Competition Commission of India probes industry bodies for possible ad cartelisation

The Competition Commission of India (CCI) is investigating whether the guidelines and advisories issued by industry bodies Indian Society of Advertisers (ISA), Advertising Agencies Association of India (AAAI) and Indian Broadcasting & Digital Foundation (IBDF) violated competition laws and promoted cartelisation in the advertising industry, according to probe-related documents seen by ET.

The investigation was initiated following an August 2024 order by the CCI allowing its director-general to conduct a probe after receiving complaints about possible cartelisation in the advertising industry.

The antitrust watchdog on March 18 and 19 searched the premises of these organisations and seized documents. In its application in February seeking approval for the search from a Delhi court, the CCI observed that the allegations pertain to the conduct, guidelines and advisories of these associations, which operate at different levels of the same supply chain.

"The commission also observed that the conduct of each of them could potentially impact other participants in the supply chain. Thus, the respective industry association appears to evolve guidelines, advisories, or negotiation parameters in the form of model agreements, to secure the commercial interest(s) of their members," it said.

Specifically, the CCI is scrutinising the ISA's Model Agency Agreement for allegedly restricting negotiations between advertisers and agencies. According to the complaints, the ISA introduced the model agreement on August 3, 2023, which limited advertiser-agency negotiations and negatively impacted agency revenues.

In response to ISA's model agreement, the AAAI issued Guidelines on Media Agency Remuneration on August 30, 2023, which set minimum commissions and incentives for traditional and digital advertising, along with a formula for fee-based services.

On September 11, 2023, the IBDF issued an advisory outlining the procedures for media account transitions. The IBDF procedure stated that an agency shall not unilaterally offer any discount on existing rates of the channel(s) for an advertiser while pitching for business.

It also mandated that "the new agency shall undertake to indemnify IBDF members against all losses/damages/costs incurred and/or suffered by channels on account of any unilateral discount in channel rates offered by the agency".

The CCI also noted allegations that the AAAI and IBDF formed a joint sub-committee that meets monthly to take collective action against certain clients and coordinate enforcement of IBDF procedures.

While the identities of the complainants remain unconfirmed, some media agencies are suspected of acting as whistle-blowers.

Industry sources suggest the complaints to the CCI may have been triggered by large advertiser accounts being consolidated within a few major agencies.

These agencies, they allege, secured major ad accounts by promising clients to procure TV ad inventory at lower rates than competing agencies. Brands typically select agencies offering the lowest possible advertising rates, they said.

In return for providing affordable ad inventory, broadcasters benefit from increased ad investments from the clients managed by these agencies, industry sources said.