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IBF-ISA row: Advertisers’ body may take legal recourse in input cost inflation surcharge case

IBF-ISA row: Advertisers’ body may take legal recourse in input cost inflation surcharge case

Author | Noor Fathima Warsia | Wednesday, Oct 17,2007 8:08 AM

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IBF-ISA row: Advertisers’ body may take legal recourse in input cost inflation surcharge case

The television ad industry is burning over the issue of the 25 per cent input cost inflation surcharge proposed by the Indian Broadcasting Foundation (IBF) following a meeting on October 5, 2007. The instant reaction seen at the time from the Indian Society of Advertisers (ISA), which houses large advertisers like Hindustan Unilever, P&G, Godrej, Philips and many others, was the rejection of this proposal.

The situation has been in a stalemate of sorts since, with both IBF and ISA refusing to back out. In a latest development, ISA has reacted to the recent communication of the IBF, which had stated that some advertisers had already agreed to this surcharge. Following its meeting on October 16, the ISA has reiterated that no advertiser would pay this surcharge.

The ISA members also “authorised ISA to take necessary legal action to stop IBF and broadcasters from collectively imposing rate increases. Members present also confirmed that they will be taking individual legal action for breach of contract, if any.” Some of the advertiser members present at this meeting included HUL, P&G, Philips, Reckitt Benckiser, LG, Nestle, Godrej Sara Lee, Maruti and Bajaj Electricals, among others.

Interestingly, the IBF and ISA have chosen not to communicate directly with each other on these matters, and both bodies have been speaking to the Advertising Agencies Association of Indian (AAAI). “Our role has become more of a mediator,” said Mahukar Kamath, President, AAAI.

The IBF in a statement last week claimed, “Member broadcasters have been reporting receipt of confirmation letters from these advertisers and expect numbers to grow substantially over this weekend.”

The ISA communiqué stated, “ISA acknowledges that many broadcasters had declined to participate in this IBF decision and expressed appreciation and support for those broadcasters who have taken a principled stand and have chosen to honour the existing contracts.”

Even though both sides still appear adamant, a source close to the situation informed that one clear problem for the IBF was that companies that had international headquarters like Turner, HBO, MTV Networks (now Viacom-18), ESPN and others had already backed out from the proposal and would not be imposing any surcharge. Some of the channels in South India are also not party to this proposal, neither is the pubcaster Doordarshan. Some sources also informed that IBF members like the TV Today Group had also backed out, though confirmation was not available on this. Nonetheless, this has divided the IBF members between those who would impose the surcharge and those who would not.

In the entire ordeal, the agencies too seem to support the advertisers. Many sources from the agencies have stated that they do not agree with this surcharge and called it “cost cartelisation”.

AAAI’s Kamath said, “We understand and respect the prerogative of the broadcasters to increase their rates. However, we don’t recognise a unilateral voice in pricing, and we don’t approve the decision to renege existing contracts.” He further said that the agencies would give release orders to the clients who agreed to the surcharge.

The ISA statement also stated, “The ISA members took note of the several exceptions implemented by some of the broadcasters, such as exempting from surcharge Government/PSUs and those advertisers who do not book through AAAI member agencies. These acts reinforce the fact that IBF’s decision to impose surcharge is irrational and arbitrary. Members who have been offered release of ads without surcharge on the pretext that they book through non-AAAI member agencies have also confirmed with ISA that they do not agree to the surcharge.”

The initial proposed date of this surcharge – October 16, 2007 – has passed, and not much has changed yet, and ads are still appearing on TV. However, one does not know how the situation would change if a legal course of action is indeed sought in the matter, as suggested at the ISA meeting. The only thing known for sure is that this war is far from over.

Also see:

Member broadcasters, advertisers for input cost inflation surcharge, says IBF

ISA, IBF lock horns over 25 pc input cost surcharge on TV ad rates

IBF imposes input cost inflation surcharge to offset uneconomic growth

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