The Feds Are Now Investigating Agency Rebates
Do you remember back in 2015 when former Mediacom CEO Jon Mandel took the stage at the ANA’s national conference and alleged a widespread scheme of agencies accepting kickbacks from media partners for buys being placed on their clients’ behalf? Since then there’s been a simmering tension between the ANA’s member brands and the 4As agency trade group. Now it looks like the kickback issue is back front and center following last Friday’s revelation that the DOJ is now investigating the major agency holding companies.
The premise for “rebates”, which is a friendly name for kickbacks, is that agencies command so much buying power from their combined clients’ spending, that they can force media partners into offering some sort of covert discount or even back payment, which the agency puts towards its own bottom line. While all the major US agencies and their HoCo parents deny this, even the thought of federal investigators nosing around their books is a problem. Besides perpetuating a feeling of distrust between clients and their agencies, a scandal like this can increase the likelihood that major national brands could cut out agencies altogether and start working directly with broadcasters and publishers.
While these shops are technically innocent until proven guilty, even the whiff of smoke from kickbacks could turn into a major fire.