Victim or collateral: Where does IBDF stand in CCI’s ad cartelisation probe?

New Delhi: Amid the ongoing investigation by the Competition Commission of India (CCI) into alleged cartelisation by advertising agencies, the broadcasters’ industry body, IBDF, which is the victim of the alleged cartelisation, has seemingly become collateral damage.

Along with advertising agencies, their industry body AAAI, and the Indian Society of Advertisers (ISA), the CCI also conducted raids on the premises of the Indian Broadcasting and Digital Foundation (IBDF) in March this year.

Soon after the CCI raids, the primary accusation revolved around bulk discounts secured by advertising agencies from broadcasters and not passing the benefit to advertisers.

It is said that Dentsu’s leniency petition included proof of WhatsApp chats in a group called “AAAI media agencies,” which prompted suspicion of cartelisation.

At least 11 top media agency executives in the group allegedly discussed pricing strategies, shared client-specific plans, and coordinated their responses during pitch processes.

Barely a month before the CCI raids, BestMediaInfo reported Prasar Bharati examining a case of cartelisation in the e-auctions of DD Freedish slots.

It was alleged that broadcasters coordinated among themselves via WhatsApp chats—screenshots of which were leaked to Prasar Bharati officials—to keep the bid prices in control.

The rules laid out by the CCI define cartelisation as formal arrangements made between players through industry bodies. Sensing there was no such case in DD Freedish e-auctions, the pubcaster did not pursue the matter further.

“WhatsApp is a means of communication, just like a phone call. How else would people communicate? Reaching a mutually beneficial understanding is not a crime unless, and I repeat, it is formalised by an industry body or through the formation of an official group," a senior advocate told BestMediaInfo.

In the matter of advertising agencies, too, WhatsApp group conversations alone were not enough to prove cartelisation, and that necessitated the raids.

Citing the content of the WhatsApp chats, Reuters established that the agencies joined hands to stop the depletion of agency commission any further.

For the record, agency commission has dropped from about 15% to as low as 1% over the last 15 years.

The Reuters report cited investigation documents concluding that the firms agreed to cooperate on pricing, including not to undercut each other; colluded with broadcasters to deny business to agencies that didn't comply; and discussed financial terms involving at least four Indian clients over conference calls.

While the competition watchdog will be probing how it is a crime to protect business interests—as the WhatsApp chats reflect—it will be interesting to see how the CCI investigation will implicate IBDF.

As per the Reuters report, the CCI documents reveal that in August 2023, the Advertising Agencies Association of India (AAAI) circulated guidelines mandating minimum commission rates for media buys.

The AAAI guidelines mandated ad agencies to charge clients whose annual spending exceeds $29 million a minimum 3% commission for digital ads and 2.5% for traditional media. Lower-spending clients would pay higher minimum commissions of up to 8%.

Soon after, a joint pact was signed by AAAI and the Indian Broadcasting & Digital Foundation (IBDF), agreeing no agency would "unilaterally offer any discount" on rates while pitching for business.

The pact declared its aim was to eliminate "lower pricing as a reason to award a pitch".

On the face of it, the pact appears to be an attempt to do the same: protect the falling agency commission.

Several subject matter experts are of the view that the charges of collusion between AAAI and IBDF to “deny business to agencies that didn't comply” may not hold, as the guidelines were strictly for members of these associations who abide by the rules and practices set by their respective industry bodies.

A specific case in point alleging cartelisation is GroupM asking Walt Disney to refrain from directly granting business to ITW Consulting, which had breached the pacts. According to Reuters, ITW Consulting later agreed not to approach clients directly.

Media analysts are of the view that the catch here is non-compliant firms.

“Industry bodies are supposed to frame their rules in a way that does not fall in the category of cartelisation. Having said that, the details that have emerged from the CCI investigation so far may not be compelling enough to prove ad agencies guilty. For the broadcasters’ body, they are the victim of the alleged cartelisation and possibly part of the investigation,” said a senior media analyst.