Loi Sapin drains agency lifeblood

Restrictive legislation is all very well in theory, but in practice, as has been demonstrated by the Loi Sapin’s effects on French media agencies, it can be very bad for business. John Shannon is president of Grey International.

Three years after its introduction, the Loi Sapin has done more damage to the French advertising and media industry than even the most gloomy forecaster could have imagined.

Ostensibly an anti-corruption measure, introducing transparency into media dealings, the law has played a part in the demise of some 20 French media agencies. More worrying still is its indirect legacy of driving down agency remuneration to unworkable levels so that some media companies are finding it hard even to cover operating costs.

This legacy has its roots in the expectations of clients brought about by pre-Sapin developments in French media buying. Broking was spreading and advertisers soon got used to paying only symbolic amounts in commission. At the same time some advertising agencies, concerned by the loss of clients or media business to specialists, maintained their offer of low-priced advertising and began to offer media services on artificially low rates in an attempt to secure their full-service accounts.

By curtailing practices associated with broking, Sapin forced media operations to become dependent again on commission and fees. But clients were by now accustomed to paying low rates of commission and were understandably reluctant to stop, particularly in such an un-favourable economic climate.

So everyone has lost out. Agencies are legally prevented from taking full competitive advantage of market conditions for the benefit of specific individual clients. Clients, meanwhile, are forced to expend considerable time and effort negotiating terms which may make agencies so unprofitable that they are unable to do their job properly. It can also lead to an atmosphere of tension undermining the business partnership.

Perhaps all this would matter less if the law had carried some social benefit. But the reality is that however well intentioned it may have been, the Loi Sapin undermined profitability. In so doing it has helped to put between 20 and 25 per cent of French agency employees out of work.

It is for reasons such as this that many in the European communications industry oppose the sort of restrictive and often punitive legislation that is the subject of so much debate across Europe.

For businesses to grow, they need the freedom to adapt to market conditions. Restrictive legislation may be neat and tidy and it may salve political consciences, but it contradicts the economic ideals on which the EU is based and threatens to undermine the growth that Europe badly needs.

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