Are kick-backs a problem?

The issue of sur-commission has raised its ugly head, Alasdair Reid says.

John Billett... raised issue of sur-commissions
John Billett... raised issue of sur-commissions

It is always with a heavy heart that we contemplate anything that could be filed under the heading of "sur-commission". This, of course, is the media industry's copper- bottomed can of worms. We're not focusing here on crates of whisky, dancing girls and fact-finding missions to the former colonies during major sporting tournaments. Thems just the perks (as we understand it) in the Ealing Comedy version of any profession.

No. What gives us that sinking feeling is any resurfacing of the old chestnut about the whole media business being built on a lie. The allegation, in short, that big buying and selling organisations routinely keep two sets of books - and that media owners make payments to agencies that clients never see.

Well, this whole wasp's nest has been given a good old poke again, thanks to the former media auditor, and now an independent consultant, John Billett. It is very interesting, though, that Billett, accomplished satirical artist that he is, dressed up his accusations, rendered in an article last week, in the nursery clothes of AA Milne and shifted the scene of the action from the West End to The Hundred Acre Wood.

Some found his banter rather difficult to follow. So our best quote this week, although anonymous, is set down here because it provides a pithy summary of all that Billett merely alludes to.

The source, a senior media agency executive, says: "Do media owners give unallocated inventory to agencies to do with what they will? Yes they do. Do they sometimes just give them the money? Yes they do. Do people hide stuff from advertisers and auditors? Yes they do. If there's money on the table, there's an almost irresistible temptation to have yourself a bit of it. Then it's up to you whether you line your own pockets or use the money to make your buying performance look better.

"The advertisers, aided and abetted by their auditors, who approve of agency deals, deserve everything they get. They are, in effect, agreeing that the agency is the primary beneficiary of the deal with the media owner. The idea that procurement people and the auditor will then help you get a share of the goodies is just plain naive."

Incendiary stuff. But is this (and Billett's bedtime story) just plain Pooh? By common consent, there is (almost unaccountably) one whiter-than-white media owner out there - Mail Newspapers. Its managing director, Guy Zitter, states: "The old 15 per cent (commission) structure was deserted years ago and, more recently, the procurement process has turned the industry on its head as media buying is rewarded by results. This might have been OK if the audit process was robust, but sur-commission has circumnavigated it and now everyone gets a good audit result, which is, of course, impossible.

"Media owners that are stronger or thinking long-term give smaller or no commission, while those trying to hit this year's numbers give larger. Those amounts vary from 0 to 25 per cent on top of the standard 15 per cent. The commissions are in the inventory and/or cash. To pretend this doesn't distort the market is not just naive but disingenuous, as the scale is too large."

But Nick Theakstone, the chief executive of Group M, counters: "Our clients demand total compliance and transparency in the media pricing arena and employ independent auditors to verify we are doing what we have committed to. John Billett and the like have created fabulous businesses out of the audit process and we encourage their participation."

Some sources say the industry is sleepwalking towards tough intervention from regulators. But then they have been saying similar things about the outdoor market - and that was recently given a clean bill of health.

The IPA president, Nicola Mendelsohn, points out that commissions and sur-commissions are a trading issue - and a private matter between IPA members and their clients. She adds: "In our experience, the financial aspects of the agency-client relationship are not only discussed exhaustively at the time of appointment but subject to periodic review thereafter - and our members adhere scrupulously to the terms of their contracts."

However, Bob Wootton, the director of media and advertising at ISBA, is not so sure. He states: "Media planning may be skewed in order to meet deals and can be influenced by the money agencies can make in dealing with particular media owners. So it would be fair to say that there are increasingly loud rumbles coming out of ISBA where transparency is concerned."

YES - Guy Zitter, managing director, Mail Newspapers

"What would be the point of sur-commissions if they were not distorting the market? It makes nonsense of objective planning in the best interests of the client. Total transparency may be the solution to prevent regulation."

NO - Nick Theakstone, chief executive, Group M

"It is the way media is traded - big volumes, big deals, big advantages. This is why Group M can deliver significant benefits to clients, which use independent auditors to verify we are doing what we have committed to."

NO - Nicola Mendelsohn, president, IPA

"The financial aspects of the agency-client relationship are discussed exhaustively at the time of appointment and periodically reviewed thereafter - and our members adhere scrupulously to the terms of their contracts."

YES - Bob Wootton, director of media and advertising, ISBA

"There is a growing belief among clients that this sort of behaviour is widespread, that it skews planning and is not considered to be in their best interests. The problem is that the detailed truth can be difficult to unravel."

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