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Storm brewing over kickbacks.(Interpublic Group of Companies Inc., Universal, Initiative and ISBA)
IPG forces Universal and Initiative to repay volume bonuses, leading ISBA to prepare for action.
Battle lines were being drawn this week as media agencies braced themselves for an attack from advertisers over the issue of media-owner kickbacks to agencies.
ISBA has become involved following reports that Interpublic has instructed its media agencies, Initiative and Universal McCann, to pay back to clients unaccounted-for payments from media owners. IPG's move is part of its clean-up operation following the restatement of its financial results last week.
ISBA is believed to have contacted client companies following a recent article in The Wall Street Journal. The article highlighted the practice of media agencies taking volume bonuses from media owners and addressed IPG's attempt to move towards greater transparency in light of its accountancy troubles.
ISBA has yet to make a public move, but is expected to take a strong line on the issue.
Media agencies, which frequently receive discounts in the form of cash from media owners in return for large-volume deals, are concerned that their profit margins will be hit if the practice is ended.
Last Friday, IPG earmarked a proportion of a total dollars 250 million in cash refunds to be returned to clients. This related to 'volume and cash discounts, principally for the purchase of media in inter-national markets' dating back to ...
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