Advertisers fear "cartel" in Oz

Advertisers fear that a new set of guidelines by Australian ad agencies will result in the forming of a "cartel". The consumer watchdog is going to be looking into these claims.

"Moves by the Advertising Federation of Australia to apply a "pitching policy" to advertisers seeking new ad agencies have been met with outrage by the advertisers' representative body, the Australian Association of National Advertisers, and concern by the Australian Competition and Consumer Commission."

The AFA released a policy document this week saying agencies were paying a high price pitching for business. A recent AFA survey found agencies were paying an average $200,000 a year each to make pitches, whether they won or lost. In one year 35 agencies spent $7.2 million on pitches.

"Creative pitches are often a lottery based more on who you know rather than what you know and too many agencies participating is a waste of time and money," says AFA NSW chairwoman Naseema Sparks.

The AFA wants advertisers to limit the number of agencies taking part in a creative pitch to three, guaranteed payment for out-of-pocket and staff expenses and the right to retain intellectual property developed during a pitch. It also plans to establish an "advisory service to monitor pitches and promote a 10-step guide for advertisers".

However, ACCC spokeswoman Lin Enright told Media the commission had concerns about the possibility the AFA was indulging in cartel-like behaviour.

"We will be in contact with the AFA and get some sort of clarification about what they are proposing," Enright says.

Issues believed to be of interest to the ACCC include the establishment of the advisory service and questions over the fact agencies already build pitching costs into their remuneration structures.

The AANA has reacted angrily to the AFA announcement, saying it has not been consulted about the policy.

From The Sydney Morning Herald:

Yesterday, the Australian Association of National Advertisers said it had not been told about the proposals, a claim hotly denied by the AFA, which said it had been working in consultation with advertisers for several months.

"There is no way that we are going to sit down with a group of people who want to discuss cartel behaviour," said AANA deputy chairman Robert Koltai.

He dismissed the proposals as "stupid" and said that they harked back to the days of the accreditation system, which had been broken up by the competition watchdog in 1996.

Hours later, the AFA hit back. Executive director Lesley Brydon said the AANA's claims were ridiculous. "We must be able to challenge practices that we think are damaging to agencies and not in the interests of our clients," she said.

New guidelines were drawn up to stop advertisers from holding lengthy and costly pitches with a large number of agencies. This practice attracted criticism of Telstra, which has held two pitches for its agency roster in the space of a year, costing agencies millions of dollars.

On the AFA site, there is a "Pitching Checklist for Agencies" which includes:

· Negotiate adequate compensation for your pitch costs. As well as materials and time, expenses may also include airfares and accommodation.

· Negotiate copyright and confidentiality clauses.
Negotiate an appropriate hand-over process. If you are the incumbent and lose the pitch, make sure all outstanding accounts are settled

· If you lose the pitch, request that all materials are returned.

The AANA site has no info on this topic. What information they do have is password protected for members only.

Apparently this topic has been batted around for a while. One article from 06 Jan 2003 from gives reasons for re-evaluating the pitching process. And in Sept 2001, Ansett Airlines went broke, while agenies poured millions into "a pitch that was shaky from the start." Feb 26th, B&T reported that an "AFA source says the AFA wants something “stronger than guidelines” outlining minimum costs to advertisers of holding creative pitches, provisions for establishing and protecting agency charges up front, and guarding the intellectual property of concepts presented in creative pitches."

It will be interesting to see how this comes out in the wash.

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caffeinegoddess I'm a creative director and copywriter with digital, integrated, and traditional expertise. I love sound strategy and great executions.