Which Media Agency Got Sued for Breaking a Fee Guarantee?

Last Updated Jul 9, 2009 4:19 PM EDT

WPP chief Martin Sorrell gave an interview to an Indian blogger at Cannes in which he claimed that a client was suing a media buying agency for not guaranteeing a price reduction on its fee.

Sorrell's claim came in a Q&A about how tough clients are becoming in the recession, something that BNET has noted here and here. As an example, he said agencies were not just promising reductions in fees, but if they went out of business were promising to pay back clients the promised reduction in addition to the foregone fee:

I think price cutting is more common with the media agencies. However, there are certain incidents which make the situation even more disturbing. I know of two media agencies in particular which have guaranteed media pricing not only against their fees but beyond their fees.

Let me explain: Let's say the client has a budget of $100 million and the fee for the media agency is $2 million. These agencies guaranteed their respective clients a price reduction of $5 million and in case the agency fails, it will not only do away with its fee of $2 million, it will also pay another $3 million to the client. Earlier, what they used to do is guarantee the client a price reduction of $5 million, and in case of failure, they would do away with the $2 million fee, but now it's beyond that. I know of an instance where a client is suing a media agency because it failed to deliver that guarantee as promised.

(BNET Advertising would love to know which agency is being sued, which client is the plaintiff, and in which court this paperwork can be found. Email jim edwards 123 at hot mail dot com with answers!)

Life is tough at WPP, too: Its TNS unit just ordered staff to take two weeks' unpaid vacation. Translation for Americans: Given that the Brits get four weeks vacation a year anyway, this means they'll be on holiday for six weeks -- more than an entire month. Oh! What a lovely recession.