It’s a measure – though admittedly a perverse one – of how far the once parochial world of five-to-one presentations, long lunches hosted by the legendary Tony Vickers and gorillas with calculators has moved on that it must now concern itself with such exalted matters as Sarbanes-Oxley and the judgments of the French Commercial Court in Nanterre.
The Sarbanes-Oxley Act – punitively rigorous US corporate legislation brought in to curb the likes of Enron – is most likely the deeper background to the IDS affair. IDS, as is well known, is the sales house of Flextech, which operates such channels as Bravo, Living TV and (in collaboration with the BBC) UKTV group. Both are subsidiaries of Telewest, a US company quoted on Nasdaq, whose senior management recently called in investigating auditors to probe the payment of commissions to media buyers, totalling about £5m, between 2001 and the end of last year.
It was the French who coined the word surcommission, and the French who banned it in 1993 with the Loi Sapin. That doesn’t mean extra payments by sales houses, beyond the normal agreed commission, are illegal over here. But it does suggest they are a practice that is not universally smiled upon – and not just in France these days. Indeed, Telewest – judging from its statement – has already laid the grounds for discontinuing it, though its concern is likely to centre on the enhanced need for transparency post-Enron rather than technical legality, which does not seem at issue.
The investigation cannot have come as good news for IDS, which is right in the middle of its negotiating season. But any findings may turn out to be more hurtful for certain media specialists. Did, for example, knowledge of these payments extend to the client? I think we ought to be told.
Meanwhile, across the Channel, Aegis has been getting itself into hot water with the legal authorities. In what had all the hallmarks of a stage-managed publicity coup, late last year Aegis subsidiary Carat launched a legally sanctioned raid on the offices of the media specialist KR Media. The significance of this is that KR is the vehicle of Eryck Rebbouh and Bruno Kemoun (aka the Siamese Twins), formerly two senior Carat executives who spectacularly quit to set up in competition with their former company, part-funded by a 20 per cent WPP stake. Carat surmised that a number of wounding account losses, such as LVMH and Bouygues Telecom, were directly attributable to KR breaking non-compete clauses. But it surmised wrongly, to the extent that the raid resulted not in the acquisition of incriminating documents but the ire of a French judge, following a counter action brought by WPP. The matter has yet to go to appeal, but it’s not looking good for the reputation of publicly quoted Aegis or its chief executive Doug Flynn: the court ruled that Aegis had abused the law in organising the raid and imposed a fine of Ã¢âÂ¬13,000 (£9.000) a day until the documents are returned.
Carat, under the Gros brothers, was so powerful that, once, it could virtually make the rules up. But the buccaneering days are over for media companies and with maturity has come responsibility. Clearly, it is not a lesson entirely lost on the board directors of Telewest.
Stuart Smith, Editor