Foreign Corruption in Advertising Markets: A Large and Looming Concern

In late October, Shanghai police reportedly raided the offices of WPP subsidiary, Group M, based on allegations of bribery in the placement of media by Group M.  In response to the raid, WPP reportedly fired the executive who was detained.  This action follows a September 2021 SEC order against WPP for alleged violations of the Foreign Corrupt Practices Act (FCPA) arising out of allegedly corrupt media placement activities in India, China, Brazil and Peru.  On September 28, the SEC charged outdoor billboard agency, Clear Channel, with FCPA violations arising out of allegations that its Chinese affiliate bribed Chinese government officials in order to obtain lucrative placements.  

These actions signal a substantial risk for every U.S. company engaging in foreign placements of advertising.  It is not unusual for U.S. companies seeking to enter foreign markets to engage agencies in overseas markets to conduct media planning and buying on their behalf.  In many countries, a shadowy network of “brokers” may be used to facilitate such placements.  Such brokers may not be legitimate businesses and lack the kinds of accounting controls that would be the norm within the United States.  They may expose the agencies and their clients to lost and unaccounted for funds, and to allegations of bribery.  This can lead not only to lost media spend – sometimes into the tens of millions of dollars, but also to criminal investigations by U.S. and foreign authorities.  Employees can go to jail for violating federal anti-corruption laws.  

How does a company ensure that its media supply chain is clean?  It begins with the right contract but it also constitutes a compliance concern.  Specialized audits can help companies identify and root out problematic activities before they come to the attention of the government.  Contractual audit rights and related obligations are crucial.  Advertisers that do not audit their agencies to ensure that they are compliant with their existing contracts are obviously far more likely to run the risk of having their media funds misapplied.