ITV sales house Laser has upped the stakes in its 2m overtrading dispute with CIA Medianetwork by alleging in letters written to CIA’s clients that the media buyer was prepared to inflate clients’ airtime costs by 1m to meet its 1996 commitments to Laser.
The letter is highly embarrass-ing to CIA and comes as Laser’s solicitors prepare to issue a writ against the media buyer. The letter implies that the agency was willing to let its clients, including Daewoo and Lloyds/TSB, pick up an expected 1m shortfall in 1996.
The disputed money arises because of the practice of media agencies being given discounts based on the share of spending they are willing to guarantee to each ITV sales house.
Laser alleges that CIA failed to meet its 1995 and 1996 commitments because it spent a smaller share than was initially promised. In 1995, CIA Media-network spent 14.6m with Laser’s broadcasters. In the nine months to September this year the agency had spent 10.4m.
Some observers believe the unprecedented legal threat could force a massive change in a practice which has been criticised for a number of years.
CIA’s share price dropped 17p on Monday to 132p and closed at 133.5p yesterday (Tuesday). It is understood that the group had been planning a 15m-plus rights issue before the overtrading issue first broke in August (MW August 2). The legal spat, however, may jeopardise its success.
“The letter states the degree to which CIA asked Laser to hike their (Laser’s) rates to cover the 1996 debt,” says one source close to clients who have received the letter. “The individual letters give details of the proposals that CIA made to sort out the deal.”
Laser’s clients, Granada, York-shire Tyne Tees, LWT and Border, first consulted lawyers on the matter at the beginning of October. A Granada source says: “We have been discussing the 1996 position and CIA has chosen to instruct Laser to increase rates to the end of the year.”
CIA Group chairman Chris Ingram declined to comment on how the letter would affect his client relationships. “We are still in discussions and no writ has been served so far,” says Ingram.
CIA Medianetwork managing director Mike Tunnicliffe has written to all its clients claiming that Laser has used “some rather heavy handed and aggressive tactics,” and asks clients to refer any approaches from Laser directly to CIA. But some CIA clients admit that they are “concerned” about the allegations, which also threaten to prevent CIA buying airtime in the four ITV regions concerned, unless the dispute is resolved before January 1.
“Every client needs a seven-day London schedule and national presence on ITV, not to mention the ability to trust its agency,” says Media Audits managing director John Storey, which advises over 150 UK advertisers on their media spend.
Laser claims almost 1m is owed from CIA’s 1995 commitments: 785,081 to YTTV, 74,722 to Granada, 115,201 to LWT and 4,353 to Border. It is understood that CIA owes a similar amount on its 1996 deal.
Laser believes CIA failed to meet its guarantees because it has been encouraged to spend a higher share of its clients’ money in rival Carlton Sales’ regions in London and Central. Both Ingram and Carlton Sales managing director Martin Bowley deny any special relationship between the sales house and the agency.
TSMS, United News & Media’s sales house, has a similar trading dispute with CIA and is studying the outcome of Laser’s legal action.
Industry observers are divided on whether the agreements made between sales houses and agencies on the basis of share of ITV spend constitute legally binding contracts. “I think it’s just tactics, leaking this information to the press. It’s all dirty tricks,” says Lorna Tilbian, Panmure Gordon’s media analyst.
Even if the CIA/Laser clash is settled without going to court, the legal threat will change the way airtime is bought and sold. For many clients that could be the most positive result.