MediaCom admits misuse of value banks – pledges no more

Rosie Baker
By Rosie Baker | 9 March 2015

MediaCom has admitted that on four instances over the last two years, value bank inventory has been on-sold to clients – against its own guidelines.

The admission comes out of the independent Ernst & Young audit being carried out over the past two months, but the clients have not been identified.

In a statement given to AdNews, Steedman outlined GroupM Australia’s policy on value banks – “the additional discounts secured over and above normally negotiated media rates – either in the form of advantageous client prices and/or bonus airtime” - had been breached.

The policy is that value banks should never be monetised for the agencies gain.

He told AdNews: “Value bank on selling – it was a situation that was against the ethics and regulations within GroupM Australia – no on charging of value banks is allowable. It’s not illegal but it’s against the ethics of our company and not acceptable.”

The clients were refunded the money they were charged in November, but Steedman would not be drawn on the value of those refunds.

Clients received the airtime they wanted – but it was in breach of GroupM’s policy to charge for it.

From now on, new procedures and controls are being put in place to make sure it doesn’t happen again.

“Where these additional discounts arise, we will – in conformity to our policy – make sure that these advantageous pieces are invoiced to clients at the price at which the agency will pay the media owner and any client specific bonus airtime provided by media owners is passed on to the respective clients at zero cost,” he said.

GroupM also moved to clarify its position on the markups that surround programmatic buys, and media credits, two focal points of discussions.

On programmatic buying, Steedman said that GroupM shoulders the financial risk on delivering guaranteed outcomes of audience deliver through its Xaxis trading brand.

“Any profit or loss that GroupM makes from this sale is kept confidential under the products’ terms and conditions of booking. All clients who buy these products are carefully appraised of these terms and conditions and sign a specific contract before buying them to acknowledge their agreement. All media plans identify these products clearly for client approval and clients decide whether to participate or not.”

On media credits, the funds that have been paid for by the client – but not yet paid to the media owner even after the media has been placed, Steedman described them as the agency’s “ongoing legal liability” to media owners, which have the right to invoice the agency at any point during a limitation period.

It can mean that funds stay with the agency for years having not been invoiced by the media owner, before the statute of limitations expires, and are then funnelled back in to the agencies’ bottom line.

Different client contracts deal with this differently.

“Treatment of media credits will be dependent on the specific client/agency agreement,” said Steedman.

“Where there are specified contractual provisions, the agency and the client should both agree to adhere to them. There are several options for dealing with media credits in an agency/client agreement, each having a level of agency administration. We have a variety of options available that can be tailored to the circumstances of the respective client.”


This article is one of a series of articles looking at the GroupM MediaCom audit. Read the rest below:
GroupM reveals findings of MediaCom audit: outlines overhaul of processes
MediaCom admits misuse of value banks – pledges no more
MediaCom faces losing at least one major client
Q&A: Yum! Brands on MediaCom - ‘As clients we’ve got to be fair
Timeline: MediaCom’s audit process



Recap the MediaCom story from last year:
MediaCom exits linked to Foxtel and KFC overcharging
Foxtel moves account from MediaCom to MindshareRogue traders: how MediaCom’s dynamite exploded MediaCom: What now - will a raft of agency audits kick off?
The media's responsibility around MediaCom

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