APA’s Stephen Best on Omnicom’s “Pass The Buck” Fiasco

I received the following from Stephen Best, APA National CEO on March 21, 2009.

APA on Omnicom statement…“our policy has not changed”

The last week has seen ever-increasing concern and anger in the advertising community concerning a change in the way the Omnicom Group and it’s subsidiaries conduct business between Omnicom subsidiaries and suppliers. Advertising Photographers of America (APA) reached out for comment from the Omnicom Group about the crises. With the Omnicom Group being the world’s largest advertising holding company, a change in terms and conditions affects the advertising community on so many levels. The policy of concern is called Sequential Liability. Sequential Liability simply means that the agency only pays the suppliers after it has been paid.

Quoted from The Association of Independent Commercial Producers (AICP) published guidelines dealing with this trend:

“Certain agencies have inserted a Sequential Liability clause in their contracts. Others have added a side letter to be signed by the production company. Still other agency contracts do not overtly refer to Sequential Liability as being in effect, but do refer to the agency “acting as agent for” (the advertiser), which suggests the same thing.

If the agency is requesting the recognitions of a “principal-agent” relationship, then the client (principal) should not be released from the obligation of payment until total payment is made to the production company. It should be clarified that even if the client pays the agency, the client remains liable if the agent defaults in fulfilling the payment obligation.

Sequential Liability means that the agency as agent for its principal, the advertiser, is liable for payment to the production company only if the advertiser has paid the agency; otherwise the advertiser is directly responsible for the payment.”

On Friday, March 20, 2009, at 11:47 AM, APA spoke with Pat Sloan, Omnicom Director of Public Relations, to express the concerns of APA and others to the opposition of this policy. APA members are not able to finance major advertising projects and these terms and conditions are not acceptable. Director Sloan’s statement is that there has been no change to their policy on this matter.

Sequential Liability has been policy in the industry for many years. The reality is that advertising agencies, many are Omnicom’s subsidiaries, have provided advances and credit to production companies and photographers to begin awarded projects with substantial expense. “Business as usual” must continue was stated to Director Sloan. APA members, independent photographers and small business owners, are not in a position to finance commercial projects of possibly hundreds of thousands of dollars.

APA business practices have long promoted the inclusion of “statements of intent” to receive 50% to 100% of expenses before the start of a job. It is imperative that this practice continues without removal of advances by clients. Photographers should also include that the photographer owns the copyright and any license agreement must be paid before the release of images.

As creators of intellectual property, photographers hold the copyright on their images. It is imperative that registration of images be immediately submitted to the U.S. Copyright Office. Copyright law and licensing agreements with your clients provide you strong legal protection. APA recommends legal action only as a last resort but registration is needed to recover statutory damages and legal fees.

We must stand together and confront these terms and conditions because they are not in the best interest of photographers and their community of support. If only one accepts them, it will cascade and the role of advertising photographer will change to one of being a financial institution or bank for clients. We must not go down that heavily liable road.

The Omnicom Director of PR did promise to recommend a meeting to discuss these matters. It is APA’s hope that a meeting will be arranged and discussions will continue to a successful resolution.

As previously stated, BE CAUTIOUS and don’t be afraid to walk away. We must stand together.

Stephen Best

APA National CEO

There Are 14 Comments On This Article.

  1. wtf is wrong with people today. No one wants to take responsibility for their actions anymore. Lets take advantage of the little guy since he can’t (afford to) fight back.

  2. Michael T. Murphy

    As a company approaches bancruptcy, most suppliers refuse to extend credit. They will demand payment at the time of delivery for any merchandise, etc., that the company receives.

    So here we have GM approaching bancruptcy and saying they will be slow paying bills because of that. No way we should fall for that one. Then we have Omnicom refusing all liability – or help – to the photographer and putting the photog seriously at risk in order to try to do a job for Omnicom.

    The solution, of course, is to “just say no.” But a lot of people are really struggling here in Detroit, with little or no work. I am sure some photogs will take the gamble and continue to work for these folks to try to keep some income flowing.

    It is one thing to risk your creative fee. Quite another to front expenses for a job and have that money – a loan really – also at risk. That is no better than working on spec!

    In addition to demanding an advance for expenses, I think the only realistic option for someone who wants to try to work with these a**holes is to insist that Omnicom be billed directly for all talent, rentals, and other expenses where-ever possible.

    Photogs need to revert to being just one more service provider amonmg many, with responsibilty only for their own creative portion of a project. Let Omnicom do all of the work and make all of the commitments for a project. The photog from here-on out just shows up and picks up a rental camera to start working.

    We are already getting screwed by the likes of AIG. No reason to put our business’, reputations, and families at risk taking on obligations that really belong to the large corporations like GM and Omnicom.

  3. I love how they claim to only be “acting as agent for” the advertiser. I’m astounded what a crock of BS this argument is.

