Ad Agencies Probed Over Contracts to Produce Commercials

The U.S. Justice Department is investigating whether advertising agencies inappropriately steered business for producing commercials to their in-house units over independent firms 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 about the issue over the past few months, the people said.

The production and postproduction of commercials is a roughly $5 billion business in the U.S. that involves services such as directing, sound editing, special effects and color correcting. Hundreds of independent firms 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, eyeing a growing revenue stream.

The Justice Department is probing whether agencies are manipulating the bidding process, urging independent firms to inflate their prices so that contracts could be awarded to the agencies' in-house production and postproduction outfits, according to the people familiar with the matter.

Price-fixing and bid-rigging are prohibited under federal antitrust law.

It is unclear which agencies are the subject of the government's inquiry. Many of the big agency holding companies, including WPP PLC, Omnicom Group Inc., Interpublic Group and Publicis Groupe SA, have in-house production and post production divisions.

A spokesman for WPP declined to comment. Representatives of Omnicom, Interpublic and Publicis didn't immediately respond to requests for comment.

Nancy Hill, the chief executive of the American Association of Advertising Agencies, a trade group that represents agencies, had no immediate comment.

Write to Suzanne Vranica at [e-mail] and Brent Kendall at [e-mail]

(END) Dow Jones Newswires

December 06, 2016 14:05 ET (19:05 GMT)

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