Rebates and volume discounts
UK advertising “agencies” have traditionally acted as principals at law rather than “agents”, so are not subject to agents’ legal duties, such as the duty not to make a secret profit. But as the Act will apply to principals as well as agents, it could affect deals that advertising agencies structure with their suppliers, whereby the agency has the opportunity to earn additional revenue, such as from rebates or volume discounts. If it can be shown that an agency would reasonably be expected to act impartially and in good faith, and had failed to do so because of its commercial arrangements with its suppliers, then the offences under the Act could be argued to apply.
So we could see marketers reviewing their agency agreements, adding “good faith” and “impartiality” language, which could help shape a defence case under the Act in terms of what a reasonable person in the UK would expect of the agency. But it is far from clear whether a court would take a contract’s contents into consideration when applying certain tests under the new Act. In the meantime, agencies may want to reconsider commercial arrangements with suppliers in light of the Act and how they may be challenged.
Anna Williams is a senior associate at Osborne Clarke. E-mail her at editorial@themarketer.co.uk
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