Did agency cartelisation over media rebates lead to CCI raids?

Posted on 20th Mar 2025

The industry is abuzz with speculation that the tip-off leading to the raids may have come from an insider

CCI raids at ad agencies & IBDF continued till Wednesday morning

The Competition Commission of India (CCI) raids on major ad agencies have sparked discussions across the advertising industry, raising questions about the reasons behind the investigation.

Conducted across 10 locations on Tuesday, the CCI raids come at a time when agencies were in the final legs of closing their financial year and the IPL deals, yet details remain scarce as key stakeholders maintain silence.

Initial speculation suggested that the inquiry stemmed from alleged coordination between agencies and broadcasters to determine ad rates.

However, by Wednesday, attention had shifted towards contentious undercutting of commission and media rebates/discounts.

Many industry insiders believe agencies are facing scrutiny over alleged undercutting on commissions, a practice where they reduce their fees to secure larger media budgets from advertisers. By offering lower commission rates, agencies may aim to attract big-spending clients while potentially compensating for the shortfall through undisclosed media rebates.

“This approach, while beneficial for cost-conscious advertisers in the short term, raises concerns about pricing transparency and fair competition. Industry insiders suggest that such tactics could be a factor in the ongoing CCI investigation, as they may contribute to market distortions and create an uneven playing field among agencies,” several industry experts told e4m.

However, some insiders link the case to media rebates, also known as volume discounts, which are routinely offered to clients/advertisers.

While some industry insiders believe the case could be linked to IPL ad rates and discounts due to the timing of raids as IPL will begin on March 22, these claims remain unverified.

Who is the complainant?

There is no clarity on the complainant in the case, adding to the curiosity among stakeholders. However, industry chatter suggests that one agency may have played a key role, allegedly filing a complaint with the CCI against rival agencies, which ultimately led to the raids.

The Role of Media Rebates

Media rebates, also referred to as volume discounts, are often extended by media houses to advertisers, typically negotiated through agencies. These discounts vary from client to client and remain confidential. Agencies sometimes offer volume-based incentives to advertisers, which can lead to complexities in pricing transparency.

One perspective within the industry suggests that some advertisers may have raised concerns about differential treatment in rebate distribution.

“Top media agencies handle multiple clients within the same category, often managed by different divisions within the same network. If certain advertisers received preferential discounts while others didn’t, it may have led to complaints about fairness and competition,” said a media executive.

Additionally, broadcasters are not obligated to honour discounts extended to advertisers unless explicitly agreed upon. This could have led to disputes between media agencies, advertisers, and broadcasters.

A Long-Standing Debate

Rebates have historically been a point of contention in the advertising industry. Typically ranging between 8-10% of total ad spends, they play a significant role in negotiations. Large advertisers with annual ad spends between Rs 1,000 crore and Rs 2,000 crore could see rebates of up to Rs 100-200 crore, making it a crucial financial factor, especially in challenging economic conditions.

The debate over the rightful ownership of rebates has persisted for years. In 2023, the Indian Society of Advertisers (ISA) issued a media charter, stating that rebates should belong to advertisers rather than agencies.

Previous Industry Directives

Concerns over media rebates are not new. In August 2018, the Indian Broadcasting Federation (IBF) advised agencies against extending discounts to clients without prior approval from broadcasters. Similarly, the Indian Newspaper Society (INS) raised this issue with the Advertising Agencies Association of India (AAAI).

By December 2019, IBF issued a formal directive reinforcing this stance. While these measures were expected to curb the practice, the growing competition among media platforms for ad spending has kept rebates in play.

It is believed that similar directives were issued two years ago, though the matter remained largely undisclosed.