CCI Raids: Advertisers push for SoPs

The recent raids by the Competition Commission of India (CCI) on leading advertising agencies have reignited the demand for the swift implementation of Standard Operating Procedures (SoPs) as a crucial first step in rebuilding trust and confidence in the advertising industry.

“Transparency remains the most desired aspect for fair trade practices. It’s high time the Indian Society of Advertisers (ISA) and the Advertising Agencies Association of India (AAAI) come up with a detailed SoP, if CCI does not enforce them itself,” an advertiser told e4m.

Many advertisers anticipate that the regulator may itself issue some directives or an SoP to ensure fair business practices in the advertising industry.

“Irrespective of the outcome of the probe, CCI may formulate some broader guidelines or SoP for the industry. Such measures would be crucial in fostering an ecosystem where advertisers can operate with greater confidence, ensuring accountability in agency-client dealings and minimising opaque financial practices that have historically led to disputes,” a marketer said.

The need for an SoP is even more crucial, given that India's advertising market has surpassed Rs 1 lakh crore. Besides, India’s top advertisers who spend hundreds of crores annually on marketing and promotional activities are closely monitoring the case.

Advertisers negotiating contracts with agencies under CCI scrutiny now find themselves in a dilemma. “We are extremely cautious about ongoing deals that were supposed to close by March-end. We’re in no rush now, as we want to avoid any potential scrutiny in future CCI investigations,” said a financial services marketer.

Last week, CCI seized key documents related to communications among major industry bodies — the AAAI, ISA, and the Indian Broadcasters and Digital Foundation (IBDF). These documents are being scrutinized as part of an ongoing probe into potential cartelization and anti-competitive behaviour by top media agencies and broadcasters.

The anti-competition case is believed to have been triggered by a few big agencies consolidating large advertiser accounts. Some media agencies have played whistle-blowers as part of a leniency scheme to waive off penalties.

As per the sources, these agencies secured big ad accounts by promising their clients TV ad inventory at lower rates than their competitors. In return, the broadcasters reportedly got more ad investments from clients managed by these agencies.

Model Agency Agreement under radar?

The watchdog is reportedly scrutinising the ISA’s Model Agency Agreement for alleged negotiation restrictions between advertisers and agencies.

The complainants have reportedly alleged that ISA launched the Model Agreement on August 3, 2023, which limited advertiser-agency negotiation thus negatively impacting agency revenues.

According to reports, in response AAAI released Guidelines on Media Agency Remuneration on August 30, 2023, setting the limit for minimum commissions and incentives of traditional and digital advertising and a formula for fee-based services.

In September 2023, the IBDF issued an advisory which emphasised that no agency should unilaterally offer any discount on existing channel rates for advertisers while pitching. It also stated that the agency must indemnify IBDF members for any losses, damages, or costs incurred due to unilateral discounts on channel rates.

It is also alleged that AAAI and IBDF formed a joint sub-committee to take collective action against parties (agency and broadcasters) who default on payment or violate contracts.

Notably, among other things, the ISA model agency contract empowers the IBF-AAAI Joint Committee to take action against advertisers who fail to pay on time.

It also mandates that the parties “shall not disclose, publish or make available any proprietary information including but not limited to rates, time bands, costs etc. to any third party and shall not sell, transfer or otherwise use or exploit any such Proprietary Information disclosed to them”.