EDITORIAL: A reverse auction does no-one good

DuPont's decision to subject the networks competing for its global account to an online reverse auction seems to bear out Oscar Wilde's definition of a cynic: somebody who knows the price of everything and the value of nothing. The chemicals conglomerate naturally eschews such a description, claiming the move is no crude cost-cutting exercise and the lowest bidder won't necessarily win.

Nice to know, but of little comfort to agency chiefs across the world who are rightly suspicious of the increasingly prominent part played by reverse auctions -in which competing shops submit their costs for servicing an account - and how they are coming to symbolise a lack of respect and understanding by clients of what their agencies provide.

The sad truth is that reverse auctions are emblematic of the imbalance in the relationship between agencies and clients that the harsh economic climate is exacerbating. In an ideal world, agencies should have nothing to do with this practice. But the world is far from ideal and reverse auctions are a fact of life. The best that can be hoped is that agencies approach such contests with caution and clients understand how over-reliance on them can easily lead to a debilitated and disenfranchised ad business.

There are practical reasons why reverse auctions are unlikely to benefit anybody. For one thing, they risk putting even more pressure on margins, limiting agencies' ability to reinvest and leaving them unable to provide levels of service clients require. For another, they threaten to limit the ability of networks to tailor structures and processes to suit clients' needs. What's more, the ability of reverse auctions to make significant savings for clients is doubtful. Are there really likely to be substantial differences between rival contenders' bids? Most worrying of all is the temptation to use the reverse auction as a lever. What of the agency that wins the creative contest only to be put under pressure from the would-be client to match rivals' lower cost proposals?

The scope for abuse with the reverse auction system is obvious. Three years of zero growth and no imminent signs of recovery have put clients in the driving seat. The problem is that too many don't know which agency costs can be stripped out without jeopardising the service. The resulting cost-cutting can appear so brutal that it looks like vindictive punishment for 80s profligacy.

It's a situation that makes the need for a just and accountable remuneration formula even more urgent. The alternative is an enfeebled industry brought low by rigid and mechanistic client processes.