    This would be true if the ad agency were acting only as an intermediary and the producer/photographer were planning the creative, copy, concepts, and overall direction for the ads, but the fact is, the “agency” is in the business of commissioning creative works from subcontractors (ie: photographers) for the sole purpose of creating a derivative work (ie: a finished ad layout) for their client. The “agency” certainly holds copyright for the works they create for their clients (ie: designs, treatments, copy, logos, etc.) and would defend this to the teeth, however Omnicom is playing it both ways and claim to only be an “agent” for their client.

    If Omnicom wants to turn over creative control to the photographers and only be a party organizing a transaction between the creator and the end client, then so be it, but they are very much in the business of creating original works.

    I’m curious how this argument would hold up under real legal scrutiny…

    • ad photographer

      @dude,

      quote: ‘I’m curious how this argument would hold up under real legal scrutiny…’

      If you take the same mindset in this, as the government does in the recent Sales Tax discussions here, isn’t the advertising agency “the consumer” of our photography? They are taking our files, converting them to color separations, (and marking up our invoices at least 15%), and then preparing a new product that’s sold to the End Client.

      The “agent” argument seems thin, at best.

      The agency’s work is certainly not done Work For Hire, to the End Client; the agency retains ownership of it.

      Seems time to review the wording on all of our Estimate forms, and make sure they’re tight.

      • @ad photographer,

        You’re completely missing my point (which is exactly the point you’re making too). I meant that the ad agency’s argument is a crock of BS, not the APA’s.

        That’s what the sarcasm was all about when I said that they CLAIM to be an “agent” (definition from Webster: “a person or company that provides a particular service, typically one that involves organizing transactions between two parties”). They’re clearly NOT just a go-between in the transaction, but are creating entirely new works which are then re-licensed to the client as a derivative work.

        My point is that, given the many years of industry precedent (I’m assuming there is also some legal precedent before this whole Omnicom thing), I question whether a judge would side with Omnicom, even with their millions of dollars worth of legal muscle. I suspect that, sadly, it’s more an issue of who can outspend whom, rather than an issue of legal precedent. Omnicom has the means to keep this in the courts for a long, long (expensive) time.

        I suspect it would make a strong argument in court for photographers to make the case that the agency is creating wholly new works from their licensed work and is therefore an entity negotiating directly with the end-client on their own and NOT on behalf of either party. But I also think Omnicom would “out-lawyer” any photographer into the poorhouse if they tried to actually get it in front of a judge.

        As for the sales tax issue, it is a completely different beast and I don’t think it really relates to this since A) the state isn’t acting on behalf of either party, and B) the state supposes that a commercial photograph, delivered over FTP or email, is a tangible good (it’s not) and therefore should be subject to sales tax. Oh yeah, and the state also claims it is a “sale” of a photograph (it’s not – it’s a license of a right to use a photograph, not transferring ownership of the photo).

        But, since you touch on it (BIG disclaimer here: I don’t live in UT, and I’m not intimately familiar with the details of state policy – but the premise is the same regardless of the state)… I assume they don’t apply the same standard to, say, legal services (is the lawyer SELLING you a contract as a tangible good or are they offering a service by writing based on a level of professional expertise) or a doctor (is a doctor SELLING you a heart stent or are they providing a service of saving your life?) or an accountant (are they SELLING you a tangible tax return, or are the providing a service by preparing it?).

        That said, I’m really glad I don’t live in UT.

        • ad photographer

          @ mr dude,

          sorry for the unclear language. i totally get your point, and i agree with everything you posted. and i would certainly not want to be the first photographer to go up against OmniCom in court. it seems common sense that their “agent” claim is laughable, even before you get to court. the main thing is to follow michael ash’s advice (and others), and simply say not to sequential liability and no advances. might be tough to say no in this economy, but not nearly as tough as eating the fee PLUS expenses on an expense-heavy travel ad job…

  4. Coming from the agency creative side, I can tell you that the hired shooter really does hold the cards, here (in my opinion).

    If this plan from Omnicom holds up, it’ll most definitely spread like baggage fees at O’Hare through the ad industry. Now, maybe I’m oversimplifying this, but if you’re faced with this type of contract, why not stipulate that you be paid before delivery of final images?

    On the agency side, everything waits for the art to show up. Without it, all work stops. And I’ve seen plenty of scrambling and hastily-drawn checks made available when it’s realized that the art ain’t coming till a check leaves the building.

    Here’s another little secret you may or may not know: big agencies like this will hold onto monies as long as possible before paying out because the interest made on deposits and balances are factored into the annual revenue. Now, this might not have direct bearing on this issue, but I’d think it just might.

    So, if this kind of provision is worked into the contract from the photographer at the onset, I’ll bet that some poor schlub in Account Services will be made responsible for getting checks from the client in short order to pay vendors so the work stays on schedule.

    Hey, for every action, there’s an equal and opposite reaction, right?

  5. The last two jobs I shot for U.S. Ad agencies cost $425,000 in expenses, I simply couldn’t find that kind of money if there were no expenses advance forthcoming. If they want to work with me they will simply have to find that money.