*

Advertising industry faces antitrust scrutiny in India

*

Watchdog reviews ad executives' WhatsApp chats detailing

coordination

*

Meeting records show ad executives celebrated pricing pact

*

Regulator determined on initial basis that conduct

breached

competition law

By Aditya Kalra

NEW DELHI, June 19 (Reuters) - Omnicom Media's India

chief was frustrated. It was October 5, 2023 and a rival was

trying to poach the U.S. firm's client by offering lower prices,

just weeks after global advertising agencies and broadcasters

struck secret pacts on ad rates in the South Asian country.

The attempt to woo the client violated the agencies'

agreement, Omnicom Media's India CEO Kartik Sharma wrote in a

WhatsApp group comprising a who's who of advertising, according

to excerpts of the discussion documented by antitrust

investigators and verified by Reuters.

"This kind of practice is not in the spirit of what we are

collectively trying to achieve," Sharma wrote, without

identifying the parties.

Shashi Sinha, then India CEO of New York-based IPG

Mediabrands, suggested an industry group should "admonish the

agency".

The exchanges form part of a confidential dossier compiled

by India's antitrust watchdog that chronicles how global

advertising companies, including leading U.S. and European

firms, coordinated to rig prices in the world's most populous

nation.

Reuters reviewed evidence from the Competition Commission of

India (CCI) investigation, including a 10-page document with

messages and records of meetings between top advertising

executives, and two industry agreements under scrutiny for

antitrust violations; and interviewed two people familiar with

the probe.

The key details, which haven't been previously reported, centre

on WhatsApp interactions involving 11 industry executives. They

include the top India or South Asia executives of WPP's ( WPP )

GroupM; U.S.-based Omnicom Media and Interpublic's

IPG Mediabrands; France's Publicis and Havas

Media; Japan's Dentsu ( DNTUF ) and India's Madison

World.

Over WhatsApp and in meetings, the executives coordinated

responses to clients, which "resulted in alignment of competing

advertising agencies," CCI officials said in the August 9

dossier, determining on an initial basis that the conduct

contravened competition law.

The firms agreed to cooperate on pricing, including not to

undercut each other; colluded with broadcasters to deny business

to agencies that didn't comply; and discussed financial terms

involving at least four Indian clients over conference calls,

according to the investigation documents.

The documents don't indicate whether the agencies' foreign

headquarters were aware of the executives' actions.

A spokesperson for WPP Media, which until May was known as

GroupM, told Reuters it was aware of the investigation but

declined to comment further.

A Dentsu India spokesperson confirmed Reuters reporting that it

had disclosed industry practices to the CCI in February 2024

under the regulator's leniency program, which enables lesser

penalties for firms that share evidence of malpractice. The

spokesperson didn't address specific evidence raised in the

dossier but said the firm had implemented stricter audits and

controls.

The other agencies and their executives didn't respond to

Reuters questions about the antitrust probe and information in

the dossier. The regulator also didn't respond to queries.

Reuters has reported that in March, as part of the continuing

investigation, the regulator raided the Indian offices of many

advertising firms and an industry group that represents

broadcasters, including the Reliance-Disney venture and Sony ( SONY )

.

CCI investigations typically take several months. The

regulator can't press criminal charges, but can impose financial

penalties on the media agencies of up to three times their

profit or 10% of an Indian entity's global turnover, whichever

is higher, for each year of wrongdoing.

SECRET PACTS

WPP Media, the world's largest media buying agency, last year -

when it was still known as GroupM - won new India business worth

$447 million, followed by Omnicom's ( OMC ) $183 million, according to

research firm COMvergence.

But India's near-$30 billion media and entertainment sector

is grappling with weak consumer sentiment. Ad spending will rise

7% to $19 billion in 2025, the slowest growth in three years,

according to GroupM estimates.

The CCI is investigating the role of two industry bodies,

the Advertising Agencies Association of India (AAAI) and the

Indian Broadcasting & Digital Foundation (IBDF), in

orchestrating the suspected cartel.

