Antitrust Law Daily Wrap Up, ANTITRUST NEWS: Justice Department litigator talks antitrust and the advertising industry, (Mar 28, 2017)

By Jeffrey May, J.D.

Rebecca Meiklejohn, a veteran trial attorney at the Department of Justice Antitrust Division, who is reportedly leading an investigation into bid rigging and fraud in the advertising industry, schooled attendees of the Association of National Advertisers 2017 Advertising Law & Public Policy Conference today on antitrust enforcement issues. While Meiklejohn would neither confirm nor deny the existence of an industry investigation, she did provide an antitrust primer and identify potential issues that can lead to criminal problems for sector participants.

Last December, media reports disclosed an antitrust investigation of bid rigging in the advertising industry. Some of the world's largest marketing/communications companies were reportedly subpoenaed by the Department of Justice regarding contracts to produce commercials. Publicis Groupe confirmed that one of its subsidiaries received a subpoena dated December 14, 2016, concerning video production and post-production practices. A few days later, WPP plc issued a similar statement that three of its subsidiaries also received subpoenas and that the company was fully cooperating with the government's investigation. Interpublic Group, Omnicom Group, and MDC Partners are among other industry players that have reportedly been contacted by the Justice Department.

This latest antitrust investigation comes nearly 15 years after another probe rocked the industry. In 2002, the Antitrust Division brought charges arising out of an investigation into a conspiracy to rig bids and allocate contracts awarded by advertising agency Grey Global Group Inc. to graphic vendors for work performed on behalf of Brown & Williamson Tobacco Corp. The government charged that the conspiracy lasted from late 1994 until 2001 and involved the payment of substantial kickbacks to executives at advertising agencies, including employees of Grey. A number of individuals, including an executive vice president and director of graphic services at Grey, pleaded guilty to the charges.

Meiklejohn, who was involved in the earlier investigation of the sector, explained that the probe from the early 2000s involved steering work to favored vendors and kickbacks for print advertising work. She warned, however, that criminal prosecutions for bid rigging and related fraud do not require evidence of kickbacks. While kickbacks might help the Justice Department focus on culpable parties, no kickback does not mean that there is no violation, she explained. The focus is on whether price or other significant terms were manipulated. Whether the price was fair or whether the buyer negotiated terms would not be a defense. The goal is for a competitive bidding process for procurement free from collusion and fraud.

Meiklejohn also noted that during the course of an antitrust investigation in the procurement context, it is standard practice for the government to talk to potential victims. The government seeks cooperation to obtain possible communications with vendors and procurement documents. Victims could be entitled to restitution, it was noted.

"If an agreement between two or more competitors exists, third parties, such as agencies and brokers, who organize or facilitate, are also culpable," Meiklejohn also advised.

Agreements regarding employees. Meiklejohn also took the opportunity to warn members of the advertising industry of the dangers of agreeing not to poach rivals’ employees. While a high-profile Justice Department investigation focused on so-called "no-poach" agreements in the tech sector of Silicon Valley, Meiklejohn pointed out that the issue is not unique to Silicon Valley, nor any particular industry. Last October, the Justice Department announced that it intended to criminally investigate naked no-poaching or wage-fixing agreements that are unrelated or unnecessary to a larger legitimate collaboration between the employers.

Companies: Association of National Advertisers; Interpublic Group; Omnicom Group Inc.; MDC Partners; Publicis Groupe; WPP, plc

News: Advertising Antitrust AntitrustDivisionNews