JP Morgan believes IPG's proactive disclosure that it received cash rebates from media owners for buying commercial air-time or advertising space for clients may signal the end of a relatively common industry practice. "(It) could have significant ramifications for the industry," said a JP Morgan note, released after Media first reported the news September 21 on its website. It estimates that rebates could potentially account for as much as 30 per cent of media agencies' net income internationally. An IPG competitor said the move "could open the floodgates" as many European and US-based clients are not aware of the practice in Asia, Latin America or Europe.
Taiwan, China India, Thailand and Malaysia have been identified as key markets where rebates are offered.
Group M, which includes MindShare, Maxus, MEC and soon MediaCom, has briefed its agencies on their response to clients. Sources say Group M is confident it has complied with its contractual obligations, while noting that it had addressed the few cases which were not in accordance with its internal procedures. Only big clients like P&G, Unilever, Coke and Colgate are currently reimbursed.
