Editorial Who’s liable?

What began as an almost incidental discovery earlier this year could lead to a broad marketing industry self-examination that cuts to the core of the roles and responsibilities of clients, agencies and the media.And if played out to an extreme, it...

What began as an almost incidental discovery earlier this year could lead to a broad marketing industry self-examination that cuts to the core of the roles and responsibilities of clients, agencies and the media.

And if played out to an extreme, it could change the way agencies, clients and the media do business.

The story began in February when the existence of a clause in most standard television contracts that makes advertisers and agencies both liable for unpaid bills came to light. Although the clause has been in existence for more than 10 years, it remained a bit of uncontested and unnoticed fine print until a series of agency closings early this year brought it into the open.

Advertisers called an emergency meeting in February involving themselves, agencies and media owners when they learned that, technically, they could end up paying a media bill twice if their agency goes out of business. Clients were adamant they would not be part of any contract that held dual liability. They told their agencies to strike any such clauses from media contracts. Clients and agencies on one side and the media owners on the other formed two working groups to examine the issues and suggest possible solutions.

One of the proposals that has come to the table in the wake of the February meeting is the notion of developing a standard system to evaluate the credit-worthiness of ad agencies. Agencies have agreed in principle to pursue the idea provided the broadcasters drop the dual liability clause. But the Canadian Association of Broadcasters, which asked for a month to think it over, now seems to have rejected the notion with its emphatic response that the ‘dual liability’ clause remain.

The cab, in a written response to the client/agency working group, says it is staying firm on an earlier stated position that holding advertisers responsible for media expenditures is ‘crucial to ensuring that the risk is minimized for the media.’ The cab adds it will recommend to its members that an existing clause in standard broadcast contracts that makes both agencies and advertisers liable be kept intact and that they will not accept any unilateral changes to the wording of the clause.

aca President John Foss has replied with equally emphatic language, saying advertisers view the cab’s response as unfair and unacceptable and that the aca feels cab’s position is in conflict with a healthy relationship between buyer and seller. The aca continues to advise its members to make it clear to their agencies that the clause be cancelled.

In a letter to its clients, Media Buying Services – one of the country’s largest media buyers – puts its position quite bluntly: ‘As far as we’re concerned, we will continue to stamp all air-time with an overriding clause indicating that we are solely liable for purchases made on behalf of our clients.’

Now that the Pandora’s Box has been opened, it will be interesting to see whether the industry will move towards establishing new conventions based on solid business practices, or whether this flare-up will burn itself out and the media, agencies and clients return to the way it’s always been.