RFPs and 'ridiculous' payment terms

Comment by IPA Director of Legal & Public Affairs, Richard Lindsay

IPA Director of Legal & Public Affairs, Richard Lindsay, comments on the recent AdWeek article on General Mills' RFP.

Here we go again. Another headline naming and shaming a big brand for expecting agencies to agree to ridiculous payment terms and to hand over their IP for nothing.

A recent Adweek article cites the frosty reaction by some agencies to the terms of a new RFP from General Mills. I’ve not seen the RFP, but the agency that sent me a copy of the Adweek article had. They were unimpressed.

There is no justification for clients seeking to impose long payment terms or for expecting to own the IP in an agency’s pitch materials. Why on earth should an agency bankroll a client for 120 days and why on earth should an agency hand over the fruits of its labours for nothing?

The IPA and ISBA co-published a Creative Services Framework Agreement in 2015 for agencies and clients to use to sign-up their deals. The default position is that agencies should be paid on 30 days from invoice – not 60 days, not 90 days and certainly not 120 days.

Last year, the IPA responded to a Government call for evidence on tackling late payment and unreasonable payment practices. We explained that late payments and unreasonably long payment terms are, typically, imposed by customers with the upper-hand in terms of bargaining position vis-à-vis their suppliers. They are regular and unwelcome practices in the advertising sector and they have serious ramifications. Not only do agencies have significant monthly outgoings, including staff salaries of course, but there are often numerous companies in their supply chain, all of which suffer if the client imposes unfair terms on the agency.

We called for greater powers to be given to the Small Business Commissioner, greater prominence to be given to the Prompt Payment Code and we called-out the practice of clients pushing vendor financing “solutions” whereby, for example, the client offers to pay on time only if the agency is prepared to accept a discount on its invoice.

On IP, the IPA agreed the terms of a mutual pre-pitch NDA with ISBA back in 2012 for agencies and clients to use at pre-pitch stage. The purpose of this document is to ensure that agencies will keep ownership both of their IP and their ideas – not the same thing - that they pitch to clients, whilst also agreeing to protect the confidential information of the client. It is fair and reasonable on both parties and its terms are industry standard. Intellectual property and ideas are the lifeblood of agencies. They shouldn’t be expected to give these assets away for nothing.

The IPA’s pitch protection scheme also helps agencies protect their IP. It’s a repository into which our members can file their pitch documents so that they can prove - should they have to in future - what they created, when they created it and for what pitch.

No agency should be forced into agreeing to unreasonable payment terms or to give away their ideas and IP at pitch stage. These problems keep swilling around the industry though, and it’s about time clients stopped trying to impose them and agencies stopped accepting them.