Publishers abandon rules on advertising commission

Press, 15 August 1988, Page 7

Publishers abandon rules on advertising commission

PA Wellington Newspaper publishers say they have abandoned efforts to have the Commerce Commission approve rules which for more than 70 years have required a 20 per cent commission to be paid to advertising agencies placing clients’ advertisements. In future, commissions may be based on actual costs, or a flat rate, or on a scale reducing according to the volume of business done with a client. The Commerce Commission issued on July 5 a draft determination on application by the Newspaper Publishers’ Association for authorisation of its regulations for accredited advertising agents, saying they cut competition and, in the absence of any public

benefit, could not be authorised. “The N.P.A. has decided to amend its rules to address the areas of concern identified by the commission,” said the group’s executive director, Mr Patrick Greene. The most significant amendments were: @ The removal of the “no-rebating” rule which prohibited an advertising agency from passing on to the advertiser client any part of the commission paid by the newspaper. The removal of this rule will allow greater negotiation between the agency and the advertiser over the methods by which the agency is paid.

© The N.P.A. will no longer set the level of commission to be paid by a newspaper to an advertising agency but will

limit its authority under the amended rules to making recommendations as to a maximum level of commission. It will be up to each individual newspaper to set its own level of commission, taking whatever account it wishes to of the N.P.A. recommendation. Of the 45 clauses in the N.P.A.’s accreditation regulations, 11 will be substantially amended or deleted. The modified rules did not constitute a restrictive trade practice which required authorisation under the Commerce Act, Mr Greene said. The N.P.A. had notified the commission of the withdrawal of its application for authorisation of the original rules.

The modified N.P.A. accreditation rules will

come into force on September 1, 1988. The executive director of the Association of New Zealand Advertisers, Mr David Forsythe, said the changes meant advertisers would now be able to negotiate freely the cost of advertising with the agencies. The fixed (non-rebate-able) commission rules, now removed from the N.P.A. . accreditation agreement, had meant payments to an agency for advertising placed had been fixed irrespective of an advertiser’s volume of business and irrespective of the number of services that an advertiser required from an advertising agency.

The trend overseas had been for advertising agencies to be paid for the services they provided,

not just for commissions generated through news media placement.

“For example, in the big deregulated advertising markets — United States, Canada and Britain — advertisers and agencies are moving towards cost-based fee systems, which allow advertisers the freedom to negotiate advertising costs and the freedom to use the services they need.” A.N.Z.A. members — which represent nearly 100 big national and multi-national advertisers —- welcomed the initiative taken by the N.P.A. to eliminate the restrictive trade practices in its news media accreditation agreement and bring to an end the single most frustrating trade restraint in the advertising industry, Mr Forsythe said.