×
You will be redirected back to your article in seconds

FBI Contacts Influential Advertiser Group Over U.S. Ad Buying Probe

A federal probe into the practices of purchasing advertising from media outlets gained new traction Wednesday after the Association of National Advertisers, an influential trade organization, disclosed that it had been contacted by the Federal Bureau of Investigation for help in the matter.

In a letter to members, ANA CEO Bob Liodice said that the FBI “contacted our outside counsel, Reed Smith LLP, requesting the cooperation of the ANA and its membership in a criminal investigation into media buying practices underway by the FBI and the United States Attorney’s Office for the Southern District of New York.” Attorneys, Liodice said “have had limited discussions with the FBI.”

The group represents more than 1,100 different companies representing around 25,000 different brands that spend $400 billion in advertising and marketing each year.

The revelation marks the latest step in a federal effort that could have significant consequences for Madison Avenue and those who depend on its billions of advertising dollars. Federal prosecutors were said in late September to have opened the investigation, issuing subpoenas as part of the process, according to a report in The Wall Street Journal. The investigation was said to be examining agencies getting rebates from media outlets, the Journal said, citing people familiar with the matter. Havas, the French company that is owned by Vivendi SA, was being looked at as part of the investigation, the report said. Havas did not respond to a request for comment made at the time.

Much of the media business could not operate without the flow of ad dollars, and five big advertising companies – Interpublic Group, Omnicom Group, WPP, Publicis Groupe of France and Havas – allocate billions of dollars in Madison Avenue cash thanks to their control over big agencies like Wavemaker, Spark Foundry, Initiative, and OMD. In 2016, the ANA released a report alleging that various media companies offer rebates to big media-buying firms in exchange for a greater amount of ad dollars – a prospect that suggests the potential allocation of billions of dollars in advertising may be influenced by a desire for a sort of kickback, rather than being done in the interests of big-spending clients.  The ANA study opened a rift between advertisers and their agencies and prompted many to outline new polices demanding transparency about how ad dollars are spent and allocated.

Relying on interviews with 150 people conducted by K2, an investigations firm, the ANA found that media owners paid rebates to agencies “in amounts ranging from 1.67% to approximately 20% of aggregate media spending, depending upon the deal.” In some cases, the percentage of the rebate owed increased along with agency spend, the company’s report stated. The organization found instances in which media agencies could purchase advertising inventory from a supplier, then mark up the price as much as 30% to 90% before passing it along to a client. Evidence suggested that a media agency’s owner, typically one of five or six global holding companies, may have pressured individual buyers to direct a client’s ad money to areas where a markup might be possible, the report stated.

These sorts of arrangements are common in Europe and Latin America but have long been viewed skeptically in the U.S. Some media executives have suggested that what could be at issue are transactions involving the sale of new kinds of ad inventory that have gained new allure as technology makes the sales process easier. More advertisers have shown an interest in so-called “programmatic” inventory, which is bought according to a predefined set of data put in place through software. Some of this inventory is sold through private exchanges, reducing the transparency around the purchase.

In Wednesday’s letter, Liodice suggested that advertisers “who think they may have been defrauded to retain counsel” and noted that a federal investigation requires “assistance in identifying potential victims, witnesses and evidence.”

The executive said that the ANA “cannot provide help to the FBI other than to share communication and information with our members,” and noted the FBI had asked the organization to reach out to “obtain assistance.”

 

 

More Biz

  • National Enquirer - Jeff Bezos

    Hudson Media CEO James Cohen Purchases the National Enquirer

    Hudson Media’s CEO James Cohen announced Thursday that he will purchase the National Enquirer as well as American Media’s other tabloids, the Globe and the National Examiner. With the purchase of the National Enquirer, which Cohen reportedly bought for $100 million, he plans to strengthen their collaborative efforts, documentary shows, weekly podcasts, and theme parks. [...]

  • Amazon

    Amazon Music’s Free Tier Is More Advertising Play Than Spotify Killer, Analysts Say

    When news began to spread last week that Amazon Music’s long-anticipated free streaming tier was imminent, headlines emerged about its threat to Spotify and Apple Music, with some stories saying that Spotify’s stock price dropped in response to the news. But not only was today’s launch of the free tier basically a soft one — [...]

  • Nicki MinajCFDA Vogue Fashion Fund Dinner,

    Nicki Minaj Parts Ways With Longtime Managers (EXCLUSIVE)

    Nicki Minaj has parted ways with Gee Roberson and Cortez Bryant and Blueprint/ Maverick Management, a source close to the situation confirms to Variety. She had worked with the pair for the majority of her career. The source says the decision was mutual and amicable, and there was no specific reason for the split, adding [...]

  • Amazon

    Amazon Music Launches Free Streaming Tier, Through Alexa Only (for Now)

    Amazon Music today basically soft-launched its free streaming tier, in which U.S. customers of its Alexa voice assistant will have access to top Amazon Music playlists and thousands of stations, at no cost. The limited access that the new free service provides — it’s only available through Alexa, and when the listener requests a song, [...]

  • Donald Glover and Adidas Launch Short

    Donald Glover and Adidas Launch Partnership With New Shoes and Short Films (Watch)

    Donald Glover and Adidas Originals today announced Donald Glover Presents, a creative partnership that unveiled a new line of shoes and a series of brief — and very funny — films to accompany them. (Watch them below.) Donald Glover Presents reimagines threeAadidas styles, the Nizza, the Continental 80, and the Lacombe. The shoes feature uneven [...]

  • Kodak Black Arrested at Border on

    Kodak Black Arrested at Border on Gun and Drug Charges

    Rapper Kodak Black and three other people were arrested after they allegedly attempted to cross the U.S.-Canada border with guns and marijuana, officials told NBC News on Thursday. The 21-year-old rapper missed concerts at the House of Blues in Boston on Wednesday night after he was stopped at the Lewiston-Queenston International Bridge near Buffalo hours [...]

More From Our Brands

Access exclusive content