Working Paper

Conflict Policy and Advertising Agency-Client Relations: The Problem of Competing Clients Sharing a Common Agency

Report Summary

Historically, advertising agencies in the U.S. and Europe did not simultaneously serve accounts and/or clients who were competitors. In recent decades, however, the advertising and marketing services industry has undergone a number of structural changes that have disrupted and modified traditional norms and policies emphasizing exclusivity in agency-client relationships.

Despite its history as a contentious issue in agency-client relations, conflicts of interest are a relatively undeveloped topic in professional and academic literature. Here, Alvin Silk examines the history of the advertising agency in the U.S. and Japan, analyzes press accounts of specific conflicts and policy guidelines, and reviews theoretical and empirical work to offer an integrated view of the issue.

He identifies two significant changes in conflict policies evident in the U.S. First, safeguards to preserve proprietary information that function as organizational, location, and personnel mobility barriers among quasi-autonomous units within a mega-agency or holding company have become an essential component of conflict policies. Subject to the protection against security breaches afforded by such safeguards, rival clients may be served by separate organizational units that are under common control and/or ownership.

Second, a family of hybrid conflict polices has evolved that feature elements of the split account system long practiced in Japan, augmented by safeguards that serve as partial substitutes for the umbrella prohibition on serving rivals imposed by exclusivity. By relying on safeguards and splitting account assignments among different organizational units within or across a mega-agency or holding company, clients exert a measure of control over those agencies’ access to confidential information while also offering them incentives to avoid conflicts of interest.

This analysis also uncovers several avenues for further research: the substantive content of conflict policies and the policy-making process, the role of safeguards in addressing conflicts of interest, the conditions under which different policy options should be adopted, the evolution of agency-client relationships, and cross-national differences.

Alvin J. Silk is Lincoln Filene Professor Emeritus, Graduate School of Business Administration, Harvard University.

Acknowledgments
I am indebted to Tim Ambler, Paul Michel, Brian Moeran and Tom Finneran and members of the American Association of Advertising Agencies’ “New Business” Committee for helpful comments on an earlier draft of this paper. Thanks are due to Don Dillon, Herb Minkel, Jr., and Jiro Yoshino for discussions of conflict policies. The assistance of Earl Campbell, John Deighton, and Susan Keane and the support of the Division of Research, Harvard Business School are gratefully acknowledged.

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