Byravee Iyer
Aug 1, 2016

Industry in Asia must not ignore ANA rebate advice

Clients should replace "hopelessly" outdated contracts with the ANA's contract template ASAP, according to industry insiders contacted by Campaign Asia-Pacific.

Industry in Asia must not ignore ANA rebate advice

ASIA-PACIFIC - A new set of media-transparency guidelines from the US Association of National Advertisers (ANA) is a good start and just as relevant for marketers and agencies in Asia-Pacific as anywhere else, according to several people in the media industry.

A key part of the report is an anti-rebate contract template that ANA suggests marketers use for their media-agency relationships. ANA also strongly urges companies to appoint a chief media officer to oversee media strategy, partner with external agencies and work with third-party suppliers.

“The ANA did a positive job working with a leading US law firm to produce a contract draft," said Greg Paull, principal at R3. "Every marketer needs to benchmark their own approach to this as soon as possible." 

Darren Woolley, founder and CEO of marketing consultancy firm Trinity P3, noted that the issue impacts all markets because media agencies participating in this behaviour are global. “The recommendations are a good start, as most advertisers either have contracts hopelessly out of date or non-existent,” he said.

The guidelines are part of a new report, "Media Transparency: Prescriptions, Principles, and Processes for Marketers," that the ANA developed with marketing analytics firm Ebiquity. The report comes after the ANA released the findings from its investigation into media rebates in the US in June.

Media rebates tend to be magnified in developing markets, Woolley said, though the prevalence of the practice varies from market to market. Markets with strong government oversight, such as Singapore, are less likely to be participating in this behaviour.

According to Paull, both media agencies and media vendors in APAC are under huge pressure to generate returns, thus, amplifying the issue of rebates and discounts further.

Paull has been urging clients to change their contracts immediately. “Marketers will have no legal standing in this debate unless the wording in their contracts protects them from these kind of issues,” he said. 

It makes no sense for one company to give another $10 million, $50 million or $100 million and not expect some independent oversight on how it was invested. —Greg Paull

While he admits that rebates are not going away, a simple onsite financial audit by a third party is crucial to make sure agencies are accountable and fulfilling their legal commitments. “It makes no sense for one company to give another $10 million, $50 million or $100 million and not expect some independent oversight on how it was invested.”

He added: “In the end, the most crucial foundation is the contract. Without a clear and well explained agreement, neither side owes the other anything.”

While news reports and online commentators are focusing on media agencies, the whole process also involves media owners. Some media owners encourage this behaviour as a way of influencing their share of spend and others do not, observed Woolley.

“Every successful partnership needs to be win-win for both sides,” said Avi Himatsinghani, the CEO of Rewind Networks, a Southeast Asia-based television station. 

The former Fox executive feels that clients should expect the best deal, but they should also be prepared to reward performance fairly. Agencies are businesses with financial goals and need to attract the best talent that can in turn deliver great value to their clients, Himatsinghani noted.

Sure, norms and guidelines are good. But they must stem from very strong basic commercial arrangements that don’t give rise to unfair practices. —Avi Himatsinghani

“Agencies that end up winning new business which may not be profitable end up looking to find alternate revenue sources," he said. "It is a vicious cycle that ends up creating a strain in the client relationship and needs to be resolved at a fundamental level.”

He added: “I am not sure whether hiring additional policing officers on the client side can necessarily change that. Sure, norms and guidelines are good. But they must stem from very strong basic commercial arrangements that don’t give rise to unfair practices.”

Campaign Asia-Pacific contacted but did not receive responses from several media agencies, as well as additional media owners and consultancies, for this article.

Related Articles

Just Published

2 hours ago

Stephen Li departs as OMD APAC CEO

Li is on gardening leave until November and a search for a replacement is underway.

8 hours ago

Snap launches a studio to help brands use AR

Arcadia will develop AR experience technology for brands globally.

8 hours ago

Procter & Gamble increases marketing spend by 30%

The consumer product goods company, which spent an additional $130 million on marketing in the quarter, expects spend to continue to increase as it returns to pre-pandemic levels.

8 hours ago

Dentsu’s global sustainability lead: ‘We have to ...

The holding group is nearly 80% towards its net zero target.