Advertising giant Omnicom Group Inc (NYSE:OMC) has come under fire from the US Department of Justice as part of an investigation into possible bid rigging amongst ad agencies.
Two of Omnicom’s subsidiaries have received subpoenas from the DoJ’s antitrust division, and the company told investors on Friday that it is cooperating with the inquiry.
The government is investigating claims that major ad agencies have been improperly steering clients to use their in-house production units rather than independent companies.
The production and post-production of commercials is estimated to be a US$5bn business in the US, with hundreds of smaller companies competing for various service contracts such as directing, sound editing and special effects.
The big boys have been starting to increase their presence in these areas, but have faced allegations that they’re urging the independent firms to inflate their prices to ensure they win more contracts.
The independent businesses often feel they have no choice but to do what they’re told for “fear of alienating an agency and risking future opportunities for work”, said trade group AICE.
Price-fixing and bid-rigging are prohibited under federal antitrust law.
Government antitrust attorney Rebecca Meiklejohn has been interviewing industry executives over the past few months in relation to the matter, according to reports.
Shares in Omnicom shed 1% in early deals to trade at US$87.22.