The former group is led by WPP Media India head Prasanth

Kumar, while the broadcasting body's president is Kevin Vaz, a

top Reliance-Disney venture executive. Neither industry group

responded to requests for comment.

The dossier shows the AAAI circulated guidelines to ad

agencies in August 2023: They must charge clients whose annual

spending exceeds $29 million a minimum 3% commission for digital

ads and 2.5% for traditional media. Lower-spending clients would

pay higher minimum commissions of up to 8%.

A month later, the industry associations entered a joint

pact, agreeing no agency would "unilaterally offer any discount"

on rates while pitching for business.

The pact, reviewed by Reuters, declared its aim was to

eliminate "lower pricing as a reason to award a pitch".

The advertising firms began coordinating their activities at

least as early as August 2023, according to the CCI documents.

Ad executives who met on December 1 that year hailed their

collaboration as a "great success" and resolved to continue,

according to meeting minutes cited in the CCI's evidence.

'ALL ALIGNED'

In the U.S., the Federal Trade Commission this month sought

information from advertising agencies as part of a probe into

whether they coordinated boycotts of certain sites. The Justice

Department in 2016 probed agencies it suspected of rigging bids

to favour in-house units, but eventually closed the case without

bringing charges.

Brewer Anheuser-Busch InBev used CCI's leniency program to blow

the whistle on an industry cartel in India in 2017.

In the case of the ad industry, Dentsu India told Reuters it

filed its leniency application with the CCI not as a reaction to

external pressure but out of a decision to "support reform from

within".

Two people with knowledge of the matter told Reuters the

evidence Dentsu ( DNTUF ) submitted included a transcript of the WhatsApp

group. The group, formed in August 2023 and reviewed in part by

Reuters, was named "AAAI media agencies" and contained scores of

chat messages.

Participants included Kumar of WPP's ( WPP ) media company, Sharma

of Omnicom Media, IPG Mediabrands' Sinha, Havas Media India CEO

Mohit Joshi, Dentsu South Asia CEO Harsha Razdan and then-media

business CEO Anita Kotwani, Publicis South Asia chief Anupriya

Acharya and Madison boss Sam Balsara, the investigators'

evidence shows.

Members of the group discussed advertising pitches and

coordinated on interactions with clients such as food delivery

giant Swiggy, drug maker Cipla,

SoftBank-backed e-commerce firm Meesho, and Kshema Insurance.

In Swiggy's case, the AAAI arranged a Zoom call with media

agency heads to discuss the company's advertising pitch. Later,

GroupM's Kumar, as AAAI president, suggested an email response

to Swiggy explaining the industry's agreed position on rebates.

"Ok all aligned thanks," he wrote after a consensus emerged.

Kshema told Reuters the insurer was unaware of the matter.

The other clients didn't respond to questions.

During another discussion on client rebates, an unspecified

Dentsu ( DNTUF ) executive told rivals over WhatsApp that "the lowest we

go to is retain 30% and 70% we pass back to the client,"

according to the CCI dossier.

CCI officials noted in the document that advertisers and the

broadcasters' group had sought to penalise enterprises that

didn't comply with the pricing pacts.

In an email to Walt Disney ( DIS ) in August 2023, Kumar

wrote that broadcasters should refrain from granting business to

a firm that had breached the pacts, ITW Consulting, though he

said it had later agreed not to approach clients directly.

ITW didn't respond to Reuters questions.

Tensions heated up again over WhatsApp three months later.

Sharma, of Omnicom Media, learned that ITW had done another

"direct deal with a client of ours" for advertising on streaming

platform Hotstar, which was run by Disney ( DIS ).

This irked Sharma, as Hotstar had the rights for the cricket

World Cup held in India at the time.

"This nuisance has to stop," he wrote in the group.

(Reporting by Aditya Kalra in New Delhi; additional reporting by

Jody Godoy in New York and Munsif Vengattil in Bengaluru;

editing by David Crawshaw.)