Another mega-agency is subpoenaed by the DOJ
December 20, 2016
Another agency holding company has been drawn into the federal probe into price fixing.
WPP said Monday that it, too, has been subpoenaed by the Department of Justice, which wants information about video ad production. Three of its agencies have been contacted, according to WPP, though it did not specify which three.
The DOJ is investigating allegations that agencies fixed prices for video ad production, favoring bids to produce commercials by internal production companies over outside ones.
All pledged cooperation with the investigation, which comes amid a growing flap over transparency in media. Earlier this year, the Association of National Advertisers issued a report alleging that kickbacks were widespread in the industry and calling for greater disclosure on the part of agencies.
The promise of video ad production
Video ad production represents a lucrative area for creative agencies, which stand to make money off production and post-production.
The DOJ is looking for evidence that the agencies favored their internal production companies to produce commercials when bidding on the business, over external, often independent production companies, asking those outside to inflate their bids in order to justify awarding the business to their in-house units.
Production companies are hired after the creative teams come up with a concept for an ad. The payoff of going in-house is potentially huge for an agency – video ad production is a $5 billion business, according to The Wall Street Journal.
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