US: Justice Department to probe bid-rigging at advertising agencies

The US Justice Department is investigating whether advertising agencies inappropriately steered business producing commercials to their in-house production units over independent companies by rigging the bidding process for those contracts, according to people familiar with the matter.

Rebecca Meiklejohn, a government antitrust attorney based in New York, has been interviewing ad industry executives on the subject over the past few months, the people said.

The production and postproduction of commercials is a roughly $5 billion business in the US that involves services such as directing, sound editing, special effects and color correcting.

Hundreds of independent companies compete for those contracts. But the giant ad agencies whose creative teams conceive commercials also have been ramping up in these areas in the past several years, pursuing a growing revenue stream.

The Justice Department is investigating whether ad agencies are manipulating the bidding process, urging independent companies to inflate their prices so that contracts could be awarded to the agencies’ own production and postproduction outfits, according to the people familiar with thematter.

It isn’t clear which agencies are the subject of the government’s inquiry. Many of the big agency holding companies, including WPPPLC, Omnicom Group, Interpublic Group and Publicis Groupe, have in-house production and postproduction divisions.

Full Content: The Wall Street Journal

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