For the best part of a century, the US has been the world's
greatest advocate of free trade. Having taken over from the United
Kingdom as the world's largest economy, it was the only logical stance
to take. But just like the British before them, the Americans do not
necessarily practice what they preach.
And, like the British, the Americans did not get where they are today
without the helping hand of protectionism.
The recent dispute between the Interpublic and Omnicom networks in the
US demonstrates the American preponderance for using another device for
achieving economic advantage - litigation. Like protectionism, this is
hardly compatible with the espousal of free trade.
But then again, recent world events suggest that all's fair in love and
war. The unfortunate fact for the protagonists in this dispute is that
they are pawns in someone else's war. In this case, it is the war
between the agencies' respective Coca-Cola and Pepsi clients.
There are three key elements to this story: ownership; people; and
It is worth considering what might happen in the UK if a dispute were to
arise in similar circumstances.
Most reports of the dispute have begun the story with the change in the
ownership of FCB by virtue of Interpublic's acquisition of its parent,
True North. This precipitated the decision of Pepsi to move its accounts
(including Gatorade, Tropicana and Aquafina) from FCB to DDB, part of
Omnicom, because of concerns about the long-standing relationship
between Interpublic and Coke.
But the origins of this battle go back further. One account at the
centre of the dispute, Gatorade, is a very successful sports drink
belonging to Quaker Oats. Quaker was bought by Pepsi during the past 12
months, apparently having beaten off competition from Coke. It is
interesting to wonder whether that has something to do with the recent
spat between their respective agencies.
Change of control and ownership can impact on provisions for conflicts
of interest in client/ agency contracts in a number of widely varying
ways. In the most extreme cases, if a contract deals with the issue on a
group-wide basis, a conflict of interest might arise as soon as the new
parent purchases an agency. That could leave the agency in breach of
contract, with the client free to terminate the contract with immediate
effect. On the other hand, if the conflict clause only applies to the
agency itself and not to other affiliates in its group, the acquisition
may be of no legal consequence. The client may not see it that way from
a commercial perspective, but its only option might be to serve
In this dispute, as well as wanting to take its own business elsewhere,
Pepsi was also trying to prevent FCB staff who had worked on its
accounts from working on rival Coke accounts awarded to FCB after
Pepsi's move to Omnicom.
In these circumstances, it would make sense for Pepsi to delay the
termination of its contract with FCB, extending the duration of any
The second element of the dispute concerns people. Interpublic began
proceedings against Omnicom for working with Brian Williams, the former
chief executive of FCB's Chicago office, to entice other FCB employees
to join him in moving to Omnicom to service the new Pepsi accounts. In
the UK, an agency faced with the potential redundancy costs on losing an
account might have been tempted to let these employees leave quickly,
quietly and with the minimum of fuss. In the US, however, the employment
law is very different and the "hire 'em and fire 'em" culture and law
would not give rise to the same temptation.
The situation was complicated further by the fact that FCB was replacing
Pepsi's Gatorade and Aquafina accounts with Coke's Powerade sports drink
and Dansani water accounts. Was Interpublic's action against Omnicom
driven by a desire to use the same personnel on the new accounts? The
answer may never be known, because Pepsi launched a separate action
against FCB to prevent people who had worked on its accounts from
working on the new Coke accounts. Eventually FCB and Pepsi agreed a bar
on such activity until 1 June 2002, about nine months after Pepsi's
decision to move the accounts.
This illustrates the overlap between the "people" element and the final
element; knowledge. The most important knowledge is in the heads of the
account team. Although confidential information can readily be protected
by the courts, the problem arises when an individual who posses such
knowledge moves from one agency to another. In this case, it is hard to
imagine that Pepsi was unhappy that its new agency, DDB, was apparently
trying to solicit people from its old agency, FCB. Meanwhile, it was
clearly unhappy that anyone who did not defect might somehow end up
working for one of FCB's new Coke accounts.
One consistent thread through all the press coverage is Pepsi and Coke's
reluctance to comment. Both companies seem happier to present the matter
as a dispute between the agencies. And yet it is hard not to conclude
that the main incentive for the dispute was a desire by the agencies to
be seen to be doing the "right thing" by their clients.
With consolidation proceeding apace, it is hard enough to deal with
conflicts in the context of continuing client/agency relationships. As
for historic relationships, advertisers would be better served by
limiting their claims of ownership to their confidential information.
Former agencies should be free to sell their services to other clients,
provided they respect confidential information.
Employees of former agencies should be free to change jobs, again with
the proviso that they respect confidential information. That's what's
called free trade.