OMD Backs Down On Media Liability Policy, Reverts To Old Position

by , Aug 31, 2006, 7:48 AM
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After ruffling feathers in the ad sales and credit departments of broadcast and cable TV outlets nationwide, OMD has backed down from a new, more aggressive position on the liability of advertising buys - at least for the time being.

OMD, an Omnicom unit that is the biggest buyer of media in the U.S., quietly began altering long-standing language in the boilerplate of its advertising insertion orders that seemed to give the media shop greater discretion over advertising payments in the event that a client defaults or declares bankruptcy.

"In the event agency returns to the advertiser any such amount paid agency by the advertiser, then media company will similarly repay such amount to agency and look solely to advertiser for payment," read the new terms, which were detected by station credit departments and brought to the attention of the Broadcast Cable Financial Management Association, which blew the whistle on OMD.

To date, OMD has declined to comment on the move, but released the following statement: "Neither the concept of, nor our position on sequential liability is new for OMD USA. In fact, it is by and large the position of advertising agencies in the U.S. and the [American Association of Advertising Agencies']. From time to time, OMD USA works to clarify and improve the standard language included in its trade agreements on behalf of all clients. We are in the process now of doing just that with regards to a technical issue involving bankruptcies and preferential treatment. This issue is extremely rare and insignificant given the high credit quality and reputation of OMD USA's client base."

Sequential liability refers to Madison Avenue's long held position that agencies are only liable for paying the media after they have been paid by their clients. The media industry, meanwhile, has maintained a position of "joint and several liability," which assumes that both the advertiser and the agency are on the hook to pay media outlets for media buys. The two industries have agreed to disagree on that language for well over a decade, with each side ignoring the other side's language, often rewriting the boilerplate on the back of insertion orders. OMD's new language, which was put into insertion orders for blue chip clients such as GE, Nissan and Dial, seemed to take the debate to a new level. It also raised questions why the agency was seeking to make the change now, and what events could have precipitated it.

On Tuesday, the BCFM issued a new advisory to its members alerting them that OMD executives said they had retracted the new language and reverted back to an earlier position.

"In a conversation with OMD on Thursday, August 24th, OMD advised BCFM {Broadcast Cable Management Association) that it has reprogrammed its computers and is again using its original (pre-July 2006) liability language," read the association's advisory. "While unable to confirm this reprogramming, it is the associations' understanding that this language refers to sequential liability. BCFM and BCCA [Broadcast Cable Credit Association] continue to recommend that media companies protect their interests by adopting a position of joint and several liability."

OMD had no further comment at presstime.

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