4As Malaysia comes down hard on MNCs and GLCs for bypassing pitch payment

The Association of Accredited Advertising Agents Malaysia (4As), is aiming to clamp down on the growing practice of MNCs and GLCs foregoing paying its member agencies, with some advertisers even compelling 4As members to secure a written exemption from 4As long standing pitch disbursement by-laws. In a statement put out by the 4As, the organisation's CEO Khairudin Rahim (pictured) reinforced the belief these exemptions are primarily being made due to the companies’ lack of familiarity with the rationale for pitch disbursement which was introduced in 2006.

The pitch disbursement requirement, Khairudin said, is intended to allow 4As’ members who are participating in a pitch to recover some of the costs associated with preparing customised strategy, ideas and creative submissions for the pitch. Considering the fact that speculative pitches are expensive and resource draining, agencies are bound to experience a financial burden, he explained. Furthermore, advertiser pitch briefs have become more demanding and complex in their requirements. He added that 100% of the successful member agencies’ pitch disbursement allocation would be returned to the advertiser upon the results of the pitch being announced.

The practice, according to 4As Malaysia has been hugely supported by over 200 companies, including Celcom Axiata, Etiqa, Malaysia Airlines, Malaysia Rail Link, Maybank, Petronas, Proctor & Gamble, Telekom Malaysia and Watsons.

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Another problem Khairudin noted in his statement was that there are a few advertisers who call for sham pitches with the agency selection already made, prior to the presentation. Some have exploited agencies by using speculative pitches to garner free brand positioning, strategy, and creative ideas. Others have even tried to legitimise the practice by introducing clauses into their pitch requirements that demand the right to utilise or release an agency’s proposals, documents, concepts, ideas, and intellectual property regardless of whether the agency is chosen in the competitive pitch.

He added:

A pitch exercise should not be used as an opportunity to mine agencies for 'free' ideas.

"Unfortunately, part of the ongoing work that the 4As undertakes is having to highlight unfair and unethical practices by advertisers including the requirement for exorbitant tender document fees, tender deposits, and demand for retention of pitch ideas,” he said, explaining that with clear understanding of the rationale, advertisers will support the need for pitch disbursements, and support 4As agencies in their drive to provide the best possible solutions to their prospective clients.

Combatting the cost of pitches

In order to combat the problem of agencies incurring costs during pitches, Khairudin suggests that advertisers should work on their relationships with current agencies first before embarking on a search for others. Long term advertiser-agency relationships often benefit the health of the advertisers brand. Around 65% of advertisers surveyed in in 2019 by the World Federation of Advertisers (WFA) and The Observatory International believing a long-term relationship with their agency is either important, very important or essential in producing great work.

A second option he suggested, would be using an agency’s credentials or past case studies as the sole selection criteria before engaging a new agency. Many successful agency appointments, he said, are based on reputation, referrals, team chemistry and testimonials from other advertisers as opposed to a speculative pitch.

This is not the first we have seen of 4As calling out the lack of fairness in payment. In November last year, 4As called out Telekom Malaysia (TM) for its "unjustifiable" tender document fee and tender deposit.

In a statement, Khairudin also called this aspect of TM's procurement policy "flawed". The telco had a condition where a non-refundable tender document fee of up to RM5,000 and a refundable tender deposit of up to RM20,000 per tender was part of its requirement. Khairudin said the 4As found it odd that agencies today have to pay a tender document fee of between RM1,000 to RM5,000 for the first phase of the tender process in order to be allowed to send agency information covering commercial and technical requirements such as its organisation details, case studies, conflict mitigation protocol, ethics compliance and financial documents to TM.

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