An eight-month probe by a marketing trade group revealed that ad agencies in the U.S. are accepting rebates from media companies, said people familiar with the matter, findings likely to stoke concerns about transparency in the industry.
The Association of National Advertisers found that media companies are using rebates to reward ad agencies for buying a certain amount of advertising time or space on behalf of their clients, the people said. The group found that the practice was widespread within the sample it studied.
A spokesman for the trade group declined to discuss details of its report, saying “its release was imminent.”
The findings are likely to intensify marketers’ concerns that ad agencies don’t have their best interests at heart and could be allocating ad dollars in ways that benefit their own businesses, as opposed to those of their clients.
Rebates or agency-volume bonuses—in cash, free ad space or other services—are a common business practice in Europe and countries such as China and Brazil. But, historically, they haven’t been part of the way U.S. advertising deals work. Some ad firms have said publicly that they don’t accept rebates in the U.S.
The trade group told the advertisers that while some of the practices it uncovered didn’t violate marketers’ contracts with ad agencies, they were worrisome because the advertisers were unaware of them. It said the problematic practices extended beyond digital advertising to television, print and outdoor advertising, according to the people familiar with the matter.
The American Association of Advertising Agencies, which represents ad agencies, said, “We cannot at this time comment on anonymous sources. We have not seen the study, have always preached full transparency to our members, and will act accordingly when the details are released.”
The ad industry is dominated by a handful of ad giants, including WPP WPPGY 0.78 % PLC, Omnicom Group Inc., OMC 0.11 % Publicis Groupe SA, PUBGY 1.02 % Interpublic Group IPG 0.63 % of Cos., Dentsu Inc., 4324 0.36 % and Havas SA HAV 0.72 % . Collectively they control hundreds of billions of dollars a year that companies spend on marketing.
A spokeswoman for Publicis declined to comment, saying it hadn’t seen the report.
“We comply with all regulations in the U.S., and we do not accept rebates in the United States,” said Colin Kinsella, chief executive of Havas Media North America. “We work with clients to achieve desirable levels of transparency in all facets of our business,” he added.
WPP’s GroupM declined to comment “on anonymous and unspecific allegations, adding that “we have always maintained that if individual clients have questions of us they should contact us directly.”
“We do not accept nondisclosed rebates, and we believe our existing process as it stands is robust and transparent for our clients and our business,” said Dentsu Aegis Network.
Omnicom said that “while we have not seen ANA’s study, it is disappointing to hear the results are broad-based allegations against the entire advertising media industry.”
Interpublic said it “will continue to modernize our transparency practices as the industry evolves.”
“In the U.S.,” it said, “we do not partake in volume rebates with our media partners and do not use any value realized by our media agencies to drive trade credits to other lines of business.”
The ANA initiated the probe and hired corporate-investigations firm K2 Intelligence, which has confidentially interviewed about 150 people in the ad business, said some of the people familiar with the matter. The report isn’t expected to name individuals or specific companies that allegedly have received rebates, those people say.
“There was some belief that this was just one bad apple, but it seems to be pervasive,” said one marketer who attended last week’s briefing.
In some cases, media companies effectively provided a rebate by paying an agency for services such as research, said some of the people familiar with the matter. Agencies also received free media inventory that could be banked and resold to clients for a profit, one of them said.
Write to Suzanne Vranica at [email protected]