Client payment demands: "Enough is enough" says MAA

The Marketing Agencies Association has voiced its support for Starcom MediaVest Group's decision to resign its £20 million Premier Foods media account, after the food group asked for a "mutual investment" payment.

Knox: payment demands are "unethical"
Knox: payment demands are "unethical"

SMG parted ways with the business after the MAA claimed that Premier Foods, which owns Oxo, Hovis and Mr Kipling, had asked agencies to pay up to £40,000 in fees to remain on its roster.

Premier Foods denied the claims but confirmed it had asked suppliers for an "investment" payment, for which there is understood to be no equity offered in return.

Scott Knox, managing director of the MAA said: "I am pleased that SMG has taken this decision, as it will encourage other agencies to be braver in standing up to excessive client demands.

He added that agencies "need to make a profit too" and called for them to stand up against excessive client demands.

"Asking agencies to pay to do business is unethical and poor commercial thinking," Knox said. "Just this week, I was informed by a member agency that a client's accounts team is considering charging an admin fee to suppliers for administration of invoices. "

He continued: "Enough is enough:  120 day payment terms, paying to be on a roster, paying to be on a procurement database, now paying for the admin of legitimate invoices.  Agencies – nay, all businesses – need to stand up for what is fair and right."

Knox added that agencies may find it difficult to say no to demands: "In a market like this, many agencies are fearful of saying no when their biggest clients demand more and more for less and less, fearful of losing that client and the damage it may cause their reputation."

The news came after ongoing concern that advertisers are increasingly demanding fees for places on rosters or databases, and that Mondelez, AB Inbev, Procter & Gamble and Johnson & Johnson were among those who request extended payment terms of up to 120 days.

Knox added: "Don't get me wrong, we live in a material world and I understand that every company needs to get more bang for its buck, but when a sector looks profit-strangled, talent and investment look elsewhere for opportunities. In turn the creative innovation loving people brands want will be elsewhere."

Premier Foods is planning to halve the number of suppliers it works with, after a pre-tax loss of £23.5 million for the six months to 30 June 2013. Last month, the company  told Campaign: "As a first step we are asking our suppliers for an investment payment to demonstrate their support for the business and their desire to remain a strategic supplier in the future."

Other agencies on the Premier Foods roster include JWT London and McCann London, which are also believed to have been asked to make a payment to the company.

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