justice is investigating the practice, says the WSJ.

Ad agencies may have been funneling work to their in-house production units by pressuring independent production companies to bow out of contract bids, the Wall Street Journal reported Tuesday. The US Department of Justice is investigating the allegations, which, if true, would be violations of American antitrust law. 

Independent production companies are claiming they have received requests from ad agencies to inflate their bids for commercial work, making them seem less attractive to clients. In comparison, the uninflated bids from agency production companies or shops within the same holding company appear more reasonable.

So far, there aren't any concrete claims about why independent shops would go along with this scheme, but the Journal cites a memo sent in October by production company trade group AICE. Independent firms play ball "for fear of alienating an agency and risking future opportunities for work," the memo said.

There is no information as yet about which agencies or holding companies are being investigated by the Justice Department. But there is at least one familiar face involved. DOJ antitrust lawyer Rebecca Meiklejohn, who made a splash with the Grey/Color Wheel scandal, is spearheading the effort. In 2005, she successfully prosecuted six people, including an EVP at Grey, for rigging bids between New York agencies and printing companies.

The new scandal bears marked similarities to the kickback scandal currently embroiling many media agencies. Using the same kind of noncompetitive practices, media agencies have chosen ad buys based on cash rebates from media sellers. Agencies have denied the allegations, but a comprehensive report by K2 Intelligence commissioned by the Association of National Advertisers uncovered extensive evidence.

An early draft of that report also included reports of bid rigging tied to this latest investigation, according to the Journal, but they were left out of the final report. Meiklejohn has subpoenaed K2's records to continue her investigations.

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