The Association of National Advertisers recently confirmed the existence of an investigation by the Federal Bureau of Investigation and the United States Attorney’s Office for the Southern District of New York into fraudulent media buying practices. The investigation was first reported in September but the FBI declined to confirm its existence at that time.
At present, the subject matter of the investigation is somewhat unclear. However, legal professionals close to the matter believe that it may involve rebate-related deception between media holding companies and advertisers, mail or wire fraud, tax evasion and possibly racketeering.
Many believe that the catalyst for the investigation was a 2016 ANA report that claimed cash rebates were rampant in the U.S. media-buying industry, spanning across digital, print and television media. Specifically, backend incentives from media outlets that are not disclosed to advertisers and designed to incentivize ad agencies to put advertisers into one media buy over another.
The ANA considers the probe to be a significant to the industry and its members. It is attempting to identify advertisers that have been defrauded and has also requested that its members assist in the criminal investigation of media buying by identifying witnesses and evidence. The ANA has also urged its members to reassess its media buying relationships, contracts and internal marketing processes.
The digital advertising model may be in store for a significant overhaul designed to minimize fraud and bolster transparency.
Richard B. Newman is an FTC attorney at Hinch Newman LLP