Markets

BBDO Backs Off "Sequential Liability" for Media Outlets

By Jim Edwards

Updated on: May 29, 2009 / 12:35 PM EDT / MoneyWatch

BBDO is backing off a plan to impose "sequential liability" on media outlets, according to Joe Mandese at MediaPost. BNET first noted that agencies of BBDO-parent Omnicom were attempting to delay payments to vendors until clients had paid its agencies back in March.

Omnicom is scrambling to manage its cash as clients delay payments but vendors seek them upfront, scared they will be left on the hook with unpaid bills following the Chrysler bankruptcy. Chrysler, a BBDO client, has $58 million in unpaid bills with BBDO.

Over the months, Omnicom has backed away from the "sequential liability" plan. First, UK commercial production shops said they would not accept delayed payments -- they want agencies to pay for their services even if a client goes bankrupt. The same plan was imposed on U.S. producers and photographers. Now, media outlets in the U.S. appear to have successfully resisted BBDO's attempts to implement the plan. Media Post:

"They've started calling [media outlets] and said they've decided not to implement the program," Mary Collins, president-CEO of the [Media Financial Management Association].
[Full text of the MFM release after the jump]

BNET's take: Vendors have successfully painted agencies who want to delay payments until clients pay them as the grinches of the industry, as if there's some sort of moral failing attached to asking a vendor to be paid by a client. Vendors seem to think they live in a risk-free world, and that there's some sort of law that allows them to remain untouched by bankrupt clients. What is Omnicom to do? It cannot create money from thin air.

For a more detailed explanation of why vendors may have to accept getting in line for payment, click here.

The MFM release:

MEMBER ADVISORY

BBDO LETTER REGARDING CHRYSLER RECEIVABLES

For Immediate Release - Northfield, IL, (May 27, 2009) - The Media

Financial Management Association (MFM) and its BCCA subsidiary have

learned that a letter agreement is being sent by BBDO to vendors with

reference to a Supplier Purchase Agreement (SPA) among BBDO, Chrysler

Receivables, and Citibank.

The terms of this letter agreement appear to be very broad, covering

not only a vendor's current Chrysler receivables with BBDO, but also

all prior and future receivables from BBDO or any of its affiliates

relating to Chrysler or otherwise. BBDO is a part of the Omnicom Group

which includes, among others, OMD, PHD and Prometheus.

The letter includes a clause which purports to make the agreement

binding on all subsidiaries of any Vendor which signs it. Execution of

the letter with this language by one location could therefore bind all

other company locations.

We cannot advise you what action(s) to take if you receive such a

letter. Each vendor must determine independently what action it will

take. We encourage you, however, to discuss this and all other

agreements with legal counsel before determining your appropriate

response.

About MFM:

Media Financial Management Association (MFM) provides education,

networking, information, and signature products to meet the diverse

needs of financial and business professionals in the media industry

throughout the U.S. and Canada. More information about MFM is available

on its web site: http://www.mediafinance.org. MFM's media credit

reporting subsidiary - BCCA - provides revenue management services,

including professional development programs and credit reports on

national and local media advertisers. More information about BCCA is

available at http://www.bccacredit.com.

Mary Collins, President and CEO of MFM and its BCCA subsidiary may be

reached at:

Mary.Collins@MediaFinance.org

Office: 847.716.7000