AICP’s new NDA protects members in bidding process

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The AICP has updated its Mutual Non-Disclosure Agreement (NDA) following a Department of Justice (DOJ) investigation into production and postproduction bidding practices to determine if ad agencies have been unfairly directing business to their in-house production/post departments over outside vendors.

The NDA, issued to AICP member companies, recommended that they use it (or a similarly worded document) before submitting bids to any agencies and/or cost consultants on behalf of marketers, according to New York-based Shoot.

An AICP memo sent to its membership Dec. 19 included a link to a document containing “Suggested Best Practices for Bidding,” which the group rolled out in November, prior to any news of the DOJ probe.

The memo addressed the bidding process and contained links to some documents. One of those documents was AICP’s revised Mutual NDA, which now contains provisions that take into account DOJ and Federal Trade Commission guidelines for the exchange of competitively sensitive information.

The modified NDA offers a measure of protection for production cost information. It ONLY permits exchanges of “aggregated information” among affiliated agencies, but NOT affiliated entities that operate as a production or postproduction entity, or act in an in-house cost consulting capacity.

The AICP recommends that the NDA be executed prior to bidding, confirming that costs and related information submitted for any project, will be handled in the most above-board manner.

The document also covers all customary non-disclosure assurances that production companies normally provide to the agency and marketer.

AICP president/CEO Matt Miller told Shoot that the document is in the best interests of production companies, ad agencies and clients. It is designed to balance all their interests while protecting the legal competitive environment.

Miller added that the DOJ will determine if there are illegalities.

Meanwhile, an AICP priority is to ascertain ways “to safeguard our members from potentially illegal practices that are counter to the benefit of the entire process [of how jobs are awarded],” Miller said.

Given marketers’ concerns about transparency, Miller said the AICP felt this would be “a good time to remind our members about fair bidding practices and obligations” for the benefit of the overall industry. Hence the development of the Suggested Best Practices rundown, which includes a section on bidding transparency.

In addition to the revised Mutual NDA, the AICP memo recommended that production companies gain assurances that safeguards are in place to protect their bidding information from being misused on prospective projects, which are put through systems such as the Omnicom Production Network (OPN) Supplier Portal. The OPN was designed to share info with Omnicom Network’s undisclosed divisions, subsidiaries and units.

In these situations, the memo continued, it needs to be determined “that the use of your company’s confidential information cannot be used to violate antitrust laws, rules or regulations, and is only used by the bidding agency and the marketer for purposes of consideration.”

DOJ probe to determine agencies’ bidding practices

The DOJ is looking to ascertain if that competitive environment has been compromised by agencies allegedly rigging the bidding process through practices such as urging or pressuring independent companies to inflate their prices so that contracts could be awarded to the agencies’ own production and post operations.

Such “dummy” or “complementary” bids from indie houses help to falsely satisfy client demands for competitive multiple bids. Federal antitrust law prohibits bid rigging and price fixing (through requiring bids to come in at a certain level or above a specified cost).

Reportedly, the DOJ probe has imposed the issuing of subpoenas to certain subsidiaries within global agency holding companies of IPG, Omnicom Group, WPP PLC and Publicis Groupe. The investigation is ongoing.

The AICP memo read that in these situations it needs to be determined “that the use of your company’s confidential information cannot be used to violate antitrust laws, rules or regulations, and is only used by the bidding agency and the marketer for purposes of consideration on a project.”

Miller said the DOJ will determine if there are illegalities. Meanwhile, the AICP priority, he affirmed, is coming up with ways “to safeguard our members from potentially illegal practices that are counter to the benefit of the entire process [of how jobs are awarded].”

The K2 study thus resulted in ANA formulating a set of recommendations designed to foster transparency in order to elevate trust and restore confidence in the client/agency partnership.

Given marketers’ concerns about transparency, Miller said the AICP felt this would be “a good time to remind our members about fair bidding practices and obligations” for the benefit of the overall industry. Hence the development of the Suggested Best Practices rundown, which includes a section on bidding transparency.

Excerpts of that section read: “If an agency requests that a production company provide a bid merely as a cover or as a way to enable an agency to fulfill an advertiser’s multiple bid requirement, the production company may feel under pressure to accede.

The U.S. Department of Justice, however, has issued legal warnings about such behavior. If, by way of example, the agency were to provide target numbers in order to better position other bids, the request may, by itself, and particularly if acted upon by the production company, raise legal questions about whether it has the potential to undermine competition in a bidding process that the advertiser may expect to be competitive.”

The Best Practices section outlined the DOJ’s take on the legal caveats posed by so-called complementary bidding, aka “cover” or “courtesy” bidding, which occurs when some competitors agree to submit bids that are either too high to be accepted or contain special terms that will not be acceptable to the buyer.

Such bids are not intended to secure the buyer’s acceptance, but, are merely designed to give the appearance of genuine competitive bidding. Complementary bidding schemes are the most frequently occurring forms of bid rigging, and they defraud purchasers by creating the appearance of competition to conceal secretly inflated prices.

In short, such activity would not be considered best practices and, worse, might be deemed anti-competitive or in violation of the law.

These passages from the Best Practices document take on a deeper meaning and relevance with the subsequent news of the DOJ investigation. During the course of that investigation, the DOJ has thus far not contacted the AICP, according to Miller.

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