German Court Orders Probe Of Spending On $47 Million Haribo Ad Account
The ruling stems from a lawsuit in which Haribo accuses Mediaplus of keeping money or credit it received from media companies in return for placing Haribo ads. Generally, marketers require that their ad agencies return to them any volume discount rebates or reimbursements their ad spending earns. In this case, Haribo alleges Mediaplus may have kept money or credit for itself. The ruling, however, does not say there was any wrongdoing at Mediaplus. It merely permits an investigation of Mediaplus' books following Haribo's allegations.
The amount in dispute is greater than €1 million, the ruling states, but it gives no further specifics.
The ruling will reverberate in European media buying circles, and may embolden clients to pursue audits of their agencies' books.
German authorities have been investigating media buying practices for several years, with 15 different agencies linked to the probe. Similarly, Danone, the yogurt maker, forced its German ad buying agency, Aegis, to reveal the discounts it was keeping. Aegis' former president, Aleksander Ruzicka, was forced to resign after it was revealed he had been diverting credits given to the agency by TV companies for free media airtime to a private company, and then selling them at a profit. In 2010, Aegis is believed to have settled that case by paying Danone €30 million ($40 million).
The Haribo ruling requires Mediaplus to turn over to Haribo all information regarding discounts, non-monetary benefits, rebates, reimbursements, "Cash" and "Freispots" (literally, free commercial TV spots), from the years 2004 through 2008. It also demands information about third parties that may be involved, and non-customer specific discounts that Mediaplus may have received. The ruling does not indicate who those third parties might be.
Mediaplus CEO Dominico Madile, 60, left the company in January to retire, according to Mediaplus. At the end of 2012, former Haribo ad exec Michael Cremer called for greater transparency in German media-buying.
The probe does not affect Interpublic or Magna, we're told. Neither company is named in the case.
It is, however, an uncomfortable reminder that Interpublic spent years shaking off a similar scandal in 2004, when the SEC disclosed that Interpublic's McCann agency had kept $600 million in European rebates that should have been paid back to clients. To this day, Interpublic is still cycling "vendor discounts and credit adjustments" off its books every quarter following the SEC case.
The 2004 scandal led to the demotion of Interpublic's former CEO, John J. Dooner Jr., and his replacement by the current CEO, Michael Roth.
An Interpublic spokesperson told Business Insider:
This has nothing to do with IPG Mediabrands. Mediaplus is a totally separate company and we don't have ownership in them. Magna is part of a buying club in that market where agencies aggregate buys to get bigger scale - and Mediaplus is part of the same group as Magna. But Mediaplus is not an IPG or IPG Mediabrands agency. This story has nothing to do with IPG or any of our agencies.