Column : Business as usual

Written by Alokananda Chakraborty | Updated: Jun 30 2009, 03:39am hrs
A major company defaults on its payment to its advertising agency and moves its creative and media chores to another agency. Is this a rare thing By no means. Every time business is slow, as it is now, the list of defaulter clients grow. They simply pack up and move off in search of a new advertising agency, leaving the incumbent with outstanding bills.

According to the Advertising Agencies Association of India (AAAI), an industry body comprising all the major advertising agencies that account for about 80% of the industry revenues in India, there is a whole of host of companiesin the real estate, finance, airline and film production spacethat are yet to pay up.

And this is a real problem before agencies. Agencies usually offer clients a 60-day credit period post the release of ads in the media. And clients asking for a more lenient credit terms and grace periods are also not uncommon. As it is, they work on wafer-thin margins, and such inordinate delays and outright defaults may actually force some of them to down shutters. AAAI insists that there is a system in place to check all this. A new agency is expected to seek a no objection certificate from the incumbent to make sure the client has cleared all dues. But do agencies follow this route We know the answer.

Again, while it cant initiate legal action, the AAAI can, through the Indian Broadcasting Federation (IBF)-AAAI joint working committee and the Indian Newspaper Society (INS)-AAAI joint working committee, put pressure on the client by advising the media partners to withhold release of new ads of the defaulter client. Compliance is as high as 85-90%, claims AAAI.

AAAI says it has already advised IBF to make sure some of the current defaulters new advertisements dont see the light of day. The advertising industry does have a reasonably effective and efficient self-regulation mechanism.

But the unfortunate fact is, in an industry where competition is cut-throat, an advisory body can do precious little. Ethics have to be followed by everyone consistentlyit is only then the rules will likely work.