• by Joe Mandese  @mp_joemandese, September 15, 2003

A petition for a confidential government inquiry into Nielsen Media Research's business practices became a public one Monday when trade magazine Advertising Age reported on the unusual request made by the American Association of Advertising Agencies (AAAA) to the Federal Trade Commission.

An AAAA spokesman confirmed that the trade association's Washington, DC, office filed the petition late Friday in response to pressure from the organization's Media Policy committee, a group comprising the chief media officers of the largest U.S. ad agencies.

While it is unusual that the AAAA would make such a request at all, the move is all the more surprising, because Nielsen executives held a top level meeting with members of the AAAA not long ago to assuage their concerns about the Nielsen's new third-party processor rules that are the source of the recent tensions. While agency media executives say those rules precipitated the request for a federal review of Nielsen's trade practices, the action is not limited to those concerns, but relates to a growing frustration with the research company that is the sole supplier of ratings that are used to conduct national and local TV ad deals.

Nielsen Third-Party Processor Fees (By Agency Size)

                                    Cost Per  Year

Small Ad Agency:                             $200 
Mid-size Shop (MediaCom)                   $8,500 
Big Agency Holding Co. (Interpublic)      $50,000 

Source: Nielsen Media Research

"It's not secret that Nielsen is a monopoly, but now we think they're exhibiting anticompetitive behavior," said a member of the group.

Agency executives acknowledge that Nielsen has quelled many of their initial concerns about the new policies, including requirements that they make confidential and proprietary business applications available to Nielsen for review. Many said they also were relieved to learn that the costs associated with the new third-party licensing fees - charges to agencies to cover Nielsen's costs for working with companies that re-process its data for agencies - were not as exorbitant as they originally feared, others said they felt any incremental charges by a monopolistic ratings company constituted "predatory pricing."

Nielsen executives deny that claim and say the fees are minuscule and relate only to incremental costs associated with additional processing of their data.

"Frankly, we're surprised it has come up again," said Nielsen Senior Vice President-Communications Jack Loftus. "When we met with the AAAA and told them what the pricing was, they agreed it wasn't a problem."

He said the fees ranged from as little as $200 a year for a small ad agency to as much as $50,000 a year for all of the Interpublic agencies. "These are not huge costs," he said.

While the costs may or may not be small to Madison Avenue, they could prove to be huge for Nielsen should regulators find just cause for allegations of anticompetitive behavior on Nielsen's part.

Meanwhile, many third-party process said they have yet to sign Nielsen's new agreements are waiting to see what steps to take before weighing in, including the possibility of antitrust litigation.

"We are in discussions with Nielsen and they are going well," said Stan Federman, CEO of Telmar, one of the major third-party processors servicing Madison Avenue.