friday, 17 october of 2014

WPP takes UK government to court over contract

A unit of WPP, the world’s biggest advertising group, has taken legal action to stop the UK government moving business worth £400m over four years to a competitor. It has also obtained a court order blocking public access to information about the case.

For the past four years, WPP has purchased advertising space for the government though a special unit created for the purpose called M4C. This includes advertising across television, print, radio and digital media for dozens of departments ranging from the Army to the Home Office.

But in September, following a six-month procurement process, the UK government decided to award a new four-year contract to Carat, an agency owned by rival Dentsu Aegis.

The decision is a major blow for WPP. The government spends more than £100m a year on ad space and is one of the biggest advertisers in the UK, ranking alongside large companies such as Unilever and Tesco. The contract is one of the most highly-prized in the UK advertising industry, both for its large financial value and its high profile.

WPP subsidiary GroupM last month filed a claim at the High Court in London to challenge the government’s decision, claiming that there were problems with the procurement process.

Normally, members of the public are allowed to see claims that have been filed in court, in accordance with the principle of “open justice”, the idea that courts must administer justice publicly. However, GroupM has secured a court order prohibiting public access to the statements of case, concealing them from scrutiny.

Anyone wishing to obtain a copy of the court documents has to make a formal application to the court, and must also give GroupM’s lawyers at least two days’ notice.

Only rarely do the UK courts keep court documents private in civil proceedings.

WPP said: “GroupM applied to have the court file sealed, given that the Particulars of Claim contained sensitive and confidential pricing information submitted by GroupM in response to an Invitation To Tender (ITT) issued by the Cabinet Office.”

The Cabinet Office said: “In reaching a decision on who to award this contract to, we followed a thorough procedure which included engaging fully with suppliers, customers, trade bodies and private sector organisations and we will robustly defend this challenge.”

“Our approach was designed to ensure the best possible competition from suppliers and will ultimately deliver the best deal for taxpayers. It included use of an independent media auditor.”

According to two people briefed on the case, the Cabinet Office will next week seek the court’s approval to award the contract to Carat immediately, rather than having to wait until the conclusion of the legal dispute.

WPP spends about £3bn a year on advertising space in the UK, making it the country’s biggest buyer, according to data from Nielsen. Dentsu Aegis, whose networks include Carat and Vizeum, spends about £1bn.

Dentsu Aegis declined to comment.

(Published by Financial Times - October 16, 2014)